Michael Wilson and Partners Limited v Robert Colin Nicholls & Ors

Michael Wilson & Partners (Plaintiff) Robert Colin Nicholls (First Defendant) David Ross Slater (Second Defendant) PARTIES : Temujin Services Limited (Third Defendant) Temujin International Limited (Fourth Defendant) Temujin International FZE (Fifth Defendant) Shaikenov & Partners, LLP (Sixth Defendant) Scoulton Holdings Limited (Seventh Defendant)

COUNSEL : Mr M Walton SC (Plaintiff) Mr G Lindsay SC, Mr A Fox (First to Fifth Defendants)

SOLICITORS : Clayton Utz (Plaintiff) Henry Davis York (First to Fifth Defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Thursday 4 June 2009 ex tempore Revised 5 June 2009

50151/06 Michael Wilson & Partners Limited v Robert Colin Nicholls & Ors

JUDGMENT The matter before the Court 1 The defendants have objected to my hearing these proceedings due to commence in the next few weeks. 2 In consequence the defendants have addressed on the matter. 3 The plaintiff has determined that the objection is a matter as between the defendants and the Court and has not taken any part in the submissions which have been addressed to the Court. The principles 4 In Idoport v National Australia Bank [2004] NSWSC 270 I had occasion to examine the rules of procedure governing the manner in which a superior Court judge must deal with an objection to his or her hearing of a particular case. 5 Importantly the danger of a judge disqualifying himself or herself too readily was the subject of the observations in paragraphs 28:

It is important that judicial officers discharge their duty to set and do not, by exceeding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge they may be able to influence the composition of the bench : cf Re JRL ; Ebner at 348 [20] 6 The test to be applied for apprehended bias was referred to in paragraphs 15-24 and 27 of the judgment in Idoport:

The most recent authoritative formulation of the test for 'apprehended bias' is contained in the joint judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ in Ebner v Official Trustee in Bankruptcy; Clenae Pty Ltd & Ors v Australia and New Zealand Banking Group Ltd (2000) 205 CLR 337. In that case, the majority held (at 344) that 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" (emphasis added). With respect to the precise test to be applied in ascertaining whether such a reasonable apprehension exists, their Honours propounded the following (at 345): "[t]he 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. " [15]

Of critical importance is the construction of 'might', a term derived from the judgment of Mason, Murphy, Brennan, Deane and Dawson JJ in Livesey v New South Wales Bar Association (1983) 151 CLR 288 and utilised in deliberate contrast to previous dicta requiring a "real" apprehension of bias, in the sense that there exists a "high probability" of the same: R v Australian Stevedoring Industry Board; Ex Parte Melbourne Stevedoring Co Ltd (1953) 88 CLR 100 at 116, per Dixon CJ, Williams, Webb and Fullagar JJ . The majority in Ebner held (at 345) that: "[d]eciding whether a judicial officer…might not bring an impartial mind to the resolution of a question that has not been determined requires no prediction about how the judge … will in fact approach the matter. The question is one of possibility (real and not remote), not probability. "

See further: Bainton v Rajski (1992) 29 NSWLR 539 at 540, per Mahoney JA; Gas & Fuel Corporation Superannuation Fund and Ors v Saunders and Anor (1994) 123 ALR 323 (FCFCA) at 338, per Gummow and Heery JJ (with whom Davies J agreed); Hagan v Independent Commission Against Corruption [2003] NSWCA 93 at [16], per Mason P (with whom Hodgson JA and Davies AJA agreed). [16]

The above tests notwithstanding, it must nonetheless be borne in mind that the application of the 'principle of apprehension' aspect of the rule is necessarily predicated upon what Brennan, Deane and Gaudron JJ in Vakauta v Kelly (1989) 167 CLR 568 at 570 deemed a "real world" understanding of legal proceedings. Specifically, their Honours stated (at 570) that the " requirement of the reality and the appearance of impartial justice in the administration of the law by the Courts is one which must be observed in the real world of actual litigation." Alternatively expressed, the application of the relevant rule is thereby entirely contingent, within the parameters of the impartial administration of justice, on the circumstances of the case and the content of the matters said to give rise to an apprehension of bias. [17] Attributes of the "fair-minded lay observer"

