Supreme Court of SA|2000-12-20

SOUTHERN EQUITIES CORP LTD & ORS v BOND & ORS No. SCGRG-96-113 [2000] SASC 450 (20 December 2000)

SUPREME COURT RULES -- COMPETENCY OF THE APPEAL - DECISION OF JUDGE NOT TO DISQUALIFY SELF Appeal, by leave, against an order of the intended trial judge dismissing applications that he disqualify himself from further hearing any proceedings and that the trial of the action be heard by another Judge - whether the appeal is incompetent - consideration of whether the Full Court may properly entertain the appeal - effect of entry of formal order refusing disqualification and ancillary orders. SUPERVISORY PROCESSES Whether judge of Supreme Court subject to supervisory process. APPREHENSION OF BIAS -- REASONABLE APPREHENSION OF BIAS BY REASON OF PREJUDGMENT Judge made findings on interlocutory applications for Mareva injunctions - these related to issues of fact and the conduct and credit of the appellants - findings made on documentary material alone - confluence between findings of fact on the Mareva applications and issues of fact to be determined in the litigation as revealed by pleadings - whether a reasonable apprehension of bias, by reason of apparent prejudgment, arose - whether judge erred in refusing to disqualify himself.

Supreme Court Act 1935 (SA) s 5(1), s 11(2), s 50(1), referred to.
IOOF Australia Trustees Ltd v Seas Sapfor Forests & Ors [1999] SASC 249;
Australian National Industries Ltd v Spedley Securities Ltd (In Liq) (1992) 26 NSWLR 411;
Mason, "Judicial Disqualification for Bias and Apprehended Bias and the Problem of Appellate Review" (1998) 1 Constititional Law and Policy 21;
Campbell, "Review of Decisions of a Judge's Qualification to Sit" [1999] QUTLawJl 1; (1999) 15 QUTLJ 1;
Tilmouth and Williams, "The High Court and Disqualification of One of its Own" (1999) 73 ALJ 72, discussed.
Kapetanos & Anor v Selig & Ors (1984) 37 SASR 493;
R v Watson: Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248;
Barton & Anor v Walker & Anor (1979) 2 NSWLR 740;
Nicholson v Griffiths (1988) 143 LSJS 204;
Brooks v The Upjohn Company & Ors (1998) 156 ALR 622;
Rajski v Wood & Ors (1989) 18 NSWLR 512;
Gas & Fuel Corporation Superannuation Fund & Ors v Saunders & Anor [1994] FCA 1237; (1994) 123 ALR 323;
Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272;
Ebner v The Official Trustee in Bankruptcy [2000] HCA 63;
Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors (1992) 57 SASR 180;
Rogerson (1990) 45 A Crim R 253, considered.
Australian Constitution s 75(v), referred to.
Craig v The State of South Australia [1995] HCA 58; (1995) 184 CLR 163, considered.
Ebner v The Official Trustee in Bankruptcy [2000] HCA 63;
Johnson v Johnson [2000] HCA 48; (2000) 174 ALR 655;
Livesey v NSW Bar Association [1983] HCA 17; (1983) 151 CLR 288, applied.
Re Morling; Ex parte Australian Meat Industry Employees Union (1985) 66 ALR 608;
R v Hutchison (1993) 171 LSJS 364;
Grassby v The Queen [1994] HCA 30; (1994) 181 CLR 41, distinguished.
Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342;
Australian National Industries Ltd v Spedley Securities Ltd (In Liq) & Ors (1992) 26 NSWLR 411;
Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70;
R v Masters, R v Richards, R v Wunderlich (1992) 26 NSWLR 450, discussed.
S & M Motor Repairs Pty Ltd & Ors v Caltex Oil (Australia) Pty Ltd & Anor (1988) 12 NSWLR 358;
Re Polites & Anor; Ex parte The Hoyts Corporation Pty Ltd & Ors (No 2) [1991] HCA 25; (1991) 173 CLR 78;
R v Watson; ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248;
Re Lusink; Ex parte Shaw (1980) 32 ALR 47;
Vakuata v Kelly (1989) 167 CLR 288;
Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41;
Reg v Australian Stevedoring Industry Board & Anor; Ex parte Melbourne Stevedoring Co Pty Ltd [1953] HCA 22; (1953) 88 CLR 100 at 116, considered.

Counsel: MR J CUDMORE - Solicitors: COSOFF CUDMORE & PARTNERS

Counsel: MR A HARRIS QC - Solicitors: GROPE HAMILTON

Counsel: MR M LIVESEY WITH MR S DOYLE - Solicitors: FISHER JEFFRIES

Judgment No. [2000] SASC 450

SOUTHERN EQUITIES CORPORATION LIMITED (In Liquidation) (ACN 008 721 926) & ORS v BOND & ORS

1 This is an appeal, by leave, against an order made by Debelle J on 14 November 2000. He dismissed applications by the appellants that he disqualify himself from further hearing any proceedings in this action and that the trial of the action be heard by a Judge other than himself. He ordered that the appellants pay the costs of and incidental to the applications.

2 When the matter came before the Court as presently constituted, the respondents took no point as to the competence of the appeal. Indeed, they urged the Court to deal with the relevant issues in the interest of the economic conduct of the litigation.

3 Having heard the submissions of the parties I am content to accept that, in the particular circumstances of this case, the Full Court may properly entertain the appeal. Had this been a purported appeal against a bare refusal by a trial judge to recuse himself, I would have been constrained to adhere to the reasoning expressed by me in Kapetanos & Anor v Selig & Ors (1984) 37 SASR 493, which was based on what fell from the High Court in R v Watson: Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 266 and derives support from Barton & Anor v Walker & Anor (1979) 2 NSWLR 740, Nicholson v Griffiths (1988) 143 LSJS 204 at 210 and a dictum of Doyle CJ in the recent case of IOOF Australia Trustees Ltd v Seas Sapfor Forests & Ors [1999] SASC 249 ("IOOF"). With the greatest respect, I perceive nothing in Brooks v The Upjohn Company & Ors (1998) 156 ALR 622 or Australian National Industries Ltd v Spedley Securities Ltd (In Liq) (1992) 26 NSWLR 411 ("Spedley") which convincingly impugns that reasoning.

4 In Spedley (at 437) Mahoney JA expressed the view that Barton v Walker was properly decided. However, he was able to distinguish it by reason of the fact that, in the case then under consideration, the appeal was founded on a decision to refuse an application that the action not be listed before the judge in question and that the trial date be vacated. As Doyle CJ pointed out in IOOF, it is clear that, if some order is made by a Judge before an action is finally disposed of, a complaint of bias may properly be raised in connection with an appeal against the relevant order (Rajski v Wood & Ors (1989) 18 NSWLR 512 at 518, Gas & Fuel Corporation Superannuation Fund & Ors v Saunders & Anor [1994] FCA 1237; (1994) 123 ALR 323 at 337).

5 To employ the words of the Chief Justice, the authorities establish the principle that, if there is an appeal properly before the Court, albeit before the final disposition of the case, it must be open to the appellant to argue, in support of that appeal, any ground that could be argued had the ground of appeal been taken at the conclusion of the case, rather than during it.

6 It was on such a basis that the respondents conceded that the present appeal was properly before this Court as to all issues sought to be ventilated by the appellants.

7 I therefore turn to the issues which were argued before it.

8 Before doing so, it is necessary to identify the context in which the appeal arises.

9 These proceedings were instituted in 1996, at the instance of the liquidator of Southern Equities Corporation Ltd (in liquidation) ("SECL"), which was formerly known as Bond Corporation Holdings Limited. The respondent Bond Corporation Pty Ltd ("BCPL") was a wholly owned subsidiary of SECL.

10 On 23 December 1993, following the collapse of the so-called "Bond Group", SECL was placed into liquidation by order of this Court.

