Shaw v Australian Pump Industries Pty Ltd

Federal Court of Australia|2014-10-09|Before: Foster J

REASONS FOR JUDGMENT 1 On 9 October 2014, I declined to recuse myself from this proceeding. The applicant (Mr Shaw) had sought an order that I do so by par 1 of an Interlocutory Application filed by him on 26 August 2014. The only basis advanced by Mr Shaw for the order for recusal claimed by him was that I had demonstrated bias towards him at a Directions Hearing on 13 August 2014 when discussing with him the effect which his bankruptcy had on his capacity to continue prosecuting the claims for relief made by him in this proceeding. These are my reasons for declining to recuse myself.

Background 2 Mr Shaw commenced employment with the respondent, Australian Pump Industries Pty Ltd (API), on 20 January 2014 pursuant to an employment contract which Mr Shaw contends was made on or about 10 January 2014. Mr Shaw remained employed by API for a relatively short time, his employment having ultimately been terminated, so it appears, on or about 17 February 2014. 3 Being dissatisfied with his treatment at the hands of API, Mr Shaw commenced this proceeding on 27 March 2014. He claimed damages for breach of contract for misleading and deceptive conduct and for misrepresentation. He also claimed compensation for breaches of various statutory duties and legal norms which he contended were applicable to his relationship with API. 4 When the proceeding was first returned before the Court, given that the amount likely to be awarded to Mr Shaw in the event that he were successful would be relatively small, I ordered that the matter be mediated by a Registrar. I also ordered that the proceeding be relisted before me on 11 June 2014. 5 Unfortunately, mediation proved unsuccessful. For that reason, on 11 June 2014, I directed a timetable designed to ensure that the pleadings filed in the matter were in an intelligible form with a view to thereafter fixing an early hearing date. To this end, I granted to Mr Shaw general leave to amend both his Originating Application and his Statement of Claim. 6 On the same day that I made those orders (11 June 2014), Gordon J made a sequestration order against Mr Shaw's estate (as to which, see Yarranova Pty Ltd v Shaw (No 2) [2014] FCA 616). 7 When I made the orders which I made on 11 June 2014, I was not aware that her Honour was reserved on an application that Mr Shaw's estate be sequestrated nor was I aware that her Honour proposed to deliver judgment on that application in the afternoon of 11 June 2014. 8 When the proceeding was next listed before me (13 August 2014), Counsel for API informed me that Mr Shaw had been made bankrupt in the afternoon of 11 June 2014. Notwithstanding that fact, on 18 June 2014, Mr Shaw filed an Amended Originating Application and an Amended Statement of Claim pursuant to the leave to amend granted on 11 June 2014. 9 On 30 June 2014, Mr Shaw filed a Notice of Appeal from the judgment of Gordon J delivered on 11 June 2014. That appeal was heard on 11 November 2014. On 12 December 2014, the Full Court dismissed Mr Shaw's appeal (Shaw v Yarranova Pty Ltd [2014] FCAFC 171). 10 Mr Shaw has recently taken steps to have his bankruptcy annulled. I understand that that application has been heard but not yet determined. 11 Although some of the matters mentioned in pars 9 and 10 above were not known as at 9 October 2014, I have referred to them in order to bring the narrative up-to-date. What was known as at 13 August 2014 and also as at 9 October 2014 was that Mr Shaw had filed an appeal from the decision of Gordon J and that that appeal was to be heard in November 2014.

