In the matter of Cheal Industries Pty Ltd - Fitzpatrick v Cheal

Judgment 1HER HONOUR: In these proceedings I published my principal reasons for judgment on 21 March 2012. Relief had been sought in the name of the second plaintiff (Chilli #1) on the basis of alleged breaches of statutory and fiduciary duties by Mr Cheal, in his capacity as a director of the company referred to as Chilli #1, and in the alternative, relief was sought by Ms Fitzpatrick (a 50% shareholder of that company, the remaining shareholder being Mr Cheal) on the basis of alleged oppression by Mr Cheal in the conduct of the affairs of Chilli #1, in breach of s 232 of the Corporations Act. (As against the second defendant (Cheal Industries) and the third defendant (Chilli #2), relief was sought on the grounds of knowing assistance in Mr Cheal's breach of his duties as a director.) Equitable compensation was sought in respect of the alleged breaches of statutory and fiduciary duty. 2The nub of the complaint made in the proceedings was that Mr Cheal had effectively diverted the "business" of Chilli #1 (namely, the business of making and selling surfboards with the Chilli logo), including the goodwill of that business, to Chilli #2 (and had dealt with the trade mark, or right to use the trade mark, pursuant to which the Chilli logo was affixed to surfboards made in the course of Chilli #1's business) with a view to excluding Ms Fitzpatrick from the business or a share in the business of Chilli #1 and with the effect that the business and goodwill in Chilli #1 was destroyed. It was alleged that Mr Cheal had placed himself in a position in which there was a conflict between his duty to Chilli #1 (to act in the interests of that company and to preserve and promote its business) and both his personal interest and his duties as a director of the other entities which later gained interests in or the right to use the Chilli trade mark (Cheal Industries and Chilli #2); and that Mr Cheal, in transferring or diverting the business (including the Chilli trade mark and associated goodwill) conducted prior to 1 July 2005 by Chilli #1 out of that company to a company (Chilli #2) in which he and his wife held interests (and Ms Fitzpatrick did not), had breached the duties he owed to Chilli #1 and conducted its affairs oppressively. 3In summary, I found that Mr Cheal was in breach of his statutory and fiduciary duties as a director of Chilli #1 by reason of his conduct (while still a director of Chilli #1) in facilitating the incorporation of Chilli #2 and effectively setting up a competing business to the business (of shaping and selling surfboards with a Chilli logo) that was then conducted by Chilli #1 (in the course of which I found that he had, in effect, appropriated for the benefit of Chilli #2 not only the name of Chilli #1 but also any goodwill associated with that name and the period of trade that the company had carried on up to the relevant time) and diverted to the new company (Chilli #2) or permitted it to assume any goodwill then comprised in the company name (Chilli Surfboards) or associated with the previous use of the trade mark by Chilli #1. 4As to the question of relief, the evidence established that at all material times Mr Cheal was the registered owner of the relevant Chilli trade mark and that Chilli #1 was no more than an authorised user of that trade mark. I accepted that, subject to any obligations that may have persisted on cessation of his employment with Chilli #1, Mr Cheal would have been in a position to cease his involvement with Chilli #1 and, after 30 June 2006, to make use of the Chilli trade mark, if authorised to do so by the then owner, Cheal Industries, in a new business venture separate from Chilli #1. 5I found that Cheal Industries and Chilli #2 (through Mr Cheal's knowledge as a director of those companies) knowingly participated in Mr Cheal's breach of directors' duties, at least insofar as that breach lay in Mr Cheal having caused those companies to enter into the June 2006 agreement without having regard to his duty to act in the best interests of Chilli #1. 6I further found that Mr Cheal had conducted the affairs of Chilli #1 oppressively within the meaning of 232 of the Corporations Act in choosing not to pursue any opportunity for the continued operation of that company's main business undertaking and in diverting or permitting the diversion of that business to Chilli #2 without regard to the interests of Chilli #1 or its 50% shareholder, Ms Fitzpatrick, and with the intention of excluding Ms Fitzpatrick from any share in the business formerly carried on by Chilli #1. 7In circumstances where alternative claims for relief had been made out, I indicated that what I considered would be the appropriate relief for the alternative claims. As to the breach of directors' statutory and fiduciary duties (and for knowing assistance therein) I considered that the appropriate relief would be for the defendants to compensate Chilli #1 for the value (if that could be separately determined) of the goodwill represented by the Chilli Surfboards company name and associated with the previous use of the Chilli logo as at 30 June 2006 (noting that the Chilli trade mark and goodwill referable specifically to the use of that trade mark reposed not in Chilli #1 but in Mr Cheal and then Cheal Industries). 8On the alternative oppression claim, I considered that the appropriate relief would be for Ms Fitzpatrick to be put in a position whereby her share in Chilli #1 was acquired by Mr Cheal for a price calculated as being a half share of the net operating assets of the company at that time (which I had, at that time, assumed to be $55,000 on the basis of my reading of some of the evidence before me) and a half share of the value attributable to the Chilli Surfboards company name and associated goodwill had that been purchased by Mr Cheal (or through him Chilli #2) from Chilli #1 as at June 2006. 9I was of the view that to the extent that the value referred to in [7] above or the full price for Ms Fitzpatrick's shares in the company referred to in [8] above could not then be determined (because the value (if any) attributable to the goodwill of Chilli #1's name and business separate from the goodwill attributable to the Chilli trade mark could not be determined by reference to the expert's report - that having been based on the erroneous assumption that the trade mark was owned by Chilli #1) then the appropriate course would be to refer to an appropriate expert the question as to the separate value, if any, as at 30 June 2006 of the goodwill in Chilli #1 attaching to the company name and its trading history. (I noted that any valuation of that intangible asset of the company would need to be on the basis that ownership of the trade mark reposed in Mr Cheal and that all Chilli #1 had in that regard, prior to the June 2006 agreement between Chilli #2 and Cheal Industries, was the right to use the trade mark at that time (and perhaps the expectation that such a right would continue beyond the expiry of the fixed term under the 2005 licence agreement or would not be terminated without reasonable notice) and the benefit of any residual goodwill associated with the Chilli Surfboards company name and its previous use of the logo from 1999-2006.) 10I also indicated that if it were to be accepted by the parties that any such separate goodwill would be, or be likely to be, nominal then in order to avoid unnecessary costs being incurred in a referral out to an expert, it might be appropriate for a nominal value (if that could not be agreed between the parties) to be fixed by the Court. 