11 In the course of his duties, the liquidator has pursued extensive investigations, both in Australia and overseas, in an endeavour to identify and get in the assets of SECL. In particular he has looked into the questions of the beneficial ownership and mode of disposition of an extensive collection of valuable artworks, which have collectively been referred to as "The Alan Bond collection".

12 In the present proceedings, the liquidator asserts that SECL and other entities within the Bond Group purchased and became the beneficial owners of a series of artworks which formed portion of The Alan Bond collection. In essence he alleges that the defendants in these proceedings (who include Alan Bond, his sons Craig and John Bond and the defendant Caboche) at various times became parties to a conspiracy to deal with the relevant artworks, to the detriment of and in fraud upon SECL and BCPL. It is also alleged against certain of the defendants that they have been guilty of breaches of statutory and fiduciary duty, unconscionable conduct, conversion and breaches of relevant statutory provisions. The liquidator claims a very large sum of money by way of damages and interest.

13 In its present form, the statement of claim runs to some 145 pages and contains complex pleas. It is said that the ultimate trial of the action will occupy at least six weeks. That may prove to be a substantial under estimate.

14 The liquidator filed applications seeking Mareva injunctions and other orders against some of the defendants and certain other persons who are not parties to the action.

15 By an application dated 11 February 2000 he sought to prevent the disposal of land in Queensland ("the Carindale land") and the proceeds of sale of it, so that the relevant assets would be preserved, to be available to satisfy any judgment debt to which the plaintiffs may be held entitled.

16 Debelle J dealt with an application as to Ms Caboche filed on 11 September 2000, on an ex parte basis, on that day. On the basis of the material before him he made an interim Mareva order in respect of a substantial sum of money said to be held to her credit at the Challenge Bank at its Perth Branch, Western Australia. He directed service of the application and associated documentation on Ms Caboche and fixed a return date for the application, together with other matters in the proceedings.

17 For the purposes of the application related to the Carindale land (which was dealt with on an inter partes basis) Debelle J had before him a substantial quantity of affidavit evidence, as well as transcripts of examinations on oath of various persons, including relevant defendants, pursuant to the provisions of the Corporations Law.

18 It should be mentioned that Debelle J has, for some considerable time, been the member of the long and complex cases judicial panel who has been assigned to manage this litigation in preparation for trial. He has also been assigned as the trial judge in respect of it.

19 The hearing of the inter partes applications extended over some five hearing days, during which the evidentiary material was canvassed in considerable detail. Debelle J published full written reasons for his decision on 14 September 2000. He acceded to the application in respect of the Carindale land.

20 In the course of his reasons he summarised the basis of the liquidator's claim in the action in these terms:-

"Shortly stated, the plaintiffs allege that in December 1989 SECL and Bond Corporation owned certain works of art, namely 13 paintings and one sculpture. They further allege that these works of art had an insured value of some $6 million; that the works of art were purportedly sold by Alan Bond and Mr Peter Beckwith in breach of their duties as directors of the plaintiff corporations for $922,500, a sum which, on the basis of the plaintiffs' allegations, was grossly below true value; that the true purchasers of the paintings were Alan Bond and his son, Craig Bond or interests associated with them; that all of the works of art have been sold or otherwise disposed of in a series of transactions in which the defendants have participated to varying degrees; and that the defendants are liable, among other things, for damages for the fraudulent dealings and to deliver up the paintings. The plaintiffs allege that all of the dealings in the works of art are void and should be set aside on the ground that the defendants Alan Bond and Peter Beckwith acted in breach of their fiduciary duty in disposing of the paintings in this way and that the other defendants participated and assisted in those breaches of duty and conspired to defraud SECL and Bond Corporation. The total loss is alleged to be some $12.9 million."

21 The learned Judge observed that, for the purposes of the Mareva injunction application before him, the defendants concerned conceded that the plaintiffs had established a prima facie case in respect of $A300,000, being part of a sum of $A798,667.71 paid into the trust account of one Redmond, a solicitor who had, from time to time, acted for Craig Bond and John Bond. (The $A300,000 was said to be the proceeds of the sale of two of the works of art, the subject of the action.) They disputed the existence of a substantial cause of action as to the balance of the claim. However, Debelle J determined that aspect against them.

22 In the course of his reasons Debelle J summarised the nature of the development of the Carindale land, the interlocking corporate structures related to it and the nature of the involvement of various members of the Bond family within that structure, as revealed by the evidentiary material before him.

23 In doing so, he noted a key role played by Hastings Finance Pty Ltd ("Hastings Finance") in the ultimate distribution of moneys to members of the Bond family; and that the directors of that company were the present appellants.

24 During his analysis of the situation Debelle J described the situation revealed by the evidence in these terms:-

"The Carindale land is being subdivided and sold for residential purposes. It is a large parcel of land and is being divided into about 500 residential allotments. The development has proceeded in stages. In June 1999 two stages remained to be completed. The development is being conducted by a joint venture called the Carindale Joint Venture. The members of the joint venture are Fairoak, Topsfield and Hastings Finance. Distribution of the income of the joint venture is discretionary. John Bond decides how and to whom the income is to be allocated. All of the profits of the Carindale Joint Venture have been paid to Hastings Finance, which has also borne losses. It appears that the joint venture commenced its operations in May 1995. There is a question whether a corporation incorporated in Texas in the United States of America and called Dampier Inc ("Dampier") was a member of the joint venture. I will return to that issue."

25 He then proceeded to consider the material bearing on the genesis and role of Dampier, which, inter alia, required him to consider an affidavit sworn by Redmond.

26 It is necessary that I recite his findings in that regard in extenso. Debelle J wrote:-

I now deal with the question whether Dampier was a member of the Carindale Joint Venture. The evidence concerning this issue comprises certain documents and evidence which the liquidator has obtained by means of examinations conducted pursuant to s 596A and s 596B of the Corporations Law or the statutory predecessors of those provisions. Mr Redmond swore an affidavit instead of being examined. The liquidator obtained orders for the examination in the United States of America of Mr Peter Philpott who is a lawyer practising in the State of Texas. Much of the following is based on the affidavit of Mr Redmond and the examination of Mr Philpott and the documents which each has produced.

In January 1995 Craig Bond instructed Philpott to incorporate two companies. They were Dampier, which was to be incorporated in Texas, and Stoneham International Investments Ltd ("Stoneham"), which was to be incorporated in the British Virgin Islands. It seems that Craig Bond also instructed Philpott that a person wished to invest money in land in Queensland and that the money was to be paid to Stoneham and then to Dampier and then to a bank account in Queensland. Dampier was incorporated in Texas on 13 January 1995. Stoneham was incorporated in the British Virgin Islands on 19 January 1995.

In January 1995, Mr Jurg Bollag informed Philpott that the sum of $US3.2 million was to be transferred to Stoneham. Mr Bollag is a person whom the plaintiffs allege has been very instrumental in assisting the defendants in this action in their allegedly wrongful dealings. It is alleged, among other things, that Bollag has arranged for payments of proceeds to Bond family interests. Philpott was also instructed by Bollag that that sum of $US3.2 million was to be transferred by Stoneham to Dampier and thence to Carindale.

On 31 January 1995 Philpott caused a bank account to be opened in the name of Stoneham with Barclays Bank at Tortola in the British Virgin Islands. On 8 February 1995 the sum of $US3,244,445.25 was paid into the account of Stoneham at Barclays Bank at Tortola.

In February 1995 Philpott instructed Barclays Bank to transfer the sum of $US3.2 million from Stoneham to Dampier at its account at Overton Bank and Trust at Fort Worth, Texas. On 27 February 1995 Barclays Bank transferred the sum of $US3,200,095 to Dampier's account at Overton Bank and Trust at Fort Worth, Texas. It seems that Philpott must have amended the request for the amount to be transferred from $US3.2 million to $US3,200,095.

