First Plaintiff v Defendants

2 At a directions hearing, I inquired whether any party would contend that this application ought for any reason be heard by another judge and, when the parties indicated instructions would be sought, I directed that any such application ought to be made forthwith, and I gave directions for written submissions. The parties were asked to state in their submission if they objected to the matter being determined on the papers and neither has done so.

3 The non-parties now submit that, given the nature of the findings I made in the Remitter, on which the SPR relies to seek non-party costs orders against Noysue and Noysy, the appropriate course is for another judge to hear the non-party cost summons. This application is opposed by the SPR.

4 The issue is whether the apprehended bias rule applies, the apprehension being of prejudgment. As it was in British American Tobacco Services Australia Ltd v Laurie,[2] the apprehension feared is that, having reached a conclusion as to certain matters on the Remitter, I might not be open to persuasion towards a different conclusion on those matters on the hearing and determination of this application.

5 The applicable principle was stated in Ebner v Official Trustee in Bankruptcy to be―

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. 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.

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.[3]

6 The non-parties identified two relevant issues. The first is the connection between Noysue and Noysy on the one hand, and Mr O'Bryan who was a party to the Remitter, on the other hand. The nature of any connection is a key issue on the questions of whether the non-parties are bound by relevant findings on the Remitter and whether it is appropriate that Noysue and Noysy pay the costs of the Remitter. The second question concerns the detail of the share sale transaction by which Noysue's shares in Australian Funding Partners Limited (AFPL) were transferred to Regent Support Pty Ltd (Regent Support).

7 Noysue and Noysy wish to contest factual findings that I made, which, they assert, include:

(a) none of Ms Noy, Noysue, and Noysy ever received consideration for the transfer of Noysue's shares in AFPL to Regent Support (J: [131]);

(b) Noysue retained its beneficial interest in AFPL despite the Court in Banksia being informed that it had divested its holding (J: [127]);

(c) while Noysue executed an instrument of transfer of its shareholding in AFPL to Regent, the share transfer form 'misrepresented the transaction' (J:[130]), 'was a paper transaction [which] disguised [Noysue's] beneficial ownership' (J:[139]), and 'was a paper transaction implementing the arrangement or understanding between Mark Elliott and [Norman] O'Bryan, designed to feign compliance with Ferguson JA's conclusions on O'Bryan's involvement as counsel and as an investor in AFP[L]' (J:[140]); and

(d) 'there was a sufficient commonality of interest between wife and husband, such that the more probable inference was that O'Bryan gained financial benefit from dealings by, or in the name of, Ms Noy and her related entities' (J:[128]).

8 They contend that in order to reach a conclusion on the issues raised by the non-party costs summons, it is at least highly likely that I will be called upon to reach a view which is contrary to my findings in the Remitter. They submitted that those findings were based on, in part, the absence of evidence from the 'O'Bryan camp', which I regarded as including Noysue and Noysy. Noysue and Noysy dispute that they are in any way fixed with O'Bryan's conduct of the Remitter or the findings that were made because they were not parties to it. The relevant findings on the Remitter, being both final and extremely serious in nature, necessarily reflected that I was 'actually persuaded' as to their existence.

9 The non-parties invited close comparison of these facts with Symphony Group plc v Hodgson,[4] noting that, on the Remitter, I did not have the benefit of submissions for the non-parties and human nature would suggest that I might be slow to conclude that I ought to make different findings. However, although that case was a non-party costs case, I note that Staughton LJ did not state a rule of general application. He confined his remarks to the case before him concluding that 'the only fair and just method of judging Symphony's application would be to start again with a clean sheet, new evidence, and a new judge.' In that case, the judge had described the relevant findings as provisional and the non-parties submitted that my relevant findings on the Remitter could not be so described. Those findings included conclusions about the bona fides of particular conduct.

