Midas Management Pty Ltd v Equator Communications Pty Ltd [2009] NSWSC 1034 | Case summary

JUDGMENT 1 HIS HONOUR: Midas Management Pty Ltd ("Midas") appeals a decision of the Local Court, alleging bias or apprehended bias, by which decision the learned Magistrate refused a disqualification application. The proceedings were before the Magistrate pursuant to orders issued by the Supreme Court in an earlier appeal, which remitted the matter to the Local Court to be determined according to law. The same Magistrate, who had heard the earlier proceedings, dealt with the matter on remitter. 2 After setting out the principles relating to disqualification on the basis of apprehended bias, it will be necessary to deal with the basis of the remitter by this Court to the Local Court, before reaching a conclusion of the issue raised in the appeal. Principles Relating to Disqualification 3 A judicial officer (or member of a tribunal required to act impartially) must, as part of the oath of office, bring an impartial mind to the issues to be decided. The purpose of the rules on bias and apprehended bias is to ensure impartiality and independent assessment, both in fact and in appearance: ANI v Spedley (1992) 26 NSWLR 411 at 418 and following, per Kirby P. 4 The general principle is that a judge should not hear a case if, in all the circumstances, the parties, or the public, if properly informed of the procedure and circumstances, might entertain a reasonable apprehension that the judge might not bring an impartial or unprejudiced mind to the resolution of the issues to be heard and determined: Livesey v New South Wales Bar Association [1983] HCA 17; (1983) 151 CLR 288 at 293-294; R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 258-263. 5 The principle is easily and often reiterated and relatively easily understood. Its application is, at times, difficult. In ANI v Spedley, Kirby P expressed the difficulty in applying the principles to particular cases and said: "It is no disrespect to the judges who have ventured their opinions upon the resolution of problems such as this to identify a certain ambivalence in the expression of the tests which are to be applied. One decision upholds the asserted apprehension of bias. The next dismisses it. One decision asserts the duty of the judicial officer to sit and not disqualify himself or herself. The next reverses a decision of a judge to sit on the ground of apprehended bias. As in this case, different judges considering the same facts reach different conclusions. To say this merely acknowledges the unique features of each case; the differing composition of the courts and tribunals concerned; the inescapably different predilection and sensitivities of judges seeking to interpret the response of the hypothetical reasonable or fair-minded observer; and the ebb and flow of judicial opinion over time.

(e) 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: see Re JRL; Ex parte CJL (at 352); Re Polites; Ex parte Hoyts Corporation Pty Ltd (1991) 173 CLR 78." ( Spedley , supra, at 417-418, per Kirby P). 6 The importance of adherence to the principle of impartiality is fundamental to the administration of justice. So too is the appearance of impartiality; not only to the parties, but to the public. If the public were to have the impression that partiality infected the decisions of courts, then the courts could not function in the manner that they do; they would lose legitimacy. In a democracy such as ours, the exercise of power (including judicial power) depends on the legitimacy of the institution exercising it. 7 The importance of impartiality, and its appearance, also requires that, in the absence of apprehended bias, judges should continue to hear and determine proceedings. Thus, judges must not accede to such an application, unless the tests for bias (or apprehended bias) are satisfied. Otherwise, such applications may be seen by the public to be "judge shopping" and also undermine the legitimacy of the process: Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342 at 352; Re Polites; Ex Parte Hoyts Corporation Pty Ltd [1991] HCA 25; (1991) 173 CLR 78; Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd [No 4] (1986) 6 NSWLR 674 at 689. 8 In Hoyts, supra, the High Court of Australia issued writs to require a particular member of an industrial tribunal to continue to hear and determine proceedings, in circumstances where the member had disqualified himself. The member disqualified himself because he had, prior to his appointment, advised a party on the employment structure implemented by it, which structure was the subject of the proceedings before him. 9 The reaction, often referred to as "the easy option", that, if there be an application to disqualify, it is better not to sit, is not an available or appropriate reasoning process. Whatever be the inclination of the judicial officer, it is necessary to determine whether there is a reasonable apprehension that an impartial mind cannot be brought to the determination of the issues before the court. 10 In order for there to be a reasonable apprehension of the relevant kind, it is necessary that a fair-minded observer, properly informed, might reasonably apprehend that the judicial officer might not bring an impartial mind to the resolution of the issues in the proceedings: Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 at 344. In that case, the High Court said: "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." (See Ebner at 345 [8] per Gleeson CJ, McHugh, Gummow and Hayne JJ.) 11 I agree, with respect, with the view expressed by Kirby J that one ought not attribute to the lay observer too great a sophistication in her or his assumed knowledge. To do so is to impute the knowledge of a reasonable judge (or legal practitioner): see Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 at 509 [54], citing with approval S & M Motor Repairs Pty Ltd v Caltex Oil (Australia) Pty Ltd (1988) 12 NSWLR 358 at 376; see also Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568. 