On 28 February 1995 Dampier transferred $US3,182,000 to Redmond's trust account at the branch of the ANZ Bank at 324 Queen Street, Brisbane. The sum of $US3.182 million converted at the then prevailing rate of exchange to $A4.3 million.

According to Redmond, the sum of $A4.3 million was to be a loan from Dampier. He received instructions from John Bond concerning Dampier early in 1995. John Bond saw Redmond in Brisbane. He told him that a company called Dampier, which had incorporated in one of the United States of America, was interested in establishing a joint venture for the development of the Carindale land. He said that Dampier could be contacted through a Mr Peter Philpott in Fort Worth, Texas. Redmond says that he neither spoke to Philpott nor contacted him in any way. Although he now has no independent recollection of doing so, Redmond prepared a loan agreement between an unnamed lender and Carindale. It is reasonable to infer for the purpose of this application that the lender was Dampier. The loan agreement was not executed. John Bond informed Redmond that Dampier would pay $4.3 million into Redmond's trust account on 2 March 1995 and that that sum was to be paid in turn to Suncorp Metway in payment of the first instalment of the purchase price. On 2 March 1995, the sum of $4.3 million was deposited in Redmond's trust account. Redmond says that he had no other knowledge as to the source of the sum of $4.3 million.

On 16 June 1995 Philpott sent a letter to John Bond at Carindale at its office in Perth stating that the directors of Dampier had resolved to convert the loan into an investment in the joint venture and to forgive the accrued interest on the loan. There is a document purporting to prove that the resolution was made on 12 June 1995. This is consistent with Philpott's evidence that in May 1995, Craig Bond told him that the Carindale development was not going well and that it would not be possible to repay Dampier the money it had lent Carindale. It was decided to convert the loan to an investment in the joint venture to develop the land. Subsequently, Dampier agreed to forego its interest in the joint venture. Later, on a date which Redmond cannot recall, John Bond instructed Redmond to prepare a joint venture agreement between Fairoak, Topsfield and Hastings Finance. Dampier was not a member of the joint venture as John Bond had told Redmond that it was no longer to be a party.

On 2 July 1995 the sum of $4.3 million was paid into Redmond's trust account at the ANZ Bank at its branch at 324 Queens Street, Brisbane. On the instructions of John Bond, Redmond disbursed the sum of $4.3 million in the following manner:

(1) The sum of $2,103,030.30 was paid to Suncorp Metway being the first of three annual instalments in respect of the purchase by Carindale of the Carindale land.

(2) The sum of $2,096,569.70 was paid to Hastings Finance.

(3) The sum of $59,400 was paid to the Office of State Revenue for land tax in relation to the subdivision of the Carindale land.

(4) The sum of $31,000 was paid to W P Brown and Partners, Engineers engaged in relation to the Carindale land.

(5) The sum of $10,000 was paid as legal fees to Redmond.

The evidence suggests that the amount of $2,096,569.70 paid to Hastings has since been applied in payment of various outgoings on behalf of Mr Alan Bond and his family.

On 15 November 1995 Redmond received the sum of $798,667.71 into his trust account from an overseas source. He says that he now has no independent recollection of the receipt of those monies nor of the fact that on 21 November 1995 they were paid to Carindale. He believes his instructions could only have come from John Bond. This is the sum which, for the purposes of this application, the three defendants concede included some $300,000 received as payment for two paintings."

27 I digress to record that, in the course of his submissions, Mr Harris, of senior counsel for the appellants, contended that, bearing in mind major differences between their evidence and the contentions of the liquidator, findings in relation to the above transactions would be of considerable importance in connection with the trial of the action, because they could potentially bear both on the credibility of the appellants and the true nature of certain key transactions in issue. Undoubtedly that is so.

28 Having summarised certain of the evidence before him in the above terms, Debelle J expressed the following conclusion ("the first conclusion"):-

"For the purpose of this application, I infer that it was never seriously intended that Dampier should either lend $4.3 million to the joint venture or that Dampier should invest in the joint venture. Instead, the statements concerning the purported loan and the purported investment were made to cloak a payment to Bond interests arranged by Bollag. The source of that money is not established. For present purposes, it is sufficient to note that Carindale, a company controlled by Craig Bond, received the sum of $4.3 million, that Craig Bond instructed Philpott to incorporate two companies which were used to assist the transfer of those funds to Carindale, and that, of the sum of $4.3 million, just over $2.1 million was applied towards the purchase of the Carindale land."

29 He then proceeded to deal with some details of Carindale profits paid to members of the Bond family.

30 Having done so, he addressed the issue as to whether a Mareva injunction should be granted. His core conclusion ("the second conclusion") was expressed as under:-

"Carindale is an asset of Craig Bond which would be available to the plaintiffs, if successful, to satisfy the judgment debt. When purchased by Carindale, the Carindale land was ready, if not ripe, for development for residential purposes. Not only was that the intended purpose of Carindale in buying the land, but it has been proved by subsequent successful development of the land. Thus, although Carindale had borrowed to purchase the land and the balance sheet showed no equity, there was an unrealised development potential which would have added value to the land. The duty of John Bond and Ms Caboche as directors of Carindale was to take all steps to realise that development potential for Carindale. However, instead of realising that development potential for Carindale, they permitted Carindale to do two things. First, they permitted Carindale to make the land available to the joint venture for residential development for no fee or other reward. Secondly, they permitted the joint venture, which had no land or assets available to offer as security for borrowings, to use monies borrowed by Carindale for the purpose of the joint venture, again for no fee or reward.

Thus, instead of acting in the best interests of Carindale, John Bond and Ms Caboche as directors of Hastings Finance, Fairoak and Topsfield, have permitted the joint venture not only to retain the profits but have also decided that Carindale should not be paid any fee or other reward for the use of the Carindale land or the monies borrowed on the security of that land. Thus, instead of Carindale receiving the profit from the development and sale of its land, the profits are diverted to Hastings Finance of which John Bond and Ms Caboche are directors. John Bond then decides what loans to make to the various trusts for the benefit of the members of the Bond family and later, as a director of Hastings Finance, decides if the company will forgive or write off those loans. It is unnecessary to consider whether the decisions of John Bond as a director of Hastings Finance to forgive or write off those loans are decisions which are in the best interests of Hastings Finance. It is sufficient to note that the decisions render the profits of the joint venture irrecoverable. In other words, the only asset of Carindale is being dealt with by a consortium of companies controlled by members of the Bond family and managed and directed by John Bond and Ms Caboche and the profits which that land is capable of realising are being diverted from Carindale to members of the Bond family. This conclusion is entirely consistent with the affidavit evidence of Mr Mews, a chartered accountant who gave advice to the joint venture. He said that his instructions were that the Carindale land was to be regarded as an asset to be developed for the members of the Bond family."

31 Distilled to the essence, the appellants' contention is that both the first conclusion and the second conclusion are expressed in terms which give rise to a reasonable apprehension of bias, by reason of apparent prejudgment, on the part of Debelle J - so that it is inappropriate that he further deal with any aspect of these proceedings.

Applications to Debelle J and the present appeals

32 On 20 October 2000 each of the appellants filed written applications that Debelle J disqualify himself from further hearing any proceedings in this action and that the trial of the action be listed before another Judge. Orders were also sought as to costs.

33 Having heard counsel, the learned Judge dismissed the applications, for reasons which he published on 14 November 2000. In those reasons, he indicated that the views which he had earlier expressed were merely for the limited purposes of the Mareva applications, on the evidentiary material related to them, and that his comments did not relate to a central issue in the proceedings. He said at p 2:-

"The question of the involvement of SHC, Dampier and Carindale are matters which arise for determination only if it is found that the defendants have been involved in the transactions alleged by the plaintiffs and if the plaintiffs prove that monies which were transferred to Carindale represent the proceeds of the sale or other dealings in the works of art the subject of these proceedings."