The Listing on 13 August 2014 12 At the commencement of the Directions Hearing held on 13 August 2014, and after Counsel for API had informed me that Mr Shaw had been made bankrupt, Counsel submitted that the whole of this proceeding was stayed by reason of Mr Shaw's bankruptcy. 13 I then turned to Mr Shaw in order to hear from him. The exchange between Mr Shaw and me proceeded as follows (commencing at transcript p 3/5): HIS HONOUR: I don't think so. Right. Now, Mr Shaw, what do you say about all that? MR SHAW: Well, firstly this is late notice to get this advice. I spoke to - well, I emailed the respondents back in 18 June and followed up with several emails after that once I was advised of the bankruptcy, to ask them what their position was and I've only just received information yesterday from them, to say what their position is. But, basically, I say that section 60(4) of the Bankruptcy Act applies and I am permitted to pursue this action in my own name. HIS HONOUR: That's not right, Mr Shaw. MR SHAW: Why do you say that, your Honour? HIS HONOUR: It's just not right. It's not within that exception at all. MR SHAW: Well, I think we would - - - HIS HONOUR: This is a claim for damages for breach of contract. MR SHAW: Well, I'm not here to argue that today, your Honour, because this is - - - HIS HONOUR: Well, I'm not going to entertain it, Mr Shaw, because it's just plainly wrong. MR SHAW: Well, I think, I have the right to make an application on that basis. HIS HONOUR: I don't think that's right. MR SHAW: Well, sorry. I can't argue with you. HIS HONOUR: No. Not really. MR SHAW: No. HIS HONOUR: When's your appeal going to be heard, do you know? MR SHAW: It's set down for the sitting date between 28 November [sic]. HIS HONOUR: Is it? MR SHAW: Yes. HIS HONOUR: I think the best thing is - this action won't be - what's your trustee doing what you've got an appeal on for, anything, or is he waiting? MR SHAW: They've agreed to wait for the matters to resolve. 14 From transcript p 4/5, the discussion moved on to the issue of whether I should make an order under s 60 of the Bankruptcy Act 1966 (Cth) in order to protect Mr Shaw's position pending the determination of his appeal. I did make such an order on 13 August 2014. 15 At transcript p 5/24-29, I said: Mr Shaw, what I'm inclined to do is to stand this matter over to a date in December by which time we may have some idea what has happened with your appeal. We may not but, at least, we will know what the progress has been at that point. That means that your present action will be protected from being disposed of by the trustee pending the appeal and your rights, such as they may be, will be protected. Now, are you happy with that course? 16 Mr Shaw answered in the affirmative and then returned to his s 60(4) point. The exchange then proceeded in the following terms (transcript p 5/31-transcript p 6/37): MR SHAW: That aspect, certainly, your Honour, but I do still maintain that 60(4) applies to my action and I may need to, obviously, make an application for that to be heard. HIS HONOUR: Well, if you wish, you can do that but I will indicate to you that I do have a view about it as I conveyed it to you but, in any event, I will hear it but I won't hear it until after the appeal because there's no point. If you win the appeal, you can bring the action anyway. Do you follow? MR SHAW: But if it's delaying my right to pursue the action if I - - - HIS HONOUR: That's the worst that's happening. Yes. MR SHAW: Yes. Well, is that fair? HIS HONOUR: Well, I think so. You obviously don't. MR SHAW: Well, it seems like you're prejudging the issue before you've seen the evidence, your Honour. HIS HONOUR: It's not - it's a legal point. You're suing for breach of contract, aren't you? MR SHAW: And also for personal damage. HIS HONOUR: What personal damage? MR SHAW: Personal damage to myself. HIS HONOUR: All right. Well, if you want to bring that application, I will consider whether I will hear it before the appeal but I'm indicating to you, it's very unlikely I will. MR SHAW: Well, it seems that you are prejudging this issue. HIS HONOUR: Well, you can say that. MR SHAW: I beg your pardon. HIS HONOUR: You can make - you can say that if you wish. You can make an application about that if you wish but the first thing you need to do is bring forward your application that this matter somehow be continued in the face of the bankruptcy. That's the first thing you need to do. All right. Now, if you want to do that, please do it. It doesn't help spending resources and time and money on things like that. All right. Well, the only order I will make today is the one I've made. The matter will stand over to 9 December 2014 at 9.30 am before me. I note that Mr Shaw has indicated he wishes to make an application of some kind directed to the proposition that, notwithstanding his bankruptcy and pending the determination of his appeal from the sequestration order made against his estate, he is entitled to seek to have further directions made in the present proceeding at this time. MR SHAW: Fair enough. Thank you. HIS HONOUR: All right.