10 The non-parties submitted that the apprehension to be found in the mind of the reasonable observer was aptly described by Heydon, Kiefel and Bell JJ in Laurie:[5]

Whenever a judge is asked to try an issue which he or she has previously determined, whether in the same proceedings or in different proceedings, and whether between the same parties or different parties, the judge will be aware that different evidence may be led at the later trial. Judge Curtis's express acknowledgment of that circumstance does not remove the impression created by reading the judgment that the clear views there stated might influence his determination of the same issue in the Laurie proceedings. Allsop P's conclusion was correct. In addition to the possibility of the evidentiary position changing, a reasonable observer would note that the trial judge's finding of fraud was otherwise expressed without qualification or doubt, that it was based on actual persuasion of the correctness of that conclusion, that while the judge did not use violent language, he did express himself in terms indicating extreme scepticism about BATAS's denials and strong doubt about the possibility of different materials explaining the difficulties experienced by the judge, and that the nature of the fraud about which the judge had been persuaded was extremely serious. In the circumstances of this unusual case, a reasonable observer might possibly apprehend that at the trial the court might not move its mind from the position reached on one set of materials even if different materials were presented at the trial - that is, bring an impartial mind to the issues relating to the fraud finding.

11 Finally, the non-parties submitted that it was no answer to say that there are inefficiencies in having a judge other than the trial judge determine the matter. The requirement that the court be constituted to exercise judicial power free from apprehended bias is fundamental. It does not involve the exercise of discretion or the evaluation of expediency.[6] Here, the interests of justice require that the judge who hears the summons should be able to, and be seen to be able to, bring an open mind to bear on all of the matters in dispute.

12 Opposing this application, the SPR contended that it is 'the duty' of the trial judge to hear and determine an application for non-party costs and there is no reasonable apprehension of bias that would displace or override that duty in this case.

(a) A non-party costs application is part of the overall process of orders made by the court at the conclusion of the trial and it is not some different or separate proceeding;[7]

(b) By reason of its nature, the procedure for determining non-party costs is summary and must be summary.[8] Policy reasons dictate that non-party costs applications are to be kept within proper bounds and the court is to do the best justice it can without in every case having the full procedures pretrial and at the trial.[9] This policy objective is contributed to by having the application heard by the trial judge.

(c) The rationale and doctrinal basis for non-party costs is always founded on the connection between the non-party in question and the facts and matters considered at trial before the trial judge.

14 The SPR submitted that it is the very familiarity of the trial judge with the issues in evidence in the trial, as well as the conduct of the parties, that places the trial judge in the best position to hear and determine expeditiously and fairly an application for non-party costs as part of the orders made at the conclusion of the trial.

15 The SPR submitted that the question of apprehended bias needs to be considered in context. An application for non-party costs always occurs in the same proceeding and in the context of findings of fact that necessarily have already been made in determining the principal proceeding.

16 The SPR submitted that when identifying findings made in the Remitter judgment that the non-parties intended to challenge in order to defeat the costs application, the non-parties failed to articulate the critical second step in the apprehended bias test: that is, the logical connection between the fact of those previous findings having been made, and the feared deviation from deciding the case on its merits. The SPR contended that a mere assertion that because factual findings have previously been made by the trial judge, a reasonable bystander might apprehend that the trial judge might not impartially hear the application if, on further evidence and argument, those findings are challenged, cannot be accepted as correct. As the Court of Appeal noted in Deutsche Bank, 'making findings of fact is part of the judicial function and to have made findings critical of one party or another does not disable the judge from dealing with consequential matters impartially, even where they turn on facts in respect of which he has already made findings'.[10]

17 In Bahai, the English Court of Appeal held that an application for an order that a solicitor pay the costs of a trial should be heard by the trial judge unless there are exceptional circumstances that require the application to be heard by another judge. Judgment was entered for the defendant after a long trial and the trial judge was highly critical of the conduct of the plaintiff's solicitor. The judge formed a provisional view that the plaintiff's solicitor did on occasions invent or embellish evidence with a view to improperly furthering his client's case, and that he was unfit to remain on the roll of solicitors. The plaintiff's solicitor appealed the judge's refusal to recuse himself on the basis that the trial judge's comments would have the appearance of being biased against him and that he would wrongly be put in the position of having to persuade the trial judge to take a different view of his conduct from that originally expressed.