The test for apprehension of bias such as to disqualify a judge is objective. It is a reasonable and not a fanciful or fantastic apprehension that must be established: Gascor v Ellicott [1997] 1 VR 332 at 342 per Tadgell JA, approved by the NSW Court of Appeal in Dovade Pty Ltd v Westpac Banking Group & Anor (1999) 46 NSWLR 168 at 188 [92]; see also Barbosa v Di Meglio [1999] NSWCA 307 at [8] per Mason P. Accordingly, the fictional observer, by reference to whom the test is formulated, is taken to be reasonable: Johnson at 493 [12]. [18]

The observer is not assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge: Webb & Hay v R (1994) 181 CLR 41 (Webb) at 73 per Deane J, cited with approval in Johnson at 493 [13]. The context connotes knowledge of "ordinary judicial practice" and the actual circumstances of the case: see Johnson at 493 [13] and Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 ("Laws") at 87 per Mason CJ and Brennan J. [19] Prejudgment as bias

A party alleging apprehension of bias in the form of prejudgment must show a reasonable apprehension on the part of the fictitious observer that "the decision-maker's mind is so prejudiced in favour of a conclusion already formed that he or she will not alter that conclusion irrespective of the evidence or arguments presented": Laws at 100 per Gaudron and McHugh JJ; see also JRL, Re; Ex parte CJL (1986) 161 CLR 342 ("Re JRL") at 352 per Mason J; Kwan v Kang [2003] NSWCA 336 ("Kwan") at [83] per Sheller, Ipp and Tobias JJA. [20]

The state of mind described as bias in the form of prejudgment is one so committed to a conclusion already formed as to be incapable of alteration; whatever evidence or arguments may be presented: Minister for Immigration and Multicultural Affairs v Jia (2001) 205 CLR 507 ("Jia") at 531-532 [71]-[72] per Gleeson CJ and Gummow J and at 564 [185]-[186] per Hayne J. Natural justice does not require the absence of any predisposition or inclination for or against an argument or conclusion: Jia at 531 [71] per Gleeson CJ and Gummow J. [21]

Saying that a decision-maker has prejudged or will prejudge an issue, or even saying that there is a real likelihood that a reasonable observer might reach that conclusion, is to make a statement which has several distinct elements at its roots: Jia at 564 [185] per Hayne J. "First, there is the contention that the decision-maker has an opinion on a relevant aspect of the matter in issue in the particular case. Secondly, there is the contention that the decision-maker will apply that opinion to that matter in issue. Thirdly, there is the contention that the decision- maker will do so without giving the matter fresh consideration in the light of whatever may be the facts and arguments relevant to the particular case." [Jia at 564 [185]] [22]

Most importantly: "there is the assumption that the question which is said to have been prejudged is one which should be considered afresh in relation to the particular case." [Jia at 564 [185]]

"The question is not whether a decision-maker's mind is blank; it is whether it is open to persuasion": [Jia at 531 [71] per Gleeson CJ and Gummow J]. [23]

Natural justice does not require the absence of any predisposition or inclination for or against an argument or conclusion: Jia at 531 [71]; see also Vakauta v Kelly (1989) 167 CLR 568 ("Vakauta") at 570-571 per Brennan, Deane and Gaudron JJ and at 575-576 per Dawson J. [24]… Comments made by judges must be considered in context