12 However much care must be taken to ensure the lack of partiality and the appearance of impartiality, the test for bias or apprehended bias is not satisfied merely because a party, even reasonably, takes the view that it is unlikely to succeed before the judicial officer. What is required is actual, or reasonably apprehended, pre-judgement on the issue (not being an issue of law) that is to be determined, or a subsidiary issue thereto. Circumstances of Remitter 13 It is unnecessary to set out all of the circumstances that initially gave rise to the proceedings in the Local Court. Her Honour Associate Justice Harrison summarised the facts as found by the learned Magistrate. Her Honour did so at paragraphs [11] to [20] of Midas Management v Equator Communications [2008] NSWSC 255. More relevant is the procedural history and the initial determination by the learned Magistrate of the issue that gave rise to the remitter. Her Honour Associate Justice Harrison set out, supra, at paragraphs [21] and following, the pleading history and framework before the learned Magistrate. 14 Essentially, and ignoring other grounds of appeal, which were wholly unsuccessful, and any issues of fact and law solely relevant to thereto, her Honour ordered remitter on the basis that an error of law occurred in the manner in which the learned Magistrate dealt with the problem of inconsistent judgments that were before him. The original proceedings raised the issue of the proper contracting party, asserting, primarily, a contract between Midas and Equator Communications Pty Ltd ("Equator"), based on the conduct of Equator's agent. In the alternative, the pleadings raised a contract with the "agent" directly. However, the causes of action against both were not in contract. The cause of action against agents and undisclosed principals is the one cause of action. In the case before the learned Magistrate, the cause of action against Midas was for breach of contract, whereas the cause of action against the "agent" was for misleading and deceptive conduct. As a consequence, the success of each action depended upon the finding of agency (or lack of agency). 15 The cause of action for misleading and deceptive conduct was based upon the "agent's" representation that the contract was being entered on behalf of Midas, which representation was the conduct that was said to be misleading and deceptive. The contract claim was based upon the existence of a contract with Midas. 16 The "agent" did not defend the proceedings and default judgment issued against the "agent". The learned Magistrate determined that the contract was with Equator, and not directly with the agent. As a consequence of that finding, if the learned Magistrate were to issue judgment against Equator, without setting aside the default judgment, there would be inconsistent judgments. While the default judgment against the "agent" was extant, judgment could not issue against Equator. 17 The learned Magistrate dealt with that issue by setting aside the default judgment and issuing judgment against Equator. In so doing, his Honour considered Petersen v Moloney [1951] HCA 57; (1951) 84 CLR 91, and a number of other judgments. The learned Magistrate correctly stated the principle, as being that a party cannot maintain two actions, where success in one of the actions would be inconsistent with success in the other. As pointed out by Harrison AsJ, at [68]: "When the Magistrate sought submissions from the parties on the issue of inconsistent judgments, neither party addressed that issue." 18 His Honour the learned Magistrate "considered that the default judgment had been procured irregularly, in that the defendants in bad faith were seeking to hide behind it in order to protect the assets of the Trust." (See Harrison AsJ at [73].) Her Honour determined that the Magistrate had correctly, notwithstanding the absence of appropriate submissions on the question, determined that both judgments could not stand. Equator had submitted to the Magistrate that the judgments were not inconsistent. The learned Magistrate then, of his own motion, set aside the default judgment against the agent and issued judgment against Midas. Her Honour Associate Justice Harrison determined that the learned Magistrate was correct in determining that he had jurisdiction to set aside, of his own motion, a default judgment, but determined that the principles in Petersen v Moloney, supra, required that it be Equator that elected, and remitted the matter to the Local Court to deal with the matter in accordance with law. 19 As earlier stated, on remitter, the matter came before the same learned Magistrate, and, as is implicit in this appeal, Equator elected to proceed against Midas and set aside the default judgment against the agent. His Honour, the learned Magistrate, after such election had been communicated, reiterated, in form and/or effect, the orders initially made. Conclusion 20 It is, it seems, necessary for me to set out the passage, on which her Honour Associate Justice Harrison relies, from Petersen v Moloney, supra, in which the High Court said: "The case is clearly one of alternative liability. Either Moloney or Pulbrook might be liable to the plaintiff, but both could not be. In such a case a final election to treat either as liable would preclude the plaintiff from proceeding against the other, and it is a well-settled general principle that, while the commencement of an action against one of two persons alternatively liable does not, the entry of judgment against one of them does, constitute a final and irrevocable election: see Morel Bros. & Co. Ltd. v. Earl of Westmoreland (1903) 1 KB 64; (1904) AC 11. In the present case the plaintiff (as she was clearly entitled to do) proceeded against both of the persons possibly liable, claiming alternatively as against each. After Walker J. had pronounced his decision she entered judgment against Pulbrook. Did this amount to a final election to treat Pulbrook as liable to the exclusion of Moloney? Apart from appeal, clearly it would amount to such an election. But the judgment was subject to appeal, and we do not think that the plaintiff