11I concluded as follows from [242]: [242] I consider that the appropriate relief on the oppression claim is to order a compulsory purchase of Ms Fitzpatrick's shares at a value that represents half of the fair market value of the Net Operating Assets as at 30 June 2006 (ie half of $110,000 - that being the book value of $119,000 less the $9,000 wrongly attributed in the accounts to the patents/trade marks entry) plus half of the amount (if any) that may be attributable to the goodwill of Chilli #1 independent of the Chilli trade mark. The latter has not yet been valued. It seems to me open to infer that it must have had some value to Mr Cheal or Chilli # 2 since Mr Cheal proceeded to appropriate the company name for the benefit of Chilli #2. [243] Absent any valuation of that amount, the appropriate purchase price would be $55,000. (Mr McMahon [the sole expert witness in the proceedings] in the witness box explained that the valuation of a share to be acquired on this basis would not take into account company debt and, in circumstances where there seems to have been no claim in that regard, and the circumstances in which the remedy has been sought, I do not take that into account.) [244] Any equitable compensation to the company would require a similar determination (and any value thereafter to be obtained by Ms Fitzpatrick in respect of her shares would require the winding up of Chilli #1 at no doubt further expense). Therefore, it seems to me that that the alternative relief based on oppression would be the relief most consistent with the just, quick and cheap resolution of the real issues in dispute. [245] The only question then is whether to refer to an expert the valuation of the goodwill represented by the company name or simply to attribute a nominal value to that in circumstances where it seems unlikely that in quantum it would have approached anywhere near the value attributable to the Chilli trade mark itself. I will hear submissions on this aspect of the relief to be granted and will hear submissions on costs. 12I then set out the orders that I proposed to make and indicated that I would hear submissions as to the form of orders and as to costs. 13The matter came back before me on 5 April 2012. On that occasion, Mr Slater QC appeared for the defendants (with Ms Francois who had appeared for them at the hearing). (In her submissions on the present occasion Ms Francois has drawn to my attention that Mr Slater appeared on a pro bono basis on that occasion.) Mr Slater submitted (and I accepted) that what should be adopted for the purpose of the proposed order for payment to Ms Fitzpatrick in respect of a half share of the net assets of the company (leaving aside the value if any to be attributed to the goodwill absent the trademarks) was the figure representing half of the shareholders' equity as disclosed in the company's balance sheet. I made orders on that occasion that reflected my acceptance of the propositions put by Mr Slater and the matter was stood over until 14 May 2012 to enable the parties to explore the possibility for agreement as to the figure to be attributed to the goodwill in the company name. 14Mr Evans had raised in the course of argument as to the relief to be granted, as I understood it, that there might be a difference in position as between the relief sought for the equitable compensation claim and the relief sought for the oppression claim but it seemed to me that either course would be likely to result in the same position. From T 9.1, there was the following exchange: EVANS: On the question of the value of the goodwill absent the trademarks, there are a number of things; incurring costs of additional expert evidence in this case seems almost to be a further piece of oppression. But there are authorities which I don't propose to put to your Honour today. But it is the string of authorities talking about the Court taking a robust view when it comes to determining the quantum of compensation in matters of breach of duty and we would say those authorities should apply in cases of oppression as well. The fact that the orders we now seek require payment to the first plaintiff in return for her handing over her shares s a matter of convenience because if moneys were paid into the second plaintiff, then for my client, Ms Fitzpatrick, to get those moneys there might be a rather-- HER HONOUR: They would have to wind up the company. EVANS: Rather unfortunate process. HER HONOUR: But in course of doing that the debt position of the company would be taken into account so that there is force in the submission that the payment for Ms Fitzpatrick's share should be half of the total shareholder equity plus half of whatever the value attributed to the goodwill, valued on the assumption the trademark never reposed in the company. EVANS: That sum would not necessarily be a nominal sum, it could be quite substantial. HER HONOUR: Unless I have an expert that tells me it is a substantial sum, I have no basis for finding that. That's why it seems to me either the parties can reach an agreement or there is an acceptance by the plaintiffs that the value would be nominal and it would be left to my approach, robust or otherwise, as to what I considered to be nominal in these circumstances or it goes off to be valued by an expert. 15Relevantly, on 5 April 2012, I ordered that: 2. The First Defendant pay to the First Plaintiff a sum equal to half of the value attributable to the Chilli Surfboards Pty Ltd company name and associated goodwill as at 30 June 2006 (valued on the basis that ownership of the Chilli trade marks TM 767677 and 804353 reposed in the second defendant at the relevant time), such sum to be as agreed between the parties, or failing such agreement within 28 days, such sum to be as determined by the Court on a date to be fixed or as determined by an expert appointed by the Court, the identity of whom and the terms of reference to whom shall be fixed by further order of the Court. 16When the matter came back before me on 14 May 2012, I was informed that the parties had not been able to reach agreement (on the value to be attributed to the Chilli #1 company name and associated goodwill as at 30 June 2006) but were agreed that a nominal value should be attributed thereto by me. Directions were made for the service of written submissions on that aspect of the matter and it was agreed by Counsel that the matter should be dealt with by me without the need for oral submissions. 17I published my reasons on the nominal value to be attributed to the company name and associated goodwill on 1 June 2012. Having considered the respective written submissions (and the various authorities referred to in my reasons as to the manner in which shares were valued in an oppression suit) I concluded that Chilli #1 would have been in a position to restrain the use of its name by another company, and hence would have had a basis on which to place a price on its consent to a change of name and that a reasonable (admittedly nominal) value should be placed on the goodwill in the company name. I placed this at $3,500, to which I added the likely costs involved in the necessary registration of the change from Chilli #1's perspective ($351), rounded up to $4,000. (Insofar as Ms Francois criticises this as a "blurring" of two nominal figures and submits that there were "no proper reasons" for the amount so fixed, I explained in my reasons the process, correct or otherwise as it may be found to be, that I had followed in reaching the figure nominated for the value of the goodwill associated with the company name. The fact that registration fees would be a company expense does not in my view make it illogical that someone placing a price on the intangible asset associated with the company name might include in that figure an amount referable to the costs associated with effecting the change of name.) 18In any event, it appears that there is no challenge by the defendants to the value so placed on the goodwill associated with the Chilli #1 name. What has precipitated the present dispute is that I also formed the opinion (informed by the authorities to which I had referred and to which Mr Evans had perhaps obliquely referred when the matter was before me in April) that, since it was Mr Cheal who had wrongfully deprived Chilli #1 of the opportunity to obtain payment for the use of its name, this sum should be attributed to Ms Fitzpatrick's share in the company. 