The Relevant Principles (Apprehended Bias) 17 In Embertec Pty Ltd v Energy Efficient Technologies Pty Ltd (No 2) [2013] FCA 347, at [4]-[13], I set out my understanding of the relevant principles governing disqualification of a judge for apprehended bias by reason of pre-judgment in the following terms: 4 A judge should not sit to hear a case if, in all the circumstances, a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question which he or she is required to decide (Johnson v Johnson (2000) 201 CLR 488 at 492-493 [11]-[12] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ; Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 293-294 per Mason, Murphy, Brennan, Deane and Dawson JJ; and Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 344-345 [6]-[8] per Gleeson CJ, McHugh, Gummow and Hayne JJ). 5 The test for apprehension of bias involves a consideration of possibilities, not probabilities, although the possibilities must be real and not remote (Ebner at 345 [7]; Cadbury Schweppes Pty Ltd v Darrel-Lea Chocolate Shops Pty Ltd (No 2) (2009) 174 FCR 175 at 199 [71] per Greenwood J and at 211-212 [121] per Besanko J). 6 The application of the test requires two things. First, it requires the identification of what it is said might lead the judge to decide a case other than on its legal and factual merits. Second, there must be an articulation of the logical connection between that matter and the feared deviation from the course of deciding the case on its merits (Ebner at 345 [8]; Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427 at 445 [63] per Gummow ACJ, Hayne, Crennan and Bell JJ; Cadbury Schweppes Pty Ltd v Darrel-Lea Chocolate Shops Pty Ltd (No 2) 199 [71] per Greenwood J and at 211-212 [121] per Besanko J). 7 The reasonable or fair-minded observer is not taken to have a knowledge of the law nor should there be attributed to her or him an awareness of the judicial process that ordinary experience suggests not to be the case (Vakauta v Kelly (1989) 167 CLR 568 at 585 per Toohey J). The reasonable hypothetical observer understands that a judge is professional but is not presumed to reject the possibility of pre-judgment. Were it otherwise, apprehension of bias would never arise in the case of the professional judge (British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283 at 333 [144] per Heydon, Kiefel and Bell JJ). 8 The lay observer is not informed by a detailed knowledge of the law nor is he or she invested with "undue knowledge and sophistication" or "highly specialised knowledge" (Johnson v Johnson at 502-503 [42] and 506 [49] per Kirby J; and Cadbury Schweppes Pty Ltd v Darrel-Lea Chocolate Shops Pty Ltd (No 2) at 200-201 [74] per Greenwood J). Nevertheless, the fictitious bystander is not "wholly uninformed and uninstructed about the law in general or the issues to be decided" (Johnson v Johnson at 508-509 [53] per Kirby J). The hypothetical observer is assumed to know the issues to be decided and the circumstances in which they came to be decided. 9 Exceptions to the apprehension of bias rule include necessity, waiver and special circumstances (British American Tobacco Australia Services Ltd v Laurie at 333 [146]). 10 The pre-judgment principle is one basis upon which a reasonable apprehension of bias may be found to exist. If a fair-minded person reasonably apprehends or suspects that the Tribunal has pre-judged the case, that observer cannot have confidence in the decision (Re Watson; Ex parte Armstrong (1976) 136 CLR 248 at 263). This notion is based upon the fundamental principle that justice must be seen to be done as well as be done. 11 The relevant test is whether a reasonable observer might conclude that the decision-maker might not bring to his or her task an impartial mind by reason of pre-judgment, in the sense that the decision-maker might be so committed to a conclusion as to be incapable of persuasion to a different view (Cabcharge Australia Ltd v Australian Competition and Consumer Commission [2010] FCAFC 111 at [25] per Kenny, Tracey and Middleton JJ). Reasonable apprehension of bias by reason of pre-judgment must be firmly established (Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352 per Mason J). A conclusion of reasonable apprehension of bias is not to be drawn lightly (Vakauta v Kelly at 584-585). 12 The applicant submitted that one instance in which a fair-minded observer might entertain a reasonable apprehension of bias by reason of pre-judgment is if the judge hearing the matter has previously expressed clear views about a question of fact which constitutes a live and significant issue in the subsequent case or about the credit of a witness whose evidence is of significance on such a question of fact (Livesey v New South Wales Bar Association at 300). 13 In the present case, the applicant relied upon certain remarks which I made about the evidence of a witness called in support of the applicant's claim for interlocutory injunctive relief (Mr Georgevits). Mr Georgevits is a consulting electrical engineer. The applicant also relied upon the circumstance that I expressed some views, albeit provisionally, in respect of the respondents' claim that the patent was invalid because it was not fairly based upon the broadest form of the invention as expressed in the specification for the patent. 18 I applied these principles to my consideration of Mr Shaw's recusal application.