an, by suing in the alternative and having judgment against one defendant, be precluded from maintaining on appeal that the judgment against that defendant should be discharged and that judgment should go against the other defendant. This is what the plaintiff seeks on this appeal, for her notice of appeal asks that the whole of the judgment of Walker J. should be set aside and that in lieu thereof the judgment should be against Moloney. She has never asked, or put herself in a position where she must be treated as asking, for a judgment against both defendants. Herein the case differs from Morel Bros. & Co. Ltd. v. Earl of Westmoreland (1903) 1 KB 64; (1904) AC 11 and from Moore v. Flanagan (1920) 1 KB 919. In each of those cases the plaintiff had obtained judgment against one of two defendants, of whom one but not both might have been liable, and then, without setting aside or seeking to set aside that judgment, had sought judgment against the other. This offended against the rule stated by Atkin L.J. (as he then was) in Moore v. Flanagan (1920) 1 KB 919, at p 928 that 'a plaintiff cannot sue an agent to judgment and then sue the principal'. The plaintiff in this case is not offending against that rule. It is to be noted that, although the rule is often stated in terms which would seem to make it depend on election, Vaughan Williams J. (as he then was) in Hammond v. Schofield (1891) 1 QB 453, at p 457 said: - 'The basis of this defence is not the election or unconscious election, if there can be such a thing, of the plaintiff, but the right of the co-contractor when sued in a second action on the same contract to insist, though not a party to the first action, on the rule that there shall not be more than one judgment on one entire contract'. This passage is quoted by Scrutton L.J. in Moore v. Flanagan (1920) 1 KB 919, at p 925. Moore v. Flanagan (1920) 1 KB 919 was not, and this case is not, a case of 'co-contractors', but the same rule is applicable, and it must rest on the same basis. There must not be more than one judgment where there is only one antecedent obligation. What Vaughan Williams J. said in Hammond v. Schofield (1891) 1 QB 453 seems to be in accord with what Lord Cairns said in Kendall v. Hamilton (1879) 4 AC 504, at pp 514, 515. In Buckingham v. Trotter (1901) 1 SR (NSW) 253, at p 261; 18 WN 217 Darley C.J., speaking for the Full Court, said: - 'The principle to be deduced from the authorities is that, in the case of principal and agent, the election to sue one or the other is not concluded until after final judgment has been obtained against the one or the other, but, after obtaining this final judgment against the one, so long as it remains of record, no action is maintainable against the other, lest such second action bring about the inconvenient results alluded to by Lord Cairns in Kendall v. Hamilton' (1879) 4 AC 504, at pp 514, 515 . Here the plaintiff asks that judgment against the one shall no longer remain of record but that judgment against the other shall be substituted for it. There is no rule which prevents her from doing this." (At 102-104) 21 The election to which the High Court referred, and of which her Honour was mindful, was an election by Equator. The justice (or the result that may be unjust) of which her Honour was mindful was the possibility that the result of the election may be that one or other of the agent or Midas may be unable to meet any liability, and it was for Equator to elect against which of the two it sought to proceed to finality. 22 The learned Magistrate had determined each of the issues of law and fact that were necessary to be determined. The election was solely a matter for Equator. There was no remaining issue for the learned Magistrate to determine. The Magistrate, with respect, in a well-intentioned application of the principles of law, elected on behalf of Equator. This he was not entitled to do. At the same time, given the findings of fact already made, the failure of the appeal on all other grounds, and the application of the principles of law, the learned Magistrate had no choice but to accept the election proffered by Equator. 23 As her Honour had noted, the learned Magistrate had found that the agent was virtually bankrupt and that Midas was apparently having difficulty raising the funds needed to pay its creditors. The election, namely, against which of Midas or the agent, Equator should proceed, was a matter for Equator, not the Magistrate. 24 To repeat part of the citation from ANI v Spedley (per Kirby P at 417.F): "There is no final or ultimate formula which can be easily applied to dispose of cases such as the present. In each case, the judicial officers concerned, whether at first instance or on appeal, must apply the well-worn words. But in the end, the response which each gives may be more instinctive and less deductive than the reasoning of the courts has tended to suggest ." [Emphasis added.] 25 In this case, the learned Magistrate has nothing left to determine. There is no issue before him upon which there could have been, or could be, pre-judgment. That which remained was solely at the election of Equator. The remitter was solely for the purpose of ensuring that Equator elected its own interests, having utilised, to the extent necessary, the Local Court's processes to ensure that the election was based upon a knowledge of its consequences. 26 The remitter that issued from this Court did not result in the need for a rehearing of any issue that had been determined. It resulted only in ensuring that the proper procedure for an election was followed. In the circumstances, no issue of bias can arise and the appeal must fail. For those reasons, the internal arrangements of the Local Court, in allocating the proceedings to the same Magistrate, ought not be the subject of interference by this Court on appeal: Steedman v Baulkham Hills Shire Council (No 2) (Court of Appeal, 13 August 1993, unreported). 27 The Court makes the following orders:

Midas Management Pty Ltd v Equator Communications Pty Ltd

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