19On that basis, I awarded Ms Fitzpatrick an additional sum of $4,000 in effect as the premium payable for use of the Chilli #1 name. I indicated that I would then list the matter for argument on costs. Prior to the matter coming back before the Court for submissions on costs, Ms Francois contacted my associate to request a meeting in chambers with her opposing Counsel, Mr Evans. Ms Francois indicated in chambers that she had received instructions to file an Amended Notice of Motion (being an amendment to a Notice of Motion for the I June judgment to be varied and for certain of the orders made on 1 June 2012 to be vacated). (Up until that time, I had not been made aware of the filing of any motion in relation to the 1 June judgment or orders and was under the impression that the sole remaining issue in the proceedings was to determine the costs of the proceedings.) 20Ms Francois indicated that an application had been file to vary or set aside the 1 June judgment and that the proposed amendment to that Notice of Motion was to seek orders that I disqualify myself from further hearing in this matter for apprehended (not actual) bias. She foreshadowed that the basis on which that application was made was the allegation that the defendants had been denied procedural fairness on two occasions and that in relation to the second occasion (the making of the orders on 1 June 2012) this was in circumstances where the order then made was punitive and where I had been made aware in April 2012 that the determination of the nominal value would, or would be likely, to have an impact on the parties' positions in relation to costs. 21I made directions for the filing of the foreshadowed Amended Notice of Motion and for the service of written submissions in relation to the application for disqualification for apprehended bias. Counsel informed me that they did not seek to be heard orally on that application (and that position has since been confirmed with them both by my staff and when the matter was listed before me today). 22These are now my reasons on that part of the Amended Notice of Motion that seeks that I disqualify myself from further hearing this proceeding and that a differently constituted Court recall the whole of the judgment and orders made on 1 June 2012 and redetermine the nominal value to be attributed to the Chilli #1 company name and associated goodwill as at 30 June 2006. (The balance of the Amended Notice of Motion, dealing with the application for variation of the judgment and vacation of the orders referred to above, has not been the subject of any submissions and remains to be heard.) Legal Principles 23There appears to be no dispute between the parties as to the test for apprehended bias (as opposed to its application in the present case). The relevant test is as to whether a fair-minded lay observer might reasonably apprehend that the judicial officer might not bring an impartial and unprejudiced mind to the resolution of the question that he or she is required to decide. The application of this test requires two steps: first, identification of what it is said might lead the decision-maker to decide a question other than on its merits; second, articulation of the logical connection between the matter identified and the feared deviation from the course of deciding the question other than on its merits (Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at [16], as recently confirmed by the High Court in Michael Wilson & Partners Ltd v Nicholls & Ors [2011] HCA 48; (2011) 282 ALR 685 at [31]). 24In Ebner, it was said (at [8]) that: 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. 25All the relevant circumstances of the particular case may be taken into account in applying the test, though only such knowledge of matters of legal or other specialist practice and process as can reasonably be attributed to the lay observer (including, perhaps, matters of which the observer would inform him or herself before reasonably forming any firm apprehension) will be taken into account (Vakauta v Kelly (1989) 167 CLR 568 at 584-585 per Toohey J; Najjar v Haines (1991) 25 NSWLR 224 at 239-240 per Rogers JA). 26At [67], in Michael Wilson the plurality (Gummow ACJ, Hayne, Crennan and Bell JJ) said: As pointed out earlier in these reasons, an allegation of apprehended bias requires an objective assessment of the connection between the facts and circumstances said to give rise to the apprehension and the asserted conclusion that the judge might not bring an impartial mind to bear upon the issues that are to be decided. An allegation of apprehended bias does not direct attention to, or permit consideration of, whether the judge had in fact prejudged an issue. To ask whether the reasons for judgment delivered after trial of the action somehow confirm, enhance or diminish the existence of a reasonable apprehension of bias runs at least a serious risk of inverting the proper order of inquiry (by first assuming the existence of a reasonable apprehension). ... And, no less fundamentally, an inquiry of [that] kind moves perilously close to the fallacious argument that because one side lost the litigation the judge was biased or the equally fallacious argument that making some appealable error, whether by not dealing with all of the losing side's arguments or otherwise, demonstrates prejudgment. (emphasis in original) 27At [116], Heydon J, concurring in the result, also noted that even had the trial judge in that case fallen into error justifying appellate intervention (which his Honour found not to be the case) that by itself would not support the conclusion that there was a reasonable apprehension of prejudgment. 28On the present application, Mr Evans refers also to the discussion by the High Court in Webb v The Queen (1994) 181 CLR 41 at 47: When it is alleged that a judge has been, or might be, actuated by bias, this Court has held that the proper test is whether fair minded people reasonably apprehend or suspect that the judge has pre-judged of might pre-judge case. The Court has applied the same test to a commissioner of the Australian Industrial Relations Commission and to a member of the Australian Broadcasting Tribunal. The Court has specifically rejected the real likelihood of bias test. The principle behind the reasonable apprehension or suspicion test is that it is of "fundamental important that justice should not only be done, but should manifestly and undoubtedly be seen to be done". noting that the relevant standard of assessment set out by the High Court in Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 at 541 is that: It is enough to show that in all the circumstances the parties, or the public, might entertain a reasonable apprehension that [the decision maker] might not bring an impartial and unprejudiced mind to the resolution of the question involved in it. 29Before turning to the basis on which it is said that there is a reasonable apprehension of bias in this case, I note that in Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411; (1992) 9 ACSR 309, Kirby P, as his Honour then was, said (at 417): [that] words can be found in the authorities, even in recent times to encourage judges said by reason of prejudgment to be disqualified for apprehended bias to stay with the case cannot be doubted. 