34 That is a situation which is challenged by Mr Harris QC. He submits that the findings go directly to the trial issue as to what he describes as the propriety of the role and function of Carindale in the receipt of overseas monies (alleged to be sourced from the sale of relevant artworks) and the repatriation of those monies to members of the Bond family. He contends that the clear effect of the findings is that the two appellants "acted in disregard of their proper duties so as to give effect to the conspiracy" which is pleaded in the action. With all due respect to Debelle J, there is considerable force in that argument. These were no mere peripheral areas of consideration.

35 Both appellants appeal against the orders made by Debelle J. They seek an order of this court setting aside those orders and directing that the trial of the action be heard by another Judge of this Court

36 The fundamental principle relating to assertions of apprehended bias is now well settled. It was articulated by the High Court in Livesey v NSW Bar Association [1983] HCA 17; (1983) 151 CLR 288 and re-affirmed by that Court in its recent judgment in Johnson v Johnson [2000] HCA 48; (2000) 174 ALR 655 and Ebner v The Official Trustee in Bankruptcy [2000] HCA 63.

37 The classic statement of such principle is to the following effect:-

"... the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias ... is whether 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 the judge is required to decide." (See Johnson at 658)

38 As was said by Meagher JA in Spedley at 448, this is a "Spartan doctrine", which has been rendered increasingly so, both by constant judicial narrowing of the scope of "necessity", as an exception to the rule, and by the developing law on the attributes of the hypothetical observer.

39 Those attributes were summarised by Kirby J in Johnson at 671 in these terms:-

"The attributes of the fictitious bystander to whom courts defer have therefore been variously stated. Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances. The bystander would be taken to know commonplace things, such as the fact that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers. The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted. The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality. Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context. Finally, a reasonable member of the public is neither complacent nor unduly sensitive or suspicious."

40 Kirby J went on to re-affirm what he originally said in two earlier cases, commencing with S & M Motor Repairs Pty Ltd & Ors v Caltex Oil (Australia) Pty Ltd & Anor (1988) 12 NSWLR 358. He made the point that care should be taken against attributing to the hypothetical reasonable observer a level of sophistication which may be enjoyed by judges and other lawyers, or by specially educated or informed citizens, or even by the parties themselves. As Kirby J expressed the concept Raybos Australia Pty Ltd v Tectran corporation Pty Ltd (1986) 6 NSWLR 272:-

"... when in the present case the critical decision must be made, it seems to me that it is to be made by reference to an impressionistic, and to some extent superficial, opinion based upon a consideration of the broad features of the allegation made. It is not made upon a detailed exploration of and the lengthy rumination about the legal or other merits of it."

41 With respect, this is, in my opinion, a most important and pertinent aspect for consideration in the instant case, and the principles enunciated in the authorities need to be applied with that well in mind.

42 In the course of his submissions, Mr Livesey, of counsel for the respondents, drew attention to the case of Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342 and, in particular, the following dictum of Mason J (as he then was) at 352:-

"It seems that the acceptance by this Court of the test of reasonable apprehension of bias in such cases as Watson and Livesey has led to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in other proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be 'firmly established'."

43 It seems to me that the concept of this dictum must be approached with considerable care. I question whether it has any real, practical application to the instant case. Of course, it has a specific application in situations of necessity, where rulings are given in the course of a trial, or where a trial is split into sequential hearings as to successive issues. However, it can scarcely be relied upon as, in some way, diluting the Spartan approach adverted to by Meagher JA in Spedley.

44 In so saying, I by no means ignore the endorsement of the dictum of Mason J above referred to, expressed in Re Polites & Anor; Ex parte The Hoyts Corporation Pty Ltd & Ors (No 2) [1991] HCA 25; (1991) 173 CLR 78 at 86 ("Polites"). However, Polites focused on a very different context, which gave rise to considerations quite different from those which presently arise.

45 At the end of the day, what is necessarily in issue in a particular case is the reasonable perception of the fair-minded lay observer, having the attributes adverted to by Kirby J. In the individual case, that observer will, no doubt, bear in mind the circumstance of any pronouncement, but will necessarily be influenced by the mode of expression actually used by the Judge in question; and the inferences which naturally flow from it.

46 It is stating the obvious to say that there are inherent dangers in a judicial officer assigned as trial judge entertaining and ruling on a pre-trial application for a Mareva injunction.

47 As Debelle J correctly identified, he was called upon to consider whether the applicants had established the following four matters, namely:-

(1) whether the plaintiffs had a substantial cause of action against the defendants;

(2) whether the plaintiffs had demonstrated a sufficiently arguable case to justify the relief claimed;

(3) whether it had been made to appear that a danger existed that, if successful in the action, the plaintiffs will not be able to have the judgment satisfied; and

(4) whether it is just and convenient to make the order.

48 Little difficulty is ever likely to arise from a consideration of facets (1), (2) and (4) - given that discretionary issues and balance of convenience aspects will arise as to (4).

49 However, an inherent problem which arises as to (3) is that, in most instances, its consideration will lead to a need to investigate and arrive at positive conclusions concerning the past and likely future conduct of the party against whom relief is sought. An assessment will need to be made whether, by virtue of that conduct, there is a danger that relevant assets will be dissipated in a manner which is likely to deprive another party of the fruits of the litigation.

50 Such an exercise may well involve issues of credibility. It almost inevitably requires the making of specific findings of fact on the evidence available. It follows that, even if those findings are expressed to be only provisional, they may, quite reasonably and naturally, engender an apprehension of pre-judgment as to other issues at trial, if the findings are made by the trial judge. Much, of course, will depend upon the precise nature of the findings and the manner in which they are expressed.

51 In the instant case, the mode of expression of both the first conclusion and the second conclusion are to be contrasted with what fell from Debelle J on 11 September 2000.

52 In proceeding to grant an interim Mareva injunction against Ms Caboche on that day, the learned Judge went to considerable lengths to render it clear that he was doing no more than arrive at provisional findings as to what, prima facie, emerged from the material before him, as to which Ms Caboche had not had an opportunity to be heard.

53 Having contrasted the evidence of the money standing to the credit of Ms Caboche with the Challenge Bank with her testimony that she had no assets of that type, he said that "On its face, the evidence justifies making what is, in effect, an interim Mareva order to preserve the funds invested with Challenge Bank".

"I say 'on its face' because I do not yet know what answer Ms Caboche makes to these allegations. In addition, there may also be a question as to the extent to which, if at all, the plaintiffs are entitled to rely on evidence obtained at examinations conducted pursuant to orders made under s 596B of the Corporations Law of persons other than Ms Caboche."

"On its face, it seems that Ms Caboche has failed to give truthful evidence. I emphasize, again, that I have not heard her answer to the allegations made in the affidavit sworn in support of this application. Thus, I make no findings of fact at this stage but, if her evidence is not truthful, it is difficult to have any confidence at all that she would not seek to take some action to put these funds beyond the reach of the liquidator".

55 It is immediately apparent that, considering those comments alone in context, no fair minded lay observer could ever reasonably apprehend that Debelle J might not subsequently bring an impartial and unprejudiced mind to questions which he might have to decide as between the liquidator and Ms Caboche. In what he said, he rendered it patently clear that he was doing no more than act, on an interim basis, on conclusions prima facie arising from evidentiary material, which Ms Caboche had not had an opportunity to answer and which, in due course, she may be able to dispel.

56 What he there said stands in stark contrast with the pronouncements now sought to be impugned. Even given the initial phrase "For the purpose of this application" in the first conclusion, the findings made are expressed in quite absolute and unqualified terms, as the outcome of a hotly contested inter partes dispute and a close analysis of a considerable quantity of evidentiary material. Such is the mode of expression that I am by no means convinced that a reasonably informed, fair minded, lay observer would remotely conclude that the first conclusion was no more than a provisional product of limited material; and that Debelle J would approach future evidence in the proceedings related to Ms Caboche with a completely open mind, unencumbered by the provisional finding.