Any comments made by a trial judge on which a party seeks to rely as evidence of a reasonable apprehension of bias must be considered in the context in which they were made including the context of ordinary judicial practice: Johnson at 493 [13] and 494-495 [16]-[17]; Re JRL at 371 per Dawson J; Webb at 73-74 per Deane J; Kwan at [69]. The rules and conventions governing such practice are not frozen in time but take account of the exigencies of modern litigation: Johnson at 493 [13]. It is not appropriate to consider the comments of the trial judge in isolation from their relevant context. Accordingly, the judgments and transcripts relevant to the comments relied upon by a party must be considered when determining whether a trial judge prejudged relevant issues: Johnson at [13].[27] A short overview of the relevant background 7 The judgment delivered on 23 May 2008 set out a short overview of the then contentions and serves for present purposes as a convenient starting point albeit that the forensic approaches may have moved on. 8 The plaintiff, Michael Wilson & Partners ["MWP"] was said to be a large law firm incorporated in the British Virgin Isles and carrying out its business of providing legal services in Kazakhstan. Mr Michael Wilson was said to be a director and principal of MWP. Apparently MWP never operated in Australia. 9 The first and second defendants, Mr Robert Colin Nicholls [apparently an Australian barrister] and Mr David Ross Slater [apparently a New South Wales solicitor], were, on the plaintiff's case, previously employed by MWP. On the plaintiff's case, Mr Emmott was also a previous employee of MWP. It was said to be common ground that, while not a party to the present proceedings, Mr Emmott was involved in a related commercial arbitration taking place in London. 10 The plaintiff's case was that Mr Slater set up a small competing firm in Kazakhstan, in which both Mr Nicholls and Mr Emmott were employed as consultants. The plaintiff's case was that this firm was conducted through the third, fourth and fifth defendants [referred to respectively as "TSL", "TIL" and "TFZE" or collectively as "The Temujin companies"]. The sixth defendant, Shaikenov & Partners LLP ["SP"] was said to be [amongst other things] a beneficiary and until holder in TIL, and was not represented in these proceedings. 11 The plaintiff made a range of allegations regarding the conduct of the abovementioned defendants. Broadly speaking, these included allegations that the individual defendants, by various acts and at various times from February 2005 onwards, arranged, while in the employ of the plaintiff, to set up their own practice and divert business and opportunities that should have gone to the plaintiff [cf: McDougall J judgment of 20 February 2008 at 3]. 12 There were also allegations that the defendants' conduct after the termination of their employment breached their duty to maintain for MWP's benefit confidential information received as part of their employment. 13 Mr Nicholls, Mr Slater and Mr Emmott were said to have terminated their employment with MWP on 1 March 2006, 9 January 2006 and 20 July 2006 [respectively]. 14 The plaintiff's case was that the employment contracts of the first and second defendant were entered into in NSW, and are subject to NSW law. At least some of the defendants were served outside of NSW, but had submitted to the Court's jurisdiction. 15 The plaintiff's case in terms of the attempts to prove loss and damage appears to require the Court to travel through the highways and byways of numerous alleged activities of the defendants in and about complex commercial dealings from which the plaintiff claims it would have benefited but for the defendants' claimed wrongdoing Reasons for rejecting the objections to my hearing the proceedings 16 It is acknowledged that the proceedings are complex in the extreme. Also that over the years a number of interlocutory decisions have been determined by myself. Many of these decisions originally involved ex parte applications in circumstances where urgent freezing orders were sought and where a number of jurisdictions were concerned. 17 The crucial parameter is constituted by a proper understanding of the relevant context. That context connotes knowledge of "ordinary judicial practice" and the actual circumstances of the case. The simple fact is that every decision which I made was an interlocutory decision informed by the well-known principles to be applied by the Court on those applications. The many interlocutory judgments were replete with numerous references to the fact that the Court was doing no more than treating with the serious question to be tried and balance of convenience parameters. 18 These parameters required the Court to take into account the evidence before it, but only as at an interlocutory level. One only of numerous examples in this regard is to be seen in a section of paragraph 80 of the Courts 55 page judgment [2008] NSWSC 501:

"The evidence of Mr Wang suffices as at an interlocutory level as establishing that THL has been established as a Bahamas vehicle through which TIL has channelled funds. To be noted is the admission by Mr Slater at paragraph 86 of his affidavit of 30 April 2008 that "payments to and from the THL Account, are in effect, payments to and from TIL" The defendants' grounds of objection 19 The defendants put forward two grounds of objection:

ii. The second is the contention that in any event there would be an inevitable denial of procedural fairness absent my recusing. 20 It is appropriate to deal with these objections seriatim. The first ground of objection - reasonable apprehension of bias 21 As to the reasonable apprehension of bias grounds these are divided into a number of subparagraphs not all of which are strictly necessary to be responded to. 22 The first ground is adumbrated in paragraph 3 of the defendants outline [MFI D2] [noting that the defendant also relies upon its earlier outline submissions MFI D1] 23 As to the matter referred to in a 3a [i] [which is conveniently treated with together with 3a[ii]], there is no substance in the complaint that the Court entertained ex parte applications by the plaintiff in closed Court on a number of occasions. This is the nature of the judicial process. The applications were for freezing orders across a number of jurisdictions. On each occasion reasons for giving the ex parte relief were given and to some extent these are identified in the defendants outline at 3a[ii]. The confidentiality orders were deemed necessary on the evidence. 24 As to the matter referred to in 3a[iii], the orders are self-explanatory and again on each occasion, reasons were given for ex parte orders. To the extent that the orders were ex parte the Court was satisfied that the plaintiff was entitled at that time and in those circumstances to have the orders which were made, made. The costs complaint is of no substance 25 As to the matter referred to in 3a[iv] relating to the closed Court application made in April 2007, there is no substance in the complaint. Following the making of the subject application for further ex parte orders and by reason of the complexities involved in the Court following, with the necessary precision, the close detail the subject of the submissions from the bar table, the Court determined not to make any orders pending the plaintiffs counsel, Mr Jones, furnishing a more detailed submission in writing. This included the need to better understand the analysis counsel had been putting concerning what had come forward concerning the UK Court of Appeal decision: Attorney General for Gibraltar v May [1999] 1 WLR 998. As I is clear [at transcript 11 April 07 [at 13-14]], I indicated that I would read the subject materials aided by the more detailed submission, and I reserved a decision pending the provision of that document to the Court. 26 As to the matter referred to in 3b[i] and 3b[ii] there is no substance in the complaint. These were interlocutory orders based upon the evidence put before the Court and in each case reasons were given. Each of the relevant occasions involved an ex parte exercise of the appropriate approach to determining the strength or weakness of a particular case and where the balance of convenience lay. 27 As I made clear to Mr Lindsay SC when speaking to his outline, I had considerable difficulty following exactly what the suggested facts were in relation to the matters referred to in 3c and 3d. If and when orders were made permitting access to previously restricted material they were no doubt acted upon. 28 When and if confidential proceedings had been marked as 'confidential' and no order had been made opening up the proceedings to the defendants, those orders would have been pervasive. 29 There were no 'private dealings' with the plaintiff [unless that phrase be construed as referrable to applications for ex parte orders, and the need to impose confidentiality regimes in that regard]. 30 I remain uncertain as to what the complaint sought to be adumbrated in 3d is. The list judge at some stage made certain orders as did I: cf my order made on 26 May 2008. 31 There is no substance in the proposition put forward in 3 e. This complaint suggests that the plaintiff has acted in a manner that, to a fair-minded observer, suggests that I was the plaintiffs 'judge of choice'. There is no substance in that proposition concerning a fair-minded observer. 32 As to the matter referred to in 3f, as I have previously made clear, every application, whether ex parte or otherwise, was always dealt with by an approach consistent with the principles which inform an interlocutory hearing. The Courts task in that circumstance is to treat with whether or not the plaintiff has established its case as sufficiently serious and to treat with the balance of convenience parameter. This was made clear in the reasons delivered on each occasion when an interlocutory application has required to be dealt with. 33 To cite only one of the defendant's complaints in this regard: it is that in the reasons for judgment [2008] NSWSC 501 [23 May 2008], findings 'as to credit' were given. One of the paragraphs in the reasons which the defendants relied upon was in the following terms:

I reject the contention that the freezing orders require to be discharged because the plaintiff's pleaded case is seen to be weak. No such finding has been made. Quite to the contrary, the freezing orders were made and the further freezing ordersare to be made:

i. because the plaintiff has established its case as being serious [the defendants own evidence as to solicitation of the plaintiff's clients in apparent breach of the defendants' contractual restraints has already been referred to];

ii. because the balance of convenience dictates that situation pending final determination of the respective rights in the usual way. The second ground of objection - Inevitable denial of procedural fairness 34 The second ground of objection is put as follows:

[A]ny trial over which the Judge presides is likely to be attended by a denial of procedural fairness because the questions to be determined at trial would include questions about the bona fides of the plaintiff's ex parte applications to the Judge and whether the plaintiff, in making those applications, deliberately misled the Judge. 35 I am unable to discern why any such inevitable denial of procedural fairness must or would be the fact in the circumstances where the Court acting in accordance with the generally accepted principled approach to ex parte applications, has on each occasion given proper reasons for its orders. 36 There is no substance in this objection 37 In the circumstances where the Court was called upon to determine the strength of the plaintiff's case to make and then extend freezing orders, it was only appropriate for the Court to pay close attention to the evidence mobilised by the parties, but always an exercise of the principled approach to interlocutory applications. 38 Where the plaintiff has complained for example, of the Courts reference 'to inconsistencies' between the affidavits and disclosure information furnished by Mr Slater in the British Version Island proceedings, as compared with that furnished in similar documents in the New South Wales jurisdiction, those comments simply reflected the Court's obligation, common in interlocutory applications, to scrutinise very closely such applications against the evidence then before the Court. 39 Approaching the matter by reference to the observations which came forward in Ebner supra, I am entirely satisfied that a fair-minded lay observer would not reasonably apprehend that I might not bring an impartial mind to the resolution of the proceedings. As the majority later held:

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

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