30His Honour referred (at 417-418) to a representative sample of injunctions typically called to the judge's attention on such applications, including that judges should not too readily accede to applications for disqualification, otherwise litigants may succeed in effectively influencing the choice of the judge in their own court (Re JRL; Ex parte CJL (1986) 161 CLR 342, at 352; Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272, at 276 and Fitzgerald v Director of Public Prosecutions (1991) 24 NSWLR 45, at 49); that judges should resist being driven from their courts by the conduct or assertions of parties including assertions of actual or imputed bias (Raybos, at 689); and that judges in the course of litigation in exchanges with parties and their representatives or interlocutory decisions may express their preliminary views with vigour, but this should not necessitate their disqualification (Galea v Galea (1990) 19 NSWLR 263, at 278; Fitzgerald (at 49); and Re Keely; Ex parte Ansett Transport Industries (Operations) Pty Ltd (1990) 64 ALJR 495; (1990) 94 ALR 1). 31His Honour further said (at 418): Judges should perform the duties of their office which, of their nature, will often be painful and unrewarding. They should do so with courage and decisiveness avoiding the relinquishment of their duties which will then necessarily fall to another judicial officer for whom the task may be no more congenial. Such relinquishment will also involve costs, delay and inconvenience to parties who are otherwise entitled to have the decision of the judicial officer appointed to their case (referring to Re JRL; Ex parte CJL; Re Polites; Ex Parte Hoyts Corporation Pty Ltd [1991] HCA 25; (1991) 100 ALR 634). 32I turn then to the basis on which this disqualification application is brought. Application for disqualification 33While conceding that appellable error is not by itself grounds for an apprehension of bias, the defendants contend that in the present case the nature of the errors made and the context in which they occurred objectively give rise to an apprehension that I might not bring an impartial and unprejudiced mind to resolution of the remaining issues to be decided. (The remaining issues are, of course, whether to vary the 1 June 2012 judgment and vacate the orders then made and, once that application is determined, to make orders as to the costs of the proceedings.) 34In essence, the defendants' position, as summarised by Ms Francois (at [5] of her written submissions) is that: In summary, the evidence upon which this apprehension is based is that the Trial Judge has twice disregarded the requirements of procedural fairness, disregarded the evidence (or lack of evidence), failed to follow an order previously made by her Honour and acted on bases which are illogical and not properly reasoned so as to favour the first plaintiff. The critical context is that the Trial Judge was made aware, prior to the judgment of 1 June 2012, that an offer of compromise made by the defendants was potentially relevant and, of necessity, the likely parameters of that offer. 35As to the first of the errors identified by Ms Francois, this relates to the initial finding (implicitly varied by the orders made when the matter was raised by Mr Slater) that the fair market value of the Net Operating Assets of the company as at 30 June 2006 was $110,000 (that being the book value of $119,000 less a sum of $9,000 wrongly attributed in the accounts to the patents/trade marks entry). The basis on which I had derived that figure (from a footnote entry in the expert's report and my understanding of the evidence given by the expert in the witness box) was referred to in my principal judgment and was confirmed by me in the course of discussion with Mr Slater on 5 April 2012. In essence, I had adopted a figure indicated as the appropriate way for valuing the net operating assets of the company on a sale of business scenario (on which scenario Ms Francois accepts that one does not take into account company debt), whereas (as Mr Slater outlined) the relevant figure to adopt on valuation of the shares of the company would be based on the shareholders' equity (on which scenario one does take into account company debt). Mr Evans did not seek to argue against the correction of that error. (I note that on that occasion there was no suggestion by Mr Slater that there had been a denial of procedural fairness or any basis for a reasonable apprehension of bias, simply that there has been an error in the calculation of the fair market value of the net operating assets of the company for the purposes of valuing the shares in the company.) 36However, Ms Francois now submits that there was a denial of procedural fairness in reaching that (admittedly incorrect) conclusion, on the basis that there had been no indication given to the defendants that the value of Ms Fitzpatrick's shares would be relied upon in the judgment. 37In this regard, Ms Francois notes that, although Ms Fitzpatrick sought relief under s 233 of the Corporations Act 2001 (NSW), Ms Fitzpatrick did not call any expert evidence as to the value of her shares (as opposed to the evidence as to the sale of the business). Ms Francois refers to what was said by her in opening oral submissions at (T 6.43): The primary way in which this case is pleaded is as a breach of directors' duties where Chilli #1 is entitled to equitable compensation but in opening Mr Evans suggested that the principal remedy sought is that Ms Fitzpatrick be paid the value of her shares. There is no evidence before you as to the value of Ms Fitzpatrick's shares. There are perhaps some steps toward calculating that but there is no evidence of that.. (my emphasis) (In passing, I note that Ms Francois seemed to accept, in the extract highlighted above, that there was some evidence from which steps could be taken towards a calculation of the value of the shares.) 38Ms Francois notes that the expert called for Ms Fitzpatrick (Mr McMahon) was not asked to opine and did not opine as to the value of the shares and that no submission was made as to the value of the shares. She cites the written submissions relied upon at that time for the plaintiffs (at [38] and [39]): It is submitted that the appropriate remedy in this case would be an order that the defendants pay equitable compensation to the second plaintiff for the value of the business transferred effectively from Chilli #1 to Chilli #2 and that the date at which the value of that business should be assessed should be 30 June 2006. While this remedy would not be an order under s 233 of the Corporations Act the purchase of the first plaintiff's shares in Chilli #1, it should be made conditional upon the transfer by the first plaintiff of her share in Chilli #1 to James Cheal or his nominee upon payment to the first plaintiff of her aliquot share in the winding up of Chilli #1. (and refers to the discussion during closing submissions by Mr Evans at T 168.30/40). 