57 The situation is even more acute in relation to the second conclusion. This was not prefaced by any qualification. It contains what are expressed to be absolute findings of fact and also conclusions that:-

. John Bond and Ms Caboche acted improperly and not in the best interest of Carindale; and that

. they breached their duty as directors of that entity by disbursing profits made by Carindale, in effect, to members of the Bond family, so as to render the profits of the joint venture irrecoverable.

58 There can be no doubt that all of the impugned findings, whilst they bore on topics which were not all necessarily issues at the very centre of the matters in contest between the parties, nevertheless went directly to the credit of the appellants, their bona fides, certain important matters of historical fact and the propriety of their conduct in relation to matters relevant to the resolution of the causes of action pleaded.

59 It is an inescapable conclusion that the hypothetical, fair minded lay observer, particularly contrasting the two modes of expression employed by the learned Judge on successive occasions, would be likely to apprehend that, such were the positive conclusions expressed on 20 October 2000, Debelle J might not approach a later assessment of the credibility and conduct of the appellants without a significant level of pre-judgment.

60 As Kirby P stressed in Spedley at 423, "there is an equation in which apprehended bias and necessity or special circumstances play an inter-active part. Where, for example, the apprehension of pre-judgment in the words used is equivocal or the importance of the opinion expressed is qualified, it will be less likely that a court will find disqualification. Where the findings made are emphatically expressed upon issues arguably crucial to subsequent litigation and where that litigation involves matters concerned with the vital interests of the parties, the high measure of stringency required by the law must be scrupulously observed".

61 That type of conceptual reasoning is pertinent to the present case. As Mahoney JA pointed out in Spedley at 442, a previous decision as to an important fact or bearing on credibility will normally, if not inevitably, create a relevant apprehension of pre-judgment.

62 The dilemma with which Debelle J was faced was that, although he was dealing with interlocutory applications on a limited range of evidence, the very nature of those applications demanded certain positive findings of fact and a consideration of alleged perjury on the part of both appellants. Unless those findings were heavily qualified as to their provisional nature, the almost certain consequence was that they would lead a fair minded lay observer to a conclusion that the Judge would necessarily come to the trial proper with a mind-set adverse to the appellants, in fundamentally important respects.

63 Moreover, whilst in the strict sense, the factual issues were not all primary, initial core issues to be decided, many of the facts found were matters which were, or were proposed to be and now are, in issue on the pleadings; and would have to be traversed at trial. The findings made in relation to them were highly adverse to the appellants in a case in which their credibility and probity arise as paramount considerations. The very basis of the applications before the learned Judge involved a direct attack upon the credit of both appellants (having regard to the content of their sworn testimony on examination, when contrasted with other evidence presented) against the background of an allegation of conspiracy - in relation to which credit and probity was all important. It was the specific case of the liquidator, on the applications before Debelle J, that the sworn evidence of the appellants was either false or deliberately misleading. The findings made unequivocally indicated a conclusion that they had not been witnesses of truth as to important matters; and that they had deliberately engaged in a course of highly improper conduct, contrary to their duty as directors. The relevant conduct would plainly arise for consideration at trial.

64 With the wisdom of hindsight, it would have been preferable for applications of this type to have been dealt with by a Judge other than the trial judge, so as to avoid the situation which has actually arisen. However, as matters now stand, it seems to me that the appellants have demonstrated a situation of apprehended bias. It is almost inevitable that, if Debelle J now embarks upon the trial, there will be a strong perception that he comes to his task from a particular point of view, and with a particular feeling towards the all important issues of the credibility and probity of the appellants - from which it is reasonably considered that he may find it intellectually difficult, if not impossible, to retreat.

65 Since writing the foregoing I have had the benefit of reading, in draft, the reasons published by Bleby J. With respect, and particularly with regard to aspects dealt with by him beyond my treatment of the matters argued before this Court, I am in agreement both with his reasoning and the conclusions expressed by him.

66 With considerable reluctance I find myself driven to the conclusion that the appellants have demonstrated that, in this case, Debelle J is disqualified from further dealing with these proceedings, by reason of the appearance of bias, on the footing that a fair minded lay observer might reasonably apprehend, in the circumstances as they have developed, that he might not bring an impartial and unprejudiced mind to the questions which will fall for decision. That that is clearly not the actuality is not to the point.

67 I would therefore allow the appeal, set aside the orders as to dismissal and costs, and substitute for those orders an order that these proceedings be listed for further consideration and trial before another judge assigned for that purpose by the Chief Justice. I would hear the parties as to costs. I would also dismiss the applications made by the appellants to this Court on 4 December seeking orders that Debelle J be disqualified from further hearing any proceedings in the action.

68 WILLIAMS J The appellants Ms Delores Caboche and Mr John Bond are defendants in an action initiated by Mr England as liquidator of SECL in respect of the appellants' alleged participation to varying degrees in a series of fraudulent transactions whereby works of art owned by SECL and its subsidiary Bond Corporation have been taken from their rightful owners. The plaintiffs are seeking to recover the art works and damages. Already one painting (of Captain Cook) has been recovered and resold by Mr England as liquidator of SECL at a price of $A5.4 million. The trial of the action was due to commence on 11 December 2000 and has been listed as a "long trial" to be heard by Debelle J who has had the management of the pre-trial procedures.

69 By applications dated 20 October 2000 each of the present appellants applied to the Court seeking orders that Debelle J disqualify himself from further hearing any proceedings in this action or alternatively for an order that the trial be heard by some other Judge. It is not suggested that Debelle J has any interest in the proceedings or that he has any personal association with those connected with the action. However, it is alleged that by reason of comments and actions of His Honour during the pre-trial processes a fair minded lay observer might reasonably apprehend that His Honour might not bring an impartial and unprejudiced mind to the resolution of the issues. In other words apprehended bias but not actual bias is alleged based upon a perception of prejudgment.

70 On 14 November 2000 after hearing submissions Debelle J declined to disqualify himself and ordered the appellants to pay the costs. A formal order dismissing the application and dealing with costs has been sealed. His Honour gave leave to appeal to this Court and directed that any application by Mr England to dismiss the appeal as incompetent should be filed by 24 November 2000 for hearing concurrently with the appeal. No such application has been made.

71 Mr England has made it clear that he wishes the present appeal to be determined upon its merits despite the difficulties which face an appeal court when no supervisory powers are available. Unlike the Federal Judges (who as Commonwealth officers ultimately may be subject to orders made under s 75(v) of the Australian Constitution) a Judge of the Supreme Court is not subject to any analogous supervisory process (see Craig v The State of South Australia [1995] HCA 58; (1995) 184 CLR 163 at 174 footnote 52).

72 Upon the present appeal the gravamen of the appellants' complaint concerns the provisional views expressed by Debelle J on 11 September 2000 and on 14 September 2000. These remarks were contained in His Honour's reasons for granting an ex parte Mareva injunction against Ms Caboche on 11 September 2000 in respect of monies in a bank account and a Mareva injunction dealt with inter partes on 14 September 2000 with respect to Carindale Land Corporation and its assets. Ms Caboche and Mr John Bond are the directors of that Company. At least in the case of Ms Caboche the Judge's remarks upon the Mareva application are put forward as the catalyst for seeking disqualification but in the light of His Honour's earlier remarks in the course of management of the action. The hearing of the inter partes Mareva application took place over five days in May and June 2000 and the ex parte application was made after His Honour had reserved his decision upon the inter partes application.

73 In order to justify a Mareva injunction it is necessary for the applicant to demonstrate (inter alia) that on the whole of the evidence then before the Court the refusal of the order would involve a real risk that a judgment in favour of the plaintiff would remain unsatisfied. It is His Honour's assessment on the papers before him of this risk (in conjunction with the identification of an arguable case with respect to the principal relief) which has sown the seeds for the present argument by Ms Caboche and Mr Bond.