Mr Shaw's Case 19 In the first iteration of Mr Shaw's case, the only part of the pleaded case that could have been interpreted as raising a claim for damages for personal injury was the following allegation made at par 15(d) of the Statement of Claim: 15. In reliance of [sic] the representations and truth thereof the Applicant: … (d) Suffered loss and damage, anxiety, loss of reputation, distress and disappointment when [API] breached conditions of the employment contract and summarily terminated the contract. 20 Paragraph 15 appeared under the heading: "Breaches of s 52 and s 53B of Trade Practices Act". It was found under a sub-heading: "Representations". 21 In his Amended Originating Application filed on 18 June 2014, Mr Shaw claimed in several places in the document damages for mental illness, depression, loss of reputation, anxiety, distress, duress, humiliation and disappointment suffered by him as a result of the various causes of action then relied upon by him. It is fair to say that, when due regard is paid to his Amended Statement of Claim filed on 18 June 2014, Mr Shaw claimed damages of that type in respect of all of the causes of action then relied upon by him. 22 By his Interlocutory Application filed on 26 August 2014, in addition to seeking an order that I recuse myself from the proceeding, Mr Shaw sought an order in the following terms: 2. The Applicant's action & claim is an action that is categorised as a personal injury and/or wrong in accordance with s 60(4) of the Bankruptcy Act 1966 and the Applicant is permitted to conduct the proceeding in his own right. 23 By an email which was sent on 3 September 2014 to the solicitors for API and copied to the Court, Mr Shaw said that he wanted to amend further his Originating Application and Statement of Claim and needed time to do so. His intention was to make clearer those claims which he considered fell within s 60(4). 24 On 5 September 2014, the matter was again listed before me for directions. At p 4/44-p 6/10 of the transcript for that day, the following exchange took place between Counsel for API and me: MR BELLAMY: And for that reason my proposal would be that if your Honour is to allow Mr Shaw to do that he can do it, but my submission would be your Honour would require him to do that and have that statement of claim back before the court at a date after the Full Federal Court has dealt with the bankruptcy. HIS HONOUR: Well, I don't know about that. You see, what - and I will ask him in a minute how long he needs, but the - I've got these two motions. I've got interlocutory applications, one from your side which you quite correctly describe as a defensive application, and I have Mr Shaw's application. I am not - I am not saying anything about how I will deal with those applications at the moment because I don't want Mr Shaw to feel that I have views about it. I have got an open mind about it, but I think the first step in dealing with both of them whatever the outcome may be in due course is to allow him to do what he's suggesting so that he is in a position where he feels what he has done puts forward the point in the best way that he can, and then we will decide what we do with the motions when they come on. That's the logical way of looking at it, I think. MR BELLAMY: Subject to this, your Honour. I would ask to be heard on this. The practical and legal reality is that at the time of Mr Shaw's bankruptcy, the proceeding, which had been articulated in an originating process and in the statement of claim were unamended, and were ineluctably caught by section 60. I don't want your Honour to make - - - HIS HONOUR: No. MR BELLAMY: - - - a ruling on that and I don't want Mr - - - HIS HONOUR: I had - I had a look at that. I'm not sure it's as clear as that. He had a claim for damage to his reputation. He had a claim for mental stress in the original claim. MR BELLAMY: That's true, but ultimately my point is, your Honour, and that's why I don't want to be heard on it. It's something - - - HIS HONOUR: No, these points will come forward on the motions I think when they're actually heard. MR BELLAMY: Something will be argued about that at a later point in time. My point is though, practically speaking, even if we have a debate upon Mr Shaw's proposed further amended statement of claim or if it's an amended statement of claim depending on how you bake it, where we will end up is in a situation where Mr Shaw wants to proceed with respect to some actions where the trustee will have an interest insofar as some mixed or related actions have vested, and it seems to me that practically speaking it will be impossible for us to proceed past a point of pleading until the Full Federal Court has decided the bankruptcy question - - - HIS HONOUR: Mr - - - MR BELLAMY: - - - because - - - HIS