18 The Court of Appeal held that there would only be compelling reason that such an application should not be heard by the trial judge in exceptional cases. The Court of Appeal observed that the fact that 'a judge has determined the issues in the action and in doing so has expressed views on the conduct of the parties and of the witnesses, neither constitutes bias nor the appearance of bias in relation to subsequent applications in the action'.[11]

19 In Deutsche Bank, the Court found it difficult to imagine a case in which it would not be appropriate for the trial judge to hear a non-party costs application even when findings critical of the non-party had been made.[12]

20 The touchstone of apprehended bias on the basis of prejudgment is not the fact that the judge may have formed a view, but rather that the judge's mind is not open to persuasion by evidence or argument.[13] In this instance, it is non-sensical to suggest that I have not formed views and cannot have a 'blank mind'. A non-party costs application necessarily follows on the completion of a trial with a judgment expressing findings of fact, reasoning, and conclusions. Whether a logical connection has been established, the second step in Ebner, must focus on how it is being put that I am not open to persuasion by evidence or argument and able to fairly discharge my oath of office. The non-parties have not shown that, by reason of prejudgment, there is a risk that findings of fact relevant to the determination of the non-party costs application are incapable of being altered by evidence or argument. Absent that connection, it cannot be said that the reasonable observer would perceive a risk that, in respect of the relevant matters, my mind is made up and I am incapable of altering my view by reference to new evidence or arguments.

21 The SPR put several reasons supporting this conclusion:

(a) The relevant findings are orthodox trial findings expressly made on the basis of the evidence led in the Remitter. They were not trenchantly or forcibly expressed in a manner that might imply extreme scepticism that any evidence led by the non-parties might lead to a different outcome.

(b) The decision in Symphony can be distinguished. There, the problem was not the findings of fact that were made but the circumstances in which they were made. None of the unusual features of Symphony are present on this application.

(c) The relevant Remitter findings are prefaced with references to there being no evidence of certain matters and key witnesses being absent, leaving critical issues unexplained. The relevant findings were not based on any adverse credit finding. Rather, being made and expressed as inferences reasonably open in all of the circumstances, these findings are non-indicative of ineradicable prejudgment.

(d) The non-parties have submitted that there is little overlap between the Remitter findings and those that will be relevant on this application as to whether Noysue and Noysy were knowingly involved in and assisted the conduct of O'Bryan. These were not issues determined in the Remitter. Thus, the non-parties submitted, holding them to the Remitter findings will not take the SPR far in proving his entitlement to relief on this application. If the Remitter findings are truly of limited relevance, it is unlikely that the reasonable observer would be persuaded that those same findings properly support a reasonable apprehension of bias by prejudgment.

(e) Finally, it might be thought that the non-parties have waived the opportunity to assert apprehension of bias as they must have known of these circumstances since at least 1 February 2022 and did not raise the issue until I prompted them to do so.[14]

22 The submissions of the SPR as to the likely response of the hypothetical reasonable observer to these circumstances are correct and to be preferred to the position advanced by the non-parties. It is not appropriate to address in greater detail the true nature of the findings that were made or their relationship to the issues on this application ahead of hearing the substantive application. Relevantly, the fair-minded lay observer is taken to be aware of the nature of the Remitter decision and the context in which it was made, and to have knowledge of the circumstances leading to this application. Three additional points can be noted.

23 Addressing the issue of precisely how prejudgment might induce an apprehension of bias, the reasonable observer would, importantly, recognise that the context of the relevant findings is that they explain my reasoning for concluding that O'Bryan did not dispose of his wife's stake in AFPL, and instead made an arrangement or reached an understanding with Mark Elliott that maintained his family's interest in AFPL. In context, my findings do not address any more than an absence of any explanation from O'Bryan's wife, Ms Noy, and the non-parties.