39There, Mr Evans, addressing the appropriate remedy (seemingly with reference to the equitable compensation claim by Chilli #1) submitted that the relevant date for assessing the loss was 30 June 2006 when the business operations effectively ceased and the operations of Chilli #2 commenced. Mr Evans said: ... And that the appropriate remedy for Chilli number one as a plaintiff is equitable compensation in the form of an appropriate payment or equitable compensation, or the value of the business transferred. And in that regard, I refer your Honour to the discussion of questions of measure of relief and Mordecai v Mordecai. And in my submission, the discussion about this is at page 71 of the report. ... Where Justice Hunt refers to Lord Wilberforce in General Tyre Rubber and Firestone. He says, Lord Wilberforce was not discussing the position in the hypothetical sale used to assess compensation cases concerning the compulsory acquisition of property. Indeed, he was expressly distinguishing infringement of patent cases from those cases. What he was discussing was the assessment of damages, when a person has unlawfully taken property which he might have obtained lawfully. That aptly describes the present case. ... So in this case, the methodology, in my submission, the court should apply is the business having been obtained unlawfully, the appropriate remedy is compensation which would be a measure of what would have been paid or payable in the event that that business was acquired lawfully, and that would be at a value, for instance, which the court would approve in the event of a sale by a trustee. 40Ms Francois submits that in light of the matters referred to above, the defendants' closing submissions did not address the value of Ms Fitzpatrick's shares. In fact, in oral submissions there was a brief discussion as to the value of the shares of the company, Ms Francois submitting that the value was negligible. At T 184.15, Ms Francois submitted: Further, your Honour, assume Mr Cheal had acted in the way that the plaintiff suggests, that what he had done is that, at some point between 2003 and 2005, said I will pay you the value of your shares. What is very clear from the report of Mr McMahon is that the value of the shares were negligible. ... In this company, you just can't separate the goodwill from the trademark. 41In support of the proposition that, absent the trademarks, the shares were of negligible value, Ms Francois then took me through the accounts to show the profits and losses over the period, the borrowings and the amounts paid out in relation to directors' salary or the like. 42Ms Francois submitted, on the basis of that exercise, that it was very unlikely there was any money to be paid for the value of the shares absent the trademark. At T 186.20, Ms Francois said: In any event, your Honour, if your Honour's not satisfied about the fact that there is no value, and that's the highest I can put those submissions, there is no evidence of that value before your Honour. And such evidence as there is suggests it would be negligible. In any event, if that's where your Honour was minded to ultimately find, there would need to be some further evidence, in our respectful submission. 43Again at T 187.23, Ms Francois said: And, your Honour, obviously when I am drawing in my written submissions to the financial history of the company, that has underlying that submission the sense that the shares are not worth particularly or anything of real value. 44At T 187.27, Ms Francois was critical as to the interaction between the components of the relief that Mr Evans had indicated in his submissions was sought (equitable compensation followed by a transfer of shares conditional on an aliquot share of the assets as on a winding up): Your Honour will see in my written submissions I am not quite sure what remedy the plaintiff seeks, and perhaps after I have finished, there might be some discussion about that, because I understand what Mr Evans suggests in his written submissions is an order that Mr Cheal and the defendants pay compensation to Chilli one. We understand that. But then he also says that that payment should be made conditional upon the transfer by Ms Fitzpatrick of her shares to Mr Cheal or his nominees upon payment to her equal shares in the winding up of Chilli one. We are not sure whether that is framed in the powers of 233, or something that can be done for equitable compensation. But in any event, your Honour, I am not sure if much turns on that. It's just the power upon which that is sought. Mr Evans' submission particularly assumes relying on section 233, but that would appear to be the only basis on which it could possibly be run. I am not sure, your Honour. In any event, if your Honour found oppression, then ordering Mr Cheal to purchase her shares after payment of compensation that is on agreed value, I don't think that would be out of purview of the section. I am not suggesting it wouldn't, but I am just trying to tie it down to some statutory basis, your Honour. 45Therefore, it cannot I think fairly be said that the issue as to the possibility of some relief based on or relating to some component of the value of the shares had not been present at some stage in Ms Francois' mind, though I accept that she dismissed it as not supported by the evidence (and there was a suggestion that further evidence might be sought to be adduced in that event - though as it transpired on 5 April 2012 there was no suggestion that this was what was required). 46It is submitted by Ms Francois that, by reference to the matters raised above, the findings at [242] and [243] in the judgment of 21 March 2012 (as set out earlier) were made in circumstances which denied the defendants procedural fairness (though as is apparent from a review of the transcript the issue of the value of the shares was one that was the subject of at least some debate in closing submissions). Ms Francois submits that the findings in question were "clearly not open on the evidence and, with respect, illogical in relation to the failure to take account of the company's debts". 47It is accepted that the error in this regard was redressed on 5 April 2012, a situation that led Ms Francois to submit that "If that finding had been the only denial of procedural fairness and error, then it could have been considered as unfortunate and there could be no complaint" and, later, that the fact that the "the unfairness caused by that error" was corrected on 5 April 2012 does not mean that the error did not occur. (The latter submission somewhat begs the question as to whether the making of an acknowledged error gives rise to a reasonable apprehension of bias in relation to later decisions.) 48The second error identified by Ms Francois, and the second occasion on which it is contended that the defendants were denied procedural fairness, relates to the determination of the nominal value to be attributed to any good will associated with the company name (a matter that the parties agreed, in the interests of costs, not to refer out to an expert for determination but to leave to me to determine with the assistance of written submissions). 