HONOUR: Mr Bellamy, that may be right. That may be right, but at this stage, at this point, I am not prepared to - to make that decision. I would like to get the first step that Mr Shaw has in his mind in the ring so that we can see whether what you say is correct or whether there is another way of proceeding in light of what he puts to me. I just don't know, but I do think that we - that we can't simply say that you are so correct right now that I am not going let him to do - - - MR BELLAMY: I am never that correct, your Honour. HIS HONOUR: No, no, but I - I mean you may turn out to be absolutely correct both in terms of the substance of the matter, and also the case management issue, but I - I think that step 1 is to let him do what he wants to start with and then we will see. 25 In order to ensure that Mr Shaw had a fair opportunity to present his argument based upon s 60(4) of the Bankruptcy Act, on 5 September 2014, I made the following orders: THE COURT ORDERS THAT: 1. Leave be granted to the applicant, Mr Shaw, to amend his Amended Originating Application and his Amended Statement of Claim both of which were filed on 18 June 2014 in such manner as he may be advised, such Further Amended Originating Application and Further Amended Statement of Claim to be filed and served by 7 October 2014, upon terms that the leave to amend so granted is without prejudice to the right of the respondent to argue that any further Amended Originating Application and Further Amended Statement of Claim filed pursuant to such leave are not truly documents in respect of which leave should have been granted. 2. Mr Shaw's Interlocutory Application filed on 26 August 2014 and the respondent's Interlocutory Application filed 1 September 2014 be fixed for hearing at 9:30 am on 9 October 2014 before Foster J. 3. The question of costs of both Interlocutory Applications and the proceedings generally to date be reserved. 4. Liberty to apply be granted to both parties on three (3) days' notice or on such shorter notice as a Judge might allow. THE COURT DIRECTS: 5. The solicitor for the respondent notify Mr Shaw's trustee in bankruptcy of the fact that there are two Interlocutory Applications listed before the Court on 9 October 2014 and of the substance of those applications by no later than 9 September 2014. 26 The reference in the orders made on 5 September 2014 to an Interlocutory Application filed by API is a reference to the Interlocutory Application filed by that corporation on 1 September 2014 by which it sought an order for security for costs against Mr Shaw. API described this application as "a defensive application". API argued that its security for costs application would only have to be dealt with if the Court allowed Mr Shaw to proceed with his claim for damages for personal injury within the meaning of s 60(4) of the Bankruptcy Act. 27 As I have already mentioned, on 9 October 2014, I heard and determined Mr Shaw's application that I recuse myself from this proceeding. 28 Prior to that date, Mr Shaw had filed a brief Submission in which he submitted that it was reasonable for the hypothetical observer to think that the matter in hand (viz whether or not Mr Shaw could pursue the present proceeding at least to the extent that he claims damages for personal injury) had already been decided by the end of the Directions Hearing held on 13 August 2014 when due regard is paid to the exchanges which took place between Mr Shaw and me at that Directions Hearing. In an affidavit affirmed by him on 21 August 2014, Mr Shaw seemed also to suggest that I had manifested bias towards him in the sense of apprehended bias when dealing with his application that this proceeding be the subject of continuing directions and case management notwithstanding that his appeal against Gordon J's decision to sequestrate his estate had not been determined as at 13 August 2014 and was listed for hearing in November 2014. 29 In the Second Amended Originating Application and Second Amended Statement of Claim filed by Mr Shaw on 7 October 2014, Mr Shaw persisted with his contention that he had suffered mental illness, anxiety, depression, loss of reputation, distress, intimidation, humiliation and disappointment, all of which, he submitted, constituted "personal injury or wrong done to [him as] the bankrupt" within the meaning of s 60(4) of the Bankruptcy Act. 30 13 August 2014 was the first listing of this proceeding after Gordon J made a sequestration order against Mr Shaw's estate. It was then that the parties informed me, for the first time, that Mr Shaw had been made bankrupt. At my instigation, Mr Shaw applied for an order pursuant to s 60(2) of the Bankruptcy Act extending the date by which his trustee in bankruptcy must decide whether to prosecute or discontinue this proceeding until thirty (30) days after the determination of Mr Shaw's appeal from the judgment of Gordon J. I made that order. 