74 It is unnecessary as a matter of general principle for a plaintiff to establish "nefarious intent" in order to secure a Mareva order. However, evidence of impropriety may be relevant to the Court's assessment of risk. In the present case the plaintiff has put before the Court evidence to support a contention that upon the face of that material one could conclude provisionally that the appellants have shown a capacity for dealing with assets in the course of corporate administration to the advantage of the Bond family interests but in disregard of their legal responsibilities. It is the Judge's acceptance of that contention in his reasons and his expressed lack of confidence in Ms Caboche which lies at the heart of the present appeal.

75 Mr England's case (insofar as it has yet been disclosed) is one based largely upon circumstantial evidence. His Honour has reached the conclusion upon the material before him that the history of the appellants' participation in questionable commercial dealings and the appellants' modus operandi gives rise to the relevant risk.

76 In the absence of more (whether by way of fact or argument) being put before him as Trial Judge there may be an expectation that Debelle J is likely to decide some crucial issues adverse to Ms Caboche and Mr John Bond if the evidence is unchanged; the respondent's counsel concedes this proposition. His Honour's reasons given on 14 September 2000 spell out the strength of the case as he sees it. But this fact does not mean that with respect to the issues His Honour will approach his task as Trial Judge otherwise than with an impartial and unprejudiced mind. To suggest that Debelle J has preconceived views with respect to the appellants is not enough. The question must be taken a step further so as to consider whether there might be raised in the mind of the hypothetical bystander a reasonable apprehension that the views expressed might be a concluded opinion so as to impede the discharge of the judicial function - at least in terms of its appearance to the bystander.

77 There are some situations where it is inevitable that there will be such an appearance; Livesey v NSW Bar Association [1983] HCA 17; (1983) 151 CLR 288 is an example. In that case the Court of Appeal Division of the New South Wales Supreme Court was twice concerned with the examination of a corrupt agreement to which a law student (Bacon) and a barrister (Livesey) were alleged to be parties. The Court of Appeal disbelieved the student when she gave oral evidence upon her application for admission to practice. The issue as to the corrupt agreement (and the knowing involvement of the parties) was again before the Court in disciplinary proceedings against the barrister; the student again gave oral evidence before two judges who had previously dealt with her - and disbelieved her. The High Court at 300 said:

"In the light of the foregoing, the situation which existed at the commencement of the hearing of the proceedings against the appellant can be shortly summarized. A central issue in the main charge against the appellant was whether the money which Ms Bacon lodged as bail was her own money. Two of the three members of the Court of Appeal, which was hearing the proceedings as a court of first instance, had already held in a previous case that it plainly was not. Another central issue in the main charge was whether, if the money lodged were not Ms Bacon's, the appellant knew that that was so. Again, two members of the Court had held in the previous case that he clearly did. Ms Bacon was a possible and critical witness on the appellant's behalf and was in fact called to give evidence. Two members of the Court had, in the previous case, expressed the strong view that she was a witness without credit whose evidence on the matters relevant to the proceedings against the appellant should be rejected. The question which arises is whether, in these circumstances, either the appellant or a fair-minded observer might have entertained a reasonable apprehension that the views which the two members of the Court of Appeal had formed and expressed in the Bacon Case might result in the proceedings against the appellant being affected by bias by reason of prejudgment. With due respect to the members of the Court of Appeal who saw the matter differently, it follows from what we have said that we consider that that question must be answered in the affirmative."

78 In Laws v Australian Broadcasting Tribunal [1990] HCA 31; (1990) 170 CLR 70 Gaudron and McHugh JJ said at 100:

"A reasonable bystander does not entertain a reasonable fear that a decision-maker will bring an unfair or prejudiced mind to an inquiry merely because he has formed a conclusion about an issue involved in the inquiry: Reg v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd [1953] HCA 22; (1953) 88 CLR 100 at 116_; Reg v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group_ (1969) 122 CLR 546 at 554-555; Re Shaw; Ex parte Shaw (1980) 55 ALJR 12 at 14-15; 32 ALR 47 at 50-51 and 53. When suspected prejudgment of an issue is relied upon to ground the disqualification of a decision-maker, what must be firmly established is a reasonable fear 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 to him or her. Thus, in Ex parte Angliss Group, the mere fact that the statement of reasons for a previous decision gave rise to the conclusion that members of the Conciliation and Arbitration Commission tended to favour the adoption of a principle of equal pay for both sexes as soon as it was economically and industrially practicable to do so was not a ground for disqualifying them from sitting on an application for an equalisation of rates of pay for male and female employees brought in reliance upon their reasons. This Court rejected the notion that a fair and unprejudiced mind was "necessarily a mind which has not given thought to the subject matter or one which, having thought about it, has not formed any views or inclination of mind upon or with respect to it". In Re Shaw, the transcript showed that a judge of the Family Court of Australia had expressed opinions adverse to the case for the husband before his counsel had opened his case. Nevertheless, Gibbs ACJ, with whose judgment Stephen J and Wilson J agreed, said that the evidence did not justify "a conclusion that the views which the learned judge expressed, although strong, were other than provisional, or that it could reasonably be suspected that at the end of the case she would not decide with a fair and unprejudiced mind."

79 Those remarks should be considered alongside the remarks of Brennan, Gaudron and McHugh JJ in Re Polites and Anor; Ex Parte Hoyts Corporation Pty Ltd & Ors (No 2) [1991] HCA 25; (1991) 173 CLR 78 at 85-86:

"The relevant test has been prescribed by this Court in a number of cases and is expressed in Livesey v NSW Bar Association [1983] HCA 17; (1983) 151 CLR 288 at 293-294 in these terms:

"[The] principle is that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it...Although statements of the principle commonly speak of 'suspicion of bias', we prefer to avoid the use of that phrase because it sometimes conveys unintended nuances of meaning."

In applying this test, it is necessary to bear in mind the caution expressed by Mason J in Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342 at 352:

"It seems that the acceptance by this Court of the test of reasonable apprehension of bias in such cases as Watson and Livesey has led to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in other proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way."

In Reg v Australian Stevedoring Industry Board & Anor; Ex parte Melbourne Stevedoring Co Pty Ltd [1953] HCA 22; (1953) 88 CLR 100 at 116 Dixon CJ, Williams, Webb and Fullagar JJ said:

"...when bias of this kind is in question, as distinguished from a bias through interest, before it amounts to a disqualification it is necessary that there should be strong grounds for supposing that the judicial or quasi-judicial officer has so acted that he cannot be expected fairly to discharge his duties. Bias must be "real". The officer must so have conducted himself that a high probability arises of a bias inconsistent with the fair performance of his duties, with the result that a substantial distrust of the result must exist in the minds of reasonable persons. It has been said that "preconceived opinions - though it is unfortunate that a judge should have any - do not constitute such a bias, nor even the expression of such opinions, for it does not follow that the evidence will be disregarded", per Charles J, Reg v London County Council; Re the Empire Theatre (1894) 71 LT 638 at 639."

80 In my view it is to distort what His Honour has said to suggest that irrespective of the state of the evidence at trial or any arguments to be addressed that His Honour had reached concluded views. If the bystander had an apprehension in this regard then I do not consider that person to be reasonable and properly informed as to the nature of a Mareva hearing and the provisional nature of the Judge's views formed on the papers and without oral evidence.

81 This is not the case of a gratuitous comment (compare Grassby v The Queen [1989] HCA 45; (1989) 63 ALJR 630 at 638-639 where an indiscretion in the reasons of an appeal Judge was construed as displaying some prejudice against a party). In the present case the parties were entitled to reasons explaining how His Honour drew together the various items of circumstantial evidence.

"On its face, the evidence justifies making what is, in effect, an interim Mareva order to preserve the funds invested with Challenge Bank.

I say "on its face" because I do not yet know what answer Ms Caboche makes to these allegations. In addition, there may also be a question as to the extent to which, if at all, the plaintiffs are entitled to rely on evidence obtained at examinations conducted pursuant to orders made under s 596B of the Corporations Law of persons other than Ms Caboche..."