49In this regard, Ms Francois emphasises that when the matter was before the Court on 5 April 2012, Mr Slater emphasised the inter-relationship between the further issue to be determined in relation to the value of the Chilli #1 company name and associated goodwill as at 30 June 2006 and an offer of compromise made by the defendants, in that he said (from T 7.40): As to interest, an order for interest can't yet be made because it depends on the operation of s 100(4). The effect is the amount of interest varied according to a comparison between the judgment and the amount of an offer of compromise. That is one reason why this matter is difficult to resolve because really the amount at stake between the parties is very minor; the real contest is as to costs. But the amount ordered has a very substantial leverage on costs because of the offer which was made. and at T 10.50: ... There is a very substantial leverage, the costs of each side as your Honour would appreciate, for a matter running several days, are at least in six figure numbers on each side. If there is a costs order in a particular way, then the verdict should be set off against that costs order. This is the problem, there is a very small amount in valuation that is going to have a huge leverage. 50As Ms Francois notes, the parties then served written submissions in relation to the nominal value to be attributed to the company name. (I have summarised those in my reasons of 1 June 2012). Ms Francois submits that "Of necessity, the positions of the parties disclosed the likely parameters in which the offer of compromise was likely to operate". (Pausing there, if that is intended to suggest that the submissions made as to nominal value were tailored by one or both of the parties in order to enhance their position in relation to any subsequent costs argument then that would seem to me to be inconsistent with the obligations of legal representatives in the conduct of litigation in this Court. What I expected to receive by way of written submissions on this aspect of the matter, and what I had assumed I had received in those submissions, was assistance from Counsel as to the appropriate method by which, and the amount for which, the nominal value of goodwill in the company name should be assessed.) 51I do not accept that the respective submissions disclosed the likely parameters of any offer of compromise (nor did they disclose whether any such offer of compromise was made under the Rules or was made as an informal offer, a distinction that would affect the onus when considering the reasonableness of the offer or its rejection) other than that it might be thought that if there were no material effect of a determination within one or other of the ranges submitted then the parties might have been in a position to agree the matter rather than to pursue the issue. Mr Slater's comments, as extracted in Ms Francois' submissions, initially pointed to the issue of interest as having an impact on the costs and then to the potential for a "small amount" in the valuation (of the goodwill associated with the company name) as having "huge leverage". I was not in a position to form any view as to the parameters of what might be seen to be a "small amount" for the purposes of any such calculation or its impact on the interest calculations, nor did I consider it appropriate or relevant to seek to do so. 52Ms Francois places weight on the fact that the submissions on nominal value served for Ms Fitzpatrick did not suggest that the value of her shares should be increased by the entire value of the Chilli #1 company name and associated goodwill. I accept that this is the case. (Mr Evans' submissions did, however, suggest that an appropriate figure would be not less than $10,000, a half share of which would be more than the amount that I concluded should be awarded to her.) 53Ms Francois submits that, in light of the orders made on 5 April 2012, the submissions by the plaintiffs and the fact there was no indication from the Court prior to judgment of any different approach, the defendants were not aware that it was possible the Court might order Mr Cheal to pay the entire value of the Chilli #1 company name and associated goodwill to Ms Fitzpatrick and hence that the defendants were denied procedural fairness in having been denied the opportunity to make submissions as to why that course was not open. The error into which it is said I have fallen was to over-value (it is said, again) Ms Fitzpatrick's shares in the company. 54Ms Francois also submits that the judgment of 1 June 2012 is in error on the basis that it is "illogical" that an asset of the company can be allocated to increase the shares of one particular shareholder. Further, it is submitted that the basis upon which the determination was made "in the absence of proper reasons" appears to be punitive "because the process being undertaken by the Court under section 233 of the Corporations Act 2001 (being the forced acquisition of the first plaintiff's shares at fair market value), already remedies the first defendant's oppressive conduct". It is submitted that there are no reasons given as to why the order made on 5 April 2012 could be "disregarded" or why a company asset could be dealt with in this way under s 233 of the Corporations Act 2001. 55It is submitted by Ms Francois that the errors identified as having been made relate to a fundamental issue in the controversy (namely, the relief to be granted to Ms Fitzpatrick) and are errors "of a considerable magnitude" producing an outcome which "significantly favours" Ms Fitzpatrick. (In that regard, the Amended Notice of Motion does not seek to displace the nominal value assigned to the goodwill in the company name, simply to amend the order for payment to Ms Fitzpatrick so that she receive only half of the amount so ascribed). 56Ms Francois submits that it is these features, in combination with: the fact that on 5 April 2012 I was informed that an offer of compromise had been made by the defendants (and that the Court's determination of value of the Chilli #1 company name and associated goodwill would have, among other things, a "substantial leverage on costs"); that the likely parameters of that "leverage" had been indicated by the parties' submissions (with the plaintiffs seeking no less than $5,000 additional value for the first plaintiff's share and the defendants submitting an amount of no more than $500); and that the amount determined in favour of Ms Fitzpatrick (by the "erroneous mechanism" of ordering the whole of the value of the Chilli #1 company name and associated goodwill) was to increase Ms Fitzpatrick's share by $4,000 (only moderately less than the amount sought by her and significantly more than the amount submitted by the defendants); that give rise to an objective apprehension that I might not bring an impartial and unprejudiced mind to the remaining question of costs and the antecedent question (raised by the motion to vary the 1 June judgment and to vacate the orders then made) of the value of the Chilli #1 company name and associated goodwill. 57Mr Evans submits that the submissions made for the defendants do not follow the two step process articulated in Ebner but, rather, rely on the making of a finding (first, the value wrongly attributed to the shares in my first judgment and then the value later attributed to the nominal value of goodwill in the company name) as evidence of the 'thing' that it might be said to lead the Court into error (something that was seen as involving fallacious reasoning in the Michael Wilson case). 58In relation to the principal judgment, Mr Evans notes (as was the case) that I had not made final orders at that time but had indicated the proposed alternative orders (the first for equitable compensation; the alternative for the payment of a sum for the purchase of Ms Fitzpatrick's shares). As to the question of the value to be attributed to the value of goodwill in the company name, Mr Evans submits that the principal judgment makes clear that submissions would be sought on the question of valuation of goodwill unless the parties otherwise came to some agreement. Ms Francois' reply to this is to point to the findings I had made in the body of the judgment and to submit that it was only the final relief that was left to be determined at that stage. While I accept that I had understood the only question remaining as at 5 April 2012 to be the form of the final relief (and costs), the fact is that the findings I had made were the subject of discussion (and implicitly varied) on that occasion. 