31 On 13 August 2014, Mr Shaw also indicated to me that he intended to press his argument that he was entitled to pursue all of the claims made by him in this proceeding notwithstanding that he was bankrupt. He submitted that s 60(4) of the Bankruptcy Act permitted him to do so. He informed me that he may need to make an application raising this point for decision. 32 As is apparent from the exchanges recorded in the transcript of 13 August 2014 which I have extracted at [13]-[16] above, I was not immediately attracted to Mr Shaw's proposition expressed, as it was, in vague and general terms. The exchanges between Mr Shaw and me were robust but no different from exchanges which commonly take place in argument, even with litigants in person. Although I had initially indicated to Mr Shaw that I would not entertain his foreshadowed application, by the end of the Directions Hearing I had reconsidered that view and was quite prepared to do so even though my preliminary view as to its prospects had not changed. It seemed to me that, if Mr Shaw's bankruptcy appeal failed, I would have to determine whether Mr Shaw was entitled to prosecute some or all of the claims for relief made by him in this proceeding in his own right and for his own benefit notwithstanding his bankruptcy. I took the view, however, that the most efficient way of dealing with the issues presented by Mr Shaw's bankruptcy was to await the outcome of his appeal and then consider the next steps in light of that outcome. In order to protect Mr Shaw, I added a note to the orders which I made on 13 August 2014. That note was in the following terms: 3. NOTES that Mr Shaw has informed the Court that he may wish to make an application that, notwithstanding his bankruptcy and notwithstanding the fact that he has appealed from the orders made by Gordon J on 11 June 2014, he is immediately entitled to have further directions made in this proceeding with a view to having this proceeding progress to a hearing. 33 Mr Shaw filed his recusal application on 26 August 2014. By the same application, he sought orders designed to progress this proceeding including by having his s 60(4) point determined as soon as possible, even if that meant doing so before his bankruptcy appeal had been decided. 34 Mr Shaw did not press any part of his 26 August 2014 Interlocutory Application on 5 September 2014. Rather, on that occasion, he sought yet another opportunity to amend his pleadings in order to ensure that he had placed himself in the best possible position to argue his s 60(4) point. 35 On 9 October 2014, which was almost two months after 13 August 2014, Mr Shaw pressed his recusal application and the other claims for relief made in his Interlocutory Application filed on 26 August 2014. I declined to recuse myself and deferred consideration of the s 60(4) point. I anchored this latter decision in case management principles. 36 Thus, by the end of the listing on 9 October 2014, Mr Shaw had brought forward an application designed to have his s 60(4) point determined and I had deferred consideration of that application until after his bankruptcy appeal was determined. At no time did I refuse to entertain that application. It remains on foot. 37 In my judgment, the time at which the question of apprehended bias needed to be assessed was 9 October 2014 when the recusal application was actually heard. Although, on 13 August 2014, I had expressed a preliminary view as to Mr Shaw's prospects of success in relation to his foreshadowed s 60(4) application, it would have been quite clear to the reasonable bystander that, by 9 October 2014, I had tempered those views somewhat and had accepted that Mr Shaw's proposition was not unarguable. Also, by then, Mr Shaw had again amended his pleadings in an endeavour to make clear which of his claims were covered by his s 60(4) point. 38 In my view, although Mr Shaw confined himself to the remarks which I made on 13 August 2014 as the basis for his recusal application, for the proper determination of that application, the fair-minded lay observer should be taken to have seen and heard not only what happened at the Directions Hearing on 13 August 2014 but also what happened at the listings on 5 September 2014 and 9 October 2014. 39 When the entire course of the three listings to which I have referred is considered, apprehended bias has not been made out in respect of the Court's consideration and determination of Mr Shaw's s 60(4) point. That point remains to be decided. 40 It was for the above reasons that I declined to recuse myself from this proceeding. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Foster.

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