"Thus, I am satisfied that Ms Caboche had funds in the Bank of Montreal, that those funds have been transferred to Australia and that those funds with interest have been invested with Challenge Bank....

On its face, it seems that Ms Caboche has failed to give truthful evidence. I emphasise, again, that I have not heard her answer to the allegations made in the affidavit sworn in support of this application. Thus, I make no findings of fact at this stage but, if her evidence is not truthful, it is difficult to have any confidence at all that she would not seek to take some action to put these funds beyond the reach of the liquidator."

"For the purpose of this application, I infer that it was never seriously intended that Dampier should either lend $4.3 million to the joint venture or that Dampier should invest in the joint venture. Instead, the statements concerning the purported loan and the purported investment were made to cloak a payment to Bond interests arranged by Bollag. The source of that monies is not established. For present purposes, it is sufficient to note that Carindale, a company controlled by Craig Bond, received the sum of $4.3 million, that Craig Bond instructed Philpott to incorporate two companies which were used - to assist the transfer of those funds to Carindale, and that, of the sum of $4.3 million, just over $2.1 million was applied towards the purchase of the Carindale land."

83 If these facts be established at trial (along with other facts mentioned by His Honour) then it may be anticipated that the defendants may face some difficulty in meeting the inference that they individually were party to fraudulent activity. However, nothing which Debelle J has said suggests to me that His Honour has a closed mind. Inferences are available and His Honour may draw them unless persuaded by evidence or advocacy that there is another way in which the involvement of the individual defendants should be fairly viewed. In my view there is not a hint of "prejudgment" as now relevant.

84 In my view the question of prejudgment should be approached in the manner approved in R v Masters, R v Richards, R v Wunderlich (1992) 26 NSWLR 450 where the Court of Criminal Appeal applied Re Polites and the statement of Mason J in re JRL. At 471 the Court in a joint judgment and referring to those cases said:

"The effect of those unanimous pronouncements was clear. The fact that a judge has decided an issue in a particular way, and is likely to decide it in the same way when it arises again, does not amount to pre-judgment which may require him to disqualify himself in order to avoid an apprehension of bias. The reasonable apprehension which should lead to disqualification must be that the judge will not decide the case impartially or without prejudice, not simply that he or she will decide the case adversely to one party."

85 The Court of Criminal Appeal expressly rejected the decision (made some weeks earlier) by the majority of the Full Court of five Judges in Australian National Industries Ltd v Spedley Securities Ltd (In Liq) (1992) 26 NSWLR 411. In Masters the Court said at 472:

"None of the three judges in the majority in Australian National Industries Ltd v Spedley Securities Ltd (In Liq) referred to the distinction drawn by Mason J in Re JRL; Ex parte CJL [1986] HCA 39; (1986) 161 CLR 342, which had been accepted by the High Court in its unanimous judgement in Re Polites; Ex parte Hoyts Corporation Pty Ltd. On the other hand, Samuels JA (with whose reasons Gleeson CJ agreed) based his dissent specifically upon that distinction."

"...we are unable to see how the distinction accepted by the High Court in Re Polites; Ex parte Hoyts Corporation Pty Ltd can itself be distinguished so as to produce the proposition of law which the majority in Australian National Industries Ltd v Spedley Securities Ltd (In Liq) have laid down, particularly as the judgments of the majority do not purport to make that distinction for themselves.

We are not persuaded that the interpretation of apprehended bias now adopted by the Court of Appeal is correct."

86 In my opinion R v Masters correctly identifies the principle now to be applied. The essence of prejudgment is that the judicial mind is closed to persuasion (or gives that appearance). That is to be distinguished from prejudice. I do not understand the appellants' present complaint to be anything other than appearance of prejudgment.

87 In my opinion the appellants have not demonstrated an appearance of prejudgment.

88 On 14 November 2000 Debelle J published a short statement of reasons (as he described it) with respect to the disqualification request. I have not found it necessary to refer to these reasons until this point. However, I note that His Honour there referred to remarks which he made on 9 October 2000 as reinforcing "the point that my reasons do not express a concluded view". (Emphasis added).

89 This and other statements made by His Honour to the parties at various times in the course of his management of this action may bear upon the assessment to be made by the fair minded hypothetical observer. I note that the Mareva application remained before the Judge until he settled minutes of order after hearing the parties on 18 October 2000 as arranged on 14 September and 9 October 2000 [T.986].

90 In Webb v The Queen [1994] HCA 30; (1994) 181 CLR 41 at 73-74 Deane J said:

"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. If, in the particular case, the proper conclusion is that a fair-minded lay observer with a broad knowledge of those facts would not entertain a reasonable apprehension of bias, that is the end of the issue of disqualification by reason of an appearance of bias."

91 In my view it is relevant to bring to account (inter alia) the remarks of Debelle J on 9 October 2000. The full transcript of that hearing (to deal with an application to amend the statement of claim) was not included in the appeal book but I consider that the hypothetical figure to which Deane J refers would have regard to the following extract from the transcript of that date: [at 1066]:

"Mr Hoffmann: Before we do rise, there was the question of any application to disqualify you for bias. You directed on 14 September any papers be filed and served by 27 September and nothing has arrived. I'm rather presuming that that matter is not being pursued, if that's so that will save a lot of time next week.

His Honour: In that case you're out of time aren't you?

Mr Cudmore: My client is still taking advice on that matter.

His Honour: You've not complied with the time limit."

"Mr Cudmore: I'm not making any application to extend the time now.

His Honour: Seeing that no application is within the time either for an affidavit or for submissions, is that right?

Mr Cudmore: Not at this time. Can I indicate that -

His Honour: What does not at this time mean Mr Cudmore? I've said to you before today that applications are made and at this time people don't just say well, I might be doing something later on. Now what is your position"

Mr Cudmore: My client is still taking advice on the matter. One of the matters upon which my client is taking advice relates to the reasons for judgment that were delivered on 14 September by you in relation to the Mareva application. The question as to whether or not -

His Honour: Do you mean the full Mareva application or the more limited one pertaining to her alone?

Mr Cudmore: No, the application relating to Carindale Land Corporation. One of the issues that may arise from that, is whether or not those findings having been made on an interlocutory application, the trial should proceed before you. As I understand as presently advised, the matter is listed to proceed before you in this action.

His Honour: There are no final findings in the sense that any issue at the trial is still left open.

Mr Cudmore: I don't wish to engage in a discussion about that now.

His Honour: I must say the thought crossed my mind whether I should say these are only findings on allegations, and they go no further. But plainly that was so, and in fact I think I did say something to the effect that findings were simply based on what was in affidavits and had not been answered.

Mr Hoffmann: It was conceded that for the purposes of that application, the plaintiffs had made out the prima facie case, there wasn't any debate about that."

92 The Judge's reasons for allowing applicants to amend the statement of claim have been extracted electronically from the transcript and combined with other rulings made that day. These rulings respectively appear at Transcript 1024, 1050 and 1062. It is that consolidation which has been included in the appeal books. I note that His Honour said:

"In my view the objections to the amendments fail when the statement of claim is read as a whole. The underlying facts upon which the plaintiffs rely for the drawing of the inference are apparent. Whether the inference can be drawn from those facts is a matter to be determined on another occasion. Plainly, the allowing of the amendment does not in any sense deal with the question whether the inference is in truth open. Much of what was said by the defendants in opposition to the application to amend was by way of submission which purported to answer the drawing of the inference. The defendants may be right at the end of the day but, I repeat, that is a matter for another occasion."

93 I consider that it is somewhat artificial now to make a judgment based merely on incomplete extracts of proceedings dealing with an extensive case management. Even before His Honour gave his reasons on 14 September 2000 upon the inter party Mareva hearing Ms Caboche intimated that she was considering whether to seek His Honour's disqualification.