24 Secondly, it is clear that the relevant Remitter findings are based on inferential reasoning. The matrix of primary facts supporting that reasoning included the unexplained absence of witnesses, such as Ms Noy, and an analysis of the probable inferences reasonably open from the documentary evidence that was tendered relevant to this issue. The reasonable observer would note that I prefaced my analysis of this matrix of primary fact with this observation:

However, in the absence of an explanation, I am satisfied that there was a sufficient commonality of interest between wife and husband, such that the more probable inference was that O'Bryan gained financial benefit from dealings by, or in the name of, Ms Noy and her related entity. It is in this sense that I speak of O'Bryan's financial interest in AFP[L]. Absent any explanation to the contrary, I can also more comfortably infer, from the following matters, that Noysue remained beneficially interested in AFP[L].

25 The 'following matters' referenced are the findings relevant to this application. The reasonable lay observer would not fear, because of prejudgment, that the inferences to be drawn from the primary facts might vary if other additional facts are placed before the court. While it is possible that a reconsideration of these facts in the context of a non‑party costs application may lead to different conclusions, there would not be a risk of a relevant inconsistency in findings, particularly one capable of affecting the overall conclusions reached in the Remitter. In this sense, the notion of prejudgment may be misplaced. The overall judgment made about the conduct of O'Bryan cannot be affected whatever be the outcome of this application, while the characteristics of the connection between O'Bryan's conduct and that of the non-parties were not the subject of findings that would cause the reasonable observer to apprehend prejudgment.

26 Thirdly, even if the basis for inferential reasoning does not change, reasonable anticipation of a particular outcome by the reasonable observer is not the test. French CJ observed in Laurie:

[T]he fact that a judge who has made a finding of fact adverse to a party on particular evidence is likely to make the same finding on the same evidence, is not of itself indicative of bias. It could be indicative of consistency subject to the judge having an open mind when it came to argument about the effect of the evidence.[15]

27 These features of the inferential reasoning on this issue in the Remitter judgment would persuade the reasonable observer that there is no logical connection between my previous findings expressed as they are in the Remitter judgment and a fear that those findings create a risk that I might not decide the non-party costs application on its merits.

28 For these reasons, I propose to hear and determine this application. I will list the non-party costs application against Noysue and Noysy for hearing on an estimate of 2 days on a date in the first fortnight of February 2023. I accept the offer of the parties to confer and submit appropriate directions for this purpose for my consideration.

JOHN ROSS LINDHOLM IN HIS CAPACITY AS SPECIAL PURPOSE RECEIVER OF BANKSIA SECURITIES LIMITED (ACN 004 736 458) (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION)

[1] Bolitho v Banksia Securities Limited (No 18) (remitter) [2021] VSC 666. I will refer to passages from this judgment as 'J: [paragraph]'.

[2] (2011) 242 CLR 283, 322 [104] (Laurie).

[3] [2000] HCA 63; (2000) 205 CLR 337, 344-5 [6], [8].

[4] [1993] 4 All ER 143.

[5] Laurie, 333 [145] (n 2) (emphasis in original).

[6] Westpac Banking Corporation v Forum Finance Pty Limited (Apprehended Bias Application) [2022] FCA 981, [145].

[7] Bahai v Rashidian [1985] 1 WLR 1337, 13342; Deutsche Bank AG v Sebastian Holdings Inc [2016] EWCA Civ 23; [2016] 4 WLR 17, [17].

[8] Flynn v Flynn [1999] 3 VR 712, 755.

[9] Centrehigh Ltd v Amen [2013] EWHC 625 [CH], [42].

[10] Deutsche Bank, [56] (n 7).

[11] Bahai, 1342 (n 7).

[12] Deutsche Bank, [56] (n 7).

[13] Minister for Immigration and Multicultural Affairs v Gia Legeng (2001) 205 CLR 407, 513-2 [71]-[72]; Elliott v Lindholm [2020] VSCA 260; (2020) 62 VR 307, 320 [52].

[14] Compare Laurie, 333 [146] (n 2).

[15] Laurie, 303 [39] (n 2).