59Ms Francois refers to what I said when the matter was before me on 5 April 2012 in relation to the proposed orders at (T 2.39): I understood there were alternative claims being put in the proceedings. I agree that if the relief that is now sought by the plaintiffs is in effect the alternative relief on the oppression suit, then the appropriate order would be to transfer the shares and the amount and it wouldn't be necessary to make an order for payment of equitable compensation. I just wasn't certain at the time I had published my reasons what the plaintiff's position was in relation to the alternative claims it was pressing. 60Mr Evans, in rejoinder, submits that it is incorrect to suggest that the findings at [242] and [243] of my principal judgment closed out further argument on the valuation question (any more than it could be said that they closed out argument on the terms of the final orders). 61Mr Evans thus submits that there was no denial of procedural fairness in the circumstances in which the judgment was delivered on 21 March 2012. Moreover, Mr Evans notes that the receipt of submissions made by Mr Slater on 5 April 2012 and the adjustments made to the findings (as implicit in the orders then made) reveals no reasonable apprehension of bias in that process. 62In that regard, the fact that when the error was drawn to my attention I considered the submissions and conceded the error is in my view a significant factor to be taken into account when considering the reasonableness of any apprehension of bias at that stage. (I also note that the subsequent willingness of the defendants to accept a regime for attribution by me of a nominal value for the company name is not consistent with any apprehension of bias arising out of the principal judgment.) 63As to the judgment of 1 June 2012, Mr Evans submits that the statement of reasons at [8] could on no reasonable construction give rise to an apprehension of bias. There, I had said: [8] I outlined in my principal reasons for judgment the relief that I considered would be appropriate (depending on the election by the plaintiffs as to which, of the alternative claims for relief made by the plaintiffs, was to be pursued. I set out in my reasons (and in the orders I then proposed to make) the amount which I took to be the relevant sum for Ms Fitzpatrick's half share in the company (based on a footnote in Mr McMahon's to the effect that, if Chilli #1 were to be valued after the acquisition of the business, then the only value would be the fair market value of the Net Operating Assets with no component for goodwill and his explanation in the witness box that the valuation of a share to be acquired on this basis would not take into account company debt). Mr Slater QC, who appeared for the defendants, leading Ms Francois, when the matter was listed for submissions as to the final orders to be made, submitted that this approach was incorrect. 64Mr Evans submits that, insofar as the balance of the defendants' submissions rests on the platform of their submissions with respect to the finding made in the judgment of 21 March 2012, then if there was no reasonable apprehension of bias or no failure to afford procedural fairness in the judgment delivered on 21 March 2012 (either as to the content of that judgment or the circumstances in which it was delivered) any allegation of apprehended bias must now rest solely on the matters said to arise from the judgment of 1 June 2012. 65Mr Evans submits that the cases cited at [28] to [36] of that judgment provide authority for the conclusion that I reached. He submits that, insofar as the defendants rely on the proposition that the judgment of 1 June 2012 contains a manifest error from which a reasonable person could discern an apprehension of bias, there is no error. 66Ms Francois submits that this fails to address the inconsistency between the judgment of 1 June 2012 (and consequential order) and order 2 made on 5 April 2012 and relies on the fact that the defendants were not heard (or on notice) that the whole of the value of the goodwill associated with the company name might be attributed solely to the plaintiff's shares. (Those matters are now the subject of the application to vary/set aside the 1 June 2012 judgment/orders and there has been no indication of any unwillingness by me to entertain that application on its merits.) 67The weight sought to be placed on the fact that the defendants were not heard on this aspect of the matter must be considered in the context that the parties had agreed that the matter should proceed on the basis of a decision made having regard to the parties' written submissions. Any error made in the "over-valuation" of the shares at that point falls within the rubric of appellable error. The import of any denial of procedural fairness in not having provided the defendants with an opportunity to argue why such an order should not be made falls to be seen in the context that the determination of a nominal value had been left by agreement to be determined without oral submissions and as to whether (having regard to the manner in which the previous error had been dealt with) there would be a reasonable apprehension that I might not bring a fair mind to the application to vary/set-aside the 1 June 2012 judgment once any error therein had been drawn to my attention. 68Mr Evans submits that there has been a failure by the defendants to identify the "thing" which it is said might lead the remaining issues in the case to be decided on anything other than a proper basis and have not articulated the logical connection between that "thing" and any feared deviation in the decision making process in the case. 69Ms Francois denies that this is the case, pointing to the matters set out in paragraphs [6] to [20] of the defendants' submissions of 20 June 2012 and the connection identified at [21], and emphasising that two of the "key" errors relied upon are errors of fairness. That said, the thrust of the submission is that because of the making of what are said to have been two errors in circumstances where the defendants assert procedural fairness (and because of the stated importance of those findings to any subsequent ruling on costs, the effect of which I cannot presently assess), there is a reasonable apprehension of bias. That seems to me very close to the reasoning exposed as fallacious in Michael Wilson. 