94 Later on 14 September 2000 [T.905] after delivering reasons for Mareva injunctions [T.905] His Honour said:

"...I was conscious of the fact that she may have an answer, and a complete answer, for all I knew. But there were, on the face of the matter, reasons why I should act. So, what I have been very careful to do, conscious of the fact I should conduct myself impartially, so far as your client is concerned, is to preserve her position. That is why my reasons are expressed in those terms. That is why I directed Mr Hoffmann to send to your client not only a copy of my reasons, but a copy of the transcript. In other words, in every respect, I am anxious,... to see that her rights are properly and fairly dealt with."

95 These remarks were directed to the ex parte order and not to His Honour's reasons which support the inter parte Mareva order. Standing alone, it may be said that they are not now immediately to the point. However, these remarks are part of an on-going exchange between Judge and counsel in which His Honour repeatedly demonstrates that he has not overlooked the case for the appellants which they have not yet presented.

96 In my view the provisional nature of the views expressed by Debelle J is evident upon the whole of the material. The hypothetical bystander would bring to account the whole of the circumstances and would have some general knowledge of a Mareva injunction and its purpose. This bystander would recognise the nature of the processes associated with the various orders and would realise that the Judge had not closed the door with respect to a proper consideration of the case for the appellants. In my view the fair minded hypothetical observer would be aware of the whole of the transcript and would reject piecemeal examination of this extensive pre-trial management.

97 In my view the only question which is justiciable upon these appeals is whether the orders as to costs were properly made against the appellants by Debelle J upon the argument before him as to disqualification. (For a useful discussion as to appealable decisions see Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors (1992) 57 SASR 180 at 190 per King CJ). If (contrary to my view) the appellants are entitled to any relief an order should be moulded which is limited to the question of costs.

98 I draw attention to the remarks of Gleeson CJ in Rogerson (1990) 45 A Crim R 253 at 255:

"There are two aspects of the intended appeal against an interlocutory judgment or order which ought to be considered. The first concerns his Honour's refusal to accede to the application that he should disqualify himself. It seems to me that there is no interlocutory judgment or order in that respect concerning which an appeal would lie under s 5F of the Criminal Appeal Act. The Court of Appeal held in the case of Barton v Walker [1979] 2 NSWLR 740 that the refusal of a judge of the Supreme Court to disqualify himself after an application in that behalf had been made to him did not constitute a judgment or order against which it was possible to appeal to the Court of Appeal. Of course such a refusal might constitute a ground of appeal against the ultimate decision in the case in the course of which such an application was made, but, so it was held, a refusal by a judge to accede to a submission that he disqualify himself is not itself a judgment or an order of the court. I am respectfully of the view that the reasons that are given for that conclusion in Barton v Walker are cogent, and in my view the case should be followed in the Court of Criminal Appeal. I might add that within the last few weeks that decision has been followed in the Court of Appeal in the case of Rajski v Wood (1989) 18 NSWLR 512. Accordingly, even leaving to one side the problem about extension of time, I would have declined leave to appeal against that aspect of Judge Shillington's decision on 5 December, simply on the ground that there is no jurisdictional basis for the appeal.

His Honour's decision in relation to a refusal to vacate the hearing date stands in somewhat different position. There may well be room for considerable doubt as to whether a refusal to vacate a hearing date or grant an adjournment constitutes an interlocutory judgment or order..."

99 Section 11(2) of the Supreme Court Act 1935 (SA) places responsibility for the administration of the Court in the hands of the Chief Justice. The allocation of work amongst the Judges of this Court is within the administrative discretion of the Chief Justice - but subject to a Judge's availability; that latter question is a matter for the individual Supreme Court Judge and may require him or her routinely to assess the Judge's qualification to preside. In the present case one would confidently expect that the administrative decisions of the Chief Justice will conform to and recognise the decisions of the Court upon justiciable questions. However, I do not consider that the Full Court by its order has power to redirect the business assigned to a Judge in the roster; that is a matter to be dealt with administratively by arrangement between the Chief Justice and the puisne judges but with deference to the responsibility of the Chief Justice.

100 I note that in Livesey the order of the High Court was "that the matter be remitted to the New South Wales Court of Appeal to be heard de novo". That form of order does not seek to dictate to the Supreme Court how the Court should or should not be constituted. Likewise in the present case any formal order now to be made should recognise the limit of power and be couched accordingly. For reasons which I have given I distinguish the form of order absolute for prohibition which issued in R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 295. Brooks v The Upjohn Co & Ors (1998) 156 ALR 622 at 625-630 discusses the ability of the Full Court of the Federal Court to entertain an appeal from a single judge of that Court with respect to disqualification. That case reflects the approach of the same Court in Gas and Fuel Corporation Superannuation Fund & Ors v Saunders & Anor [1994] FCA 1237; (1994) 123 ALR 323 at 332-337 where a decision of a single Judge to disqualify himself was treated as a procedural direction which was appealable. It is sufficient now to observe that it may be useful to take as a starting point the discussion in Barton & Anor v Walker & Anor (1979) 2 NSWLR 740 at 749-750 and to observe the distinguishing features between the Federal Court and this Court.

101 In my opinion the order under appeal with respect to costs was properly made within the judicial discretion. There is no breach of the rules of natural justice associated therewith.

102 On 4 December 2000 independently of their appeals the appellants made application direct to this Court for relief. These applications are incompetent.

103 I would dismiss both the appeals and the applications.

104 Section 50(1) of the Supreme Court Act provides that subject to the rules of court, an appeal lies to the Full Court "against every judgment...., order, or direction of a judge, whether in court or chambers, and also from the refusal of any judge to make any order". There follow a number of provisos qualifying the right of appeal by providing circumstances in which either no appeal lies or where leave is required. Section 50(1)(3)(b) provides, in effect, that no appeal lies without leave of the judge or of the Full Court from any "interlocutory order or interlocutory judgment". Section 5(1) of the Act provides that "judgment" includes decree, and that "order" includes rule.

105 No objection was taken by the respondents to the competency of these appeals. Both the appellants and the respondents were understandably anxious that any question of Debelle J's competence to conduct the trial - a trial that is expected to last some six weeks - should be resolved before embarking on that exercise. It is in the interests of the Court and of all parties that there be an early resolution of the present issue where there is otherwise a possibility that an appeal court might later direct a retrial on grounds now sought to be agitated by the appellants.

106 A decision to withdraw from hearing a case based on apprehension of bias, or a decision not so to withdraw, is a decision made by a judge based on his or her own knowledge of the facts which are said to give rise to the disqualification. They are not matters properly subject to proof on an application brought before the judge. Very often, a judge will merely withdraw from the hearing without inviting submissions, and perhaps without even publicly disclosing the reason for withdrawing.

107 There is a whole range of circumstances attending a decision to continue with or to withdraw from a hearing. Besides a decision by the judge without inviting submissions, the judge may make an announcement of the potentially disqualifying fact of which he or she is aware, and may merely invite submissions from the parties before deciding, without the judge making any formal order. There may be an oral request by a party for a judge to consider self-disqualification before or at the beginning of the trial, based on information then known to one of the parties, as in R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248. There may, as was the case concerning both the present appellants, be a formal written application or motion. In this case one appellant merely sought an order that Debelle J disqualify himself from further hearing the action. The other appellant sought a similar order but, by way of alternative, an order that the trial of the action be heard by a judge of the court other than Debelle J. The actual order made by Debelle J was drawn up and sealed, and so far as is material, ordered that the two applications be dismissed.

108 It is against that formal order that these appeals are brought. The substantive orders sought by the appellants in substitution for the order of dismissal are that "the Court order that the trial of this action be heard by a Justice of this Honourable Court other than the Honourable Justice Debelle".

109 A request, in whatever form, that a judge disqualify himself or herself could seldom be regarded as an inter partes application requiring resolution of an inter partes dispute by the judