Ronan v Australia & New Zealand Banking Group Ltd [2000] VSCA 77

Court of Appeal (Vic)|2000-05-12|Before: ORMISTON, CALLAWAY and BATT, JJ.A.

For the reasons stated above, the appeal, both as to claim and counterclaim, should be dismissed. In the light of our conclusions it is unnecessary to amend the parties to this appeal, inasmuch as the third executor, Patrick Ronan, is already bound by the original order.

"1. That the learned trial judge erred in law in not disqualifying himself from hearing and determining the case, in the absence of consent from all parties, because, at the time, the judge had a proprietary and/or a pecuniary interest in the outcome of the proceeding in that he had an 'indirect interest' in a 'moderate number of shares' issued by the respondent (the plaintiff in the proceeding)."

After a short adjournment, the following exchanges took place:

"MR PIRRIE: Your Honour, I'm indebted for the time. Your Honour, the history of this matter, and I won't go into detail in relation to that issue, but it goes back a number of years, Your Honour, and the relationship between the parties at this point in time, Your Honour, is such that no matter how independent Your Honour will no doubt be in his adjudications in this particular proceeding, my instructions are that my clients would always be concerned, depending on the outcome of this proceeding, as to what part, if any, that shareholding may have had in any conclusions Your Honour may ultimately make. To that extent, Your Honour, I am instructed to ask Your Honour to disqualify himself from hearing the matter.

The perception is, Your Honour, that - or the basis of it is that justice must not only be done, obviously that must be seen to be done, and as I've indicated the position between the parties is such that there would be concern at the end of the day as to whether or not any shareholding, and to what extent that shareholding may be, would impact upon any decisions Your Honour would make in the time of the trial, and in ultimately deciding the case.

HIS HONOUR: Yes. I hope I made it plain, Mr Pirrie, that the shareholding is indirect, and it's moderate. But in any event, those are your instructions - - -

HIS HONOUR: And I understand what your submissions are. Yes, Mr Sifris, do you have any submissions to make?

MR SIFRIS: Your Honour, we oppose that course. It's a matter for Your Honour. But the relationship between any indirect interest and the matters that require adjudication are so tenuous, with great respect, so as not to excite any reasonable apprehension of bias on the part of any bystander in the court. There's really no grounds.

HIS HONOUR: Mr Pirrie, I'm mind[ed] to disallow the objection, and to proceed with the case. In my view, the circumstances are such that there could be no reasonable apprehension of bias notwithstanding the indirect shareholding in which I have an interest. Now, I don't want to make the position more difficult for you than it is.

HIS HONOUR: If you wish to have more time to look at some cases, I'm prepared to give you some time, but not much time.

HIS HONOUR: I think we're all familiar with the [cases] on the perception of justice - - -

MR PIRRIE: Yes, Your Honour, it has a long protracted history this matter, and Your Honour will obviously be aware that the proceedings commenced in 1992. I think it's fair to say, Your Honour, that all parties are at this point in time keen to have the matter determined with some finality.

MR PIRRIE: Would Your Honour just bear with me just for one second while I clarify my position with my instructing solicitor?

MR PIRRIE: No, Your Honour, that won't be necessary."

Mr. Gillard contended that the judge erred in failing to disclose the nature and extent of his interest, by describing it only as "indirect" and "moderate". That deprived the appellants, so the argument proceeded, of an opportunity properly to consider their position and to make submissions. It was also said that it deprived this Court of the means of deciding whether his Honour should have disqualified himself. Reliance was placed on certain observations of Winneke, P. and Charles, J.A. in Clenae Pty. Ltd. v. Australia and New Zealand Banking Group Ltd.[49]. I do not think it necessary or prudent to express an opinion on that contention, because it does not fall within the grounds of appeal. The possibility that the Court might take that view was mentioned at the hearing.

The question ground 1 requires us to decide is whether the judge erred in not disqualifying himself in the absence of consent from all parties. Mr. Shaw submitted that Mr. Pirrie's objection was eventually abandoned, so that there may ultimately have been such consent. All his Honour said, so this argument proceeded, was that he was minded to disallow the objection. He expressed a tentative view but invited further submissions. Counsel sought instructions in open court and took the matter no further. The contrary interpretation of the exchanges is that his Honour expressed a firm conclusion that the circumstances were such that there could be no reasonable apprehension of bias but invited further submissions on the law. I am prepared to assume that the latter is the correct view. In my opinion ground 1 must fail for other reasons.

Until recently it was widely perceived that a judge who held shares in a litigant should ordinarily disqualify himself or herself. (I put to one side cases of waiver and necessity and exceptional cases of the kind referred to in the first two sub-paragraphs of [89] in the Clenae Case and I shall assume in favour of the appellants that the judge's "indirect" interest was equivalent to such a shareholding.) The strict view to which I have referred is, however, no longer open to us in the light of the Clenae Case. Winneke, P. and Charles, J.A. determined, as one of their Honours' rationes decidendi, that either the ordinary test of reasonable apprehension of bias is to be applied or else a special test, which Charles, J.A. described as follows at [59]:

"If there is a separate rule for automatic disqualification for financial interest, unrelated to a reasonable apprehension of bias, in my view the irrebuttable presumption of bias only arises (subject to questions of waiver or necessity) where the judicial officer has a direct pecuniary interest in the outcome of the proceeding. Such an interest would exist when the judicial officer has a pecuniary interest in one of the parties, and, as a direct result of the decision made, it can reasonably be said that that interest might be affected. If the question arises at the outset of a hearing, and the judge, after an objection is taken, remains in any reasonable doubt as to whether the judge's pecuniary interest might be affected by the outcome, doubt should be resolved in favour of recusal. Different considerations, such as necessity and fairness to all parties, would be involved if the question arises, as here, at a later stage in the hearing. In the present case, I would conclude that the learned judge's interest in the Bank, by reason of his shareholding or under the debenture, would not have been affected by the outcome of this action. Accordingly, on this test, the judge had no direct pecuniary interest requiring his disqualification. On this view, it is unnecessary to consider whether there is scope for a de minimis exception to the rule." (Emphasis added.)

See also [3] per Winneke, P.; Dovade Pty. Ltd. v. Westpac Banking Group[50] and Locabail (UK) Ltd. v. Bayfield Properties Ltd.[51]

The other ratio decidendi of the Clenae Case appears at [2], [60] and [91-93][52]. As to cases with more than one ratio, see R. v. Perfili[53] and the authorities to which reference is there made.

On the assumption in [100], the question is whether it can reasonably be said that an indirect and moderate interest in shares in the respondent might be affected as a direct result of the decision in the present case. There was some debate as to the time at which that question should be answered. Mr. Shaw relied on the judgment of Deane J. in Webb v. R.[54], where his Honour said:

"If the test of a reasonable apprehension on the part of a fair-minded observer with knowledge of the material objective facts fell to be applied by reference only to those facts which were apparent at the time, there would be much to be said for the view that the real likelihood or real danger test should be retained to be applied in cases where some of the damaging material facts - whether prior, contemporaneous or subsequent - as ascertained by the appellate court were not known at the time of the proceedings. In my view, however, the material objective facts are not so confined for the purposes of the test. The fair-minded observer is a hypothetical figure. While the question is not settled by any decision of the Court, it appears to me that the knowledge to be attributed to him or her is a broad knowledge of the material objective facts as ascertained by the appellate court, as distinct from a detailed knowledge of the law or knowledge of the character or ability of the members of the relevant court. The material objective facts include, of course, any published statement, whether prior, contemporaneous or subsequent, of the person concerned." (Emphasis added but footnotes omitted.)

The relevant time may depend on the purpose for which evidence of subsequent events is adduced in an appellate court. Here we are concerned with whether the judge erred in not disqualifying himself at the beginning of the trial by reason of interest. It is difficult to believe that subsequent events could be relevant to that issue.[55] The point need not, however, be decided. For, whether the matter is considered as at the first day of the trial or now and whatever a "moderate" interest may be in this context, it cannot reasonably be said that that interest might be affected as a direct result of the decision. Indeed the contrary view would be inconsistent with the opinion of the majority in the Clenae Case[56].

Ground 1 asserts only that the judge erred in not disqualifying himself because he had a proprietary or pecuniary interest (or both) in the outcome of the proceeding. The case was nevertheless argued on the footing that we should apply not only the test described by Charles, J.A. but also the ordinary test of reasonable apprehension of bias. Rather than assume that the Clenae test is necessarily and always stricter than the test of reasonable apprehension of bias, it is better to accede to the parties' invitation and test the matter in both ways.

The ordinary test is whether, in all the circumstances, a fair-minded lay observer with knowledge of the material objective facts might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the questions involved in the case[57]. In my opinion that test is not satisfied either, and again irrespective of the time at which it should be applied. A fair-minded lay observer with knowledge of the material objective facts, and making the most favourable assumptions in favour of the appellants with regard to the nature of his Honour's "indirect" and "moderate" interest, would not entertain a reasonable apprehension of bias. It would be foolish to do so. That is doubtless one of the reasons Mr. Pirrie made the submission below in the terms set out in [97] and did not press it any further when his Honour expressed the view that he did.