70For completeness, I note that Ms Francois took issue with various of the submissions made by Mr Evans (at [20] to [22]) as to the history of the matter, which she submits have no proper foundation and are irrelevant to the issue now before me. Mr Evans denies that the submissions so made are unsupported by the evidence and submits that, this present application having been expressly brought "on instructions", it is appropriate in the circumstances (having regard to the evidence put forward in the case and the inferences available to be drawn from that evidence) for there to be a submission as to the true source of the allegation of bias. I do not consider it productive to enter into debate on this issue. I have not taken into account (in reaching my conclusion on the bias application) the existence or otherwise of any family issues as to Ms Fitzpatrick's shareholding in the company. Conclusion 71Insofar as the disqualification application rests largely on the allegations of denial of procedural fairness, I have had regard to the authorities as to the circumstances when it is incumbent upon a trial judge, as a matter of procedural fairness, to give notice to the parties of an intention to rely upon particular observations of a witness or to raise matters on which he or she may rely in reaching judgment on the matter (and in particular the reasons of Mason P in Kassem v Crossley & Anor; Kassem v Krayem & Anor [2000] NSWCA 276; Chaina v Alvaro Homes Pty Ltd [2008] NSWCA 353, at [2] and King CJ in Angaston & District Hospital v Thamm (1987) 47 SASR 177, at 178-179). 72Gaudron J in Re Association of Architects of Australia; Ex parte Municipal Officers Association of Australia (1989) 63 ALJR 298, at 305, said that: As was pointed out by Deane J in Sullivan v Department of Transport (1978) 20 ALR 323 at 343, procedural fairness requires only that a party be given "a reasonable opportunity to present his case" and not that the tribunal ensure "that a party takes the best advantage of the opportunity to which he is entitled". And it is always relevant to enquire whether the party or his legal representative should reasonably have apprehended that the issue was or might become a live issue. (my emphasis) 73In that regard, the question whether the valuation of shares should have been perceived to be an issue in the principal trial should take into account that Ms Francios in closing submissions addressed that very issue (albeit in terms dismissive of there being any such value). Nevertheless, Ms Francois' position is that the alternative claim for relief in relation to the oppression suit by reference to the value of the shares was not an issue that she considered to be before the Court at that time. As to the 1 June reasons, I accept that the basis on which I might attribute a nominal value was not addressed other than in the written submissions and the reliance placed on the authorities in relation to oppression had only been raised briefly in the closing submissions by Mr Evans at the hearing. 74In Chaina v Alvaro, Giles JA said (at [3]): Many considerations may come into whether there has been a denial of procedural fairness, as it is a question of practical fairness and justice. Amongst other things, where a party is represented the focus will ordinarily be on what should in fairness and justice be made known to the representative. It is not required that the representative be appraised of the judge's views generally, although if the judge is minded to decide the case on a completely different basis from that on which the case is being conducted, that should be raised, Selpsam Pty Ltd v Gahlev (2005) NSWCA 208; (2005) 3 DDCR 1 at [78] per Ipp JA. (my emphasis) 75In Adamson v Ede [2009] NSWCA 379, the question was raised as to whether a judge contemplating making a finding detrimental to a party was obliged, as a matter of procedural fairness, to warn that party that he was contemplating making such a finding and to give the party a proper opportunity to be heard about whether the findings should be made. In that case Campbell JA said (at [72]) that he did not regard Holt v Protective Commissioner (1993) 31 NSWLR 227 as standing for any general proposition that a judge should inform someone concerning whom he is contemplating making an unfavourable finding and give them a specific opportunity to argue against that finding being made, and noted that there was authority against a judge being under an obligation to warn parties that he may make findings detrimental to them, referring to what was said by Lord Diplock in Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295, at 369: Even in judicial proceedings in a court of law, once a fair hearing has been given to the rival cases presented by the parties, the rules of natural justice do not require the decision-maker to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental processes before he reaches a final decision. If this were a rule of natural justice, only the most talkative of judges would satisfy it and trial by jury would have to be abolished. 76In relation to the first of the errors identified by Ms Francois, I had understood from the pleadings (and the relief sought therein) that one of the issues for determination was the claim for relief in relation to oppression. In circumstances where the relief indicated in the closing submissions was for the payment of equitable compensation with a condition as to the transfer of the share and the payment of aliquot compensation for the share on a winding up of the company, that seems to me directly to raise the question of the value of the shares in the company, as did the claim for oppression itself. 77In any event, the test as to a reasonable apprehension of bias at that stage is not in my view satisfied having regard to the manner in which I dealt with the issue before me on 5 April 2012 as soon as it was raised. 78As to the second of the alleged errors, I had focused in my 1 June 2012 judgment on what was proper compensation in relation to the purchase of Ms Fitzpatrick's share in the company, in the context of the finding I had made of oppression. I considered the authorities outlined in my judgment and came to the view expressed. I accept that there is, at least on one view (though Mr Evans contends otherwise) an inconsistency between that finding and the terms of the order made on 5 April 2012. What I do not accept is that this gives rise to a reasonable apprehension of bias as to the manner in which any application to vary the judgment or vacate the orders is to be determined (once the complaint as to a lack of opportunity to address that issue had been raised). I would have thought that the manner in which the earlier issue was dealt with would dispel any reasonable apprehension in that regard. 79There is an understandable attraction, on an application such as this, to the course of simply acceding to the application by the defendants and leaving the matter to be dealt with by another judicial officer. However, I do not consider that that would be consistent with my duty (as indicated in the observations of Kirby P, as his Honour then was, to which I have earlier referred) nor do I consider that it would be consistent with the case management principles applicable in this Court. Appellable error (assuming for the purpose of this application, that there is appellable error in the findings of 1 June 2012) is not of itself sufficient to give rise to an apprehension of bias. I do not accept that the indication by Mr Slater on 5 April 2012 that the valuation would be significant from a costs perspective (or that a small difference in valuation might have "huge leverage") alters the position that there is no more than a potential appellable error in this regard. Nor do I accept that the findings can properly be described as punitive (even apart from the fact that I have no basis to determine the impact of such orders on the costs position of the respective parties at this stage). If that were to be the case, then so must the authorities to which I have referred in my earlier judgment be accepted as punitive. 80After much consideration, I have concluded that the application for disqualification for apprehended bias should be dismissed. I will hear the parties as to the directions to be made for the hearing of the balance of the Amended Notice of Motion.