Accordingly I would not uphold ground 1. The main difficulty about ground 7 is that there was no proof of tender or of an intimation, even by implication[58], that a tender would be refused. So far as the other grounds of appeal are concerned, subject to two qualifications, I agree in the reasons of the other members of the Court.

At [57] their Honours say that each of the limbs of the definition of "the Customer" in clause 40(d) leads to the conclusion that the further advances in question were those made to the third and fourth partnerships. That may very well be so, but the construction of clause 40(d) is not without difficulty. I am content to say that, on the facts of this case as recounted in the leading judgment, at least one of those limbs leads to that conclusion.

I attach less significance to the appellants' solicitors' letters of 26th January and 1st February 1989.[59] The respondent's solicitors' reply to the former was in very guarded terms. The respondent had instructed them not to enter judgment if the appellants continued to co-operate in a manner satisfactory to the respondent and agreed to give further consideration to the other matters raised once it had received the valuer's report. There was no obligation to pursue the avenues described in the appellants' solicitors' letter.

[1] This ground was not pursued: see below para.47, esp. the footnote.

[2] [1999] VSCA 193 at para.46

[3] [1999] VSCA 35 esp. at paras.3 and 59

[6] (unreported, Batt, J., 14 June 1994)

[11] (1880) 16 Ch.D. 290 at 314 and 317-318

[13] (1884) 25 Ch.D. 692 at 703 and 705

[19] 4th edn., (reissue), vol. 20, paragraph 293

[30] Halsbury's Laws of England, 4th edn., Vol.20, (reissue) paras.101n4, 103n3 and 185

[31] [1894] VicLawRp 11; (1894) 20 V.L.R. 30, especially at 32 per Madden, C.J. for the Full Court

[32] (1888) 6 NZLR 659, esp. at 661

[35] (1816) 1 Mer.572; [1815] EngR 77; 35 E.R. 781

[39] In the commercial sense in contradistinction to the strict legal position, as explained in, e.g., Lindley and Banks on Partnership (16th ed.) 591: cf. Carter v. Renouf [1962] HCA 67; (1962) 111 C.L.R. 140 at 148; Tikva Investments Pty. Ltd. v. F.C.T. [1972] HCA 68; (1972) 128 C.L.R. 158 at 167-168; and Re F. [1941] VicLawRp 2; [1941] V.L.R. 6 at 11.

[40] [1974] 1 W.L.R. 391 at 394-395 per Templeman, J.

[43] In the circumstances it is not necessary to discuss the conceptual difficulties raised by Callaway, J.A. in Riseda Nominees Pty. Ltd. v. St. Vincent's Hospital [1998] 2 V.R. 70 at 77.

[45] See the letter of 18 October 1989, quoted in para.

[46] We have no recollection of any separate discussion of para.(b) during argument but there was an impermissible attempt to raise it in the written submissions in reply. Paragraph (b) raised in elaborate terms an alleged failure by the judge to address certain arguments put at trial as to the appellants' contention that the Bank had agreed to offer, and presumably sell, the Wallace land to them before any auction and thereby "exhaust all avenues" to enable them to retain the land. Much of the matter so raised is discussed below, in any event, but it is not appropriate to allow the reply to raise issues not earlier argued.

[47] At that time it seems that $337,000 was the highest valuation, but no offer at that price was ever made, nor, for obvious reasons, has it ever been asserted by the appellants that the Bank had agreed to sell at that price.

[48] It was also argued that the Bank was in breach of duty in failing to allow the appellants to make another offer at "the Bank's or higher valuation". There never had been any agreement which bound the Bank to accept the so-called "standing offer" (see the discussion of the agreement alleged under ground 8, in paras.[-). In any event any such offer had long since lapsed and was subsumed in the offer of $285,000. There is no substance in the contention.

49] [1999] VSCA 35 at [6-7] and [47].

[52] A critical witness had died. The alternative ratio was concerned with necessity, in the light of the authorities explaining the significance of a trial judge's personal assessment of a witness.

[55] Compare State of Victoria v. Psaila [1999] VSCA 193 at [32], dealing with disqualification by conduct, including published statements.

[56] See [28], where an idea is given of the scale of the respondent's operations and the size of its operating profit after tax, and [29], where reference is made to the much larger sums involved in that litigation.

[57] See, for example, Livesey v. New South Wales Bar Association [1983] HCA 17; (1983) 151 C.L.R. 288 at 293-294; Webb v. R. at 67 and Rozenes v. Judge Kelly [1996] VicRp 20; [1996] 1 V.R. 320 at 329.

[58] Compare Mahoney v. Lindsay (1980) 55 A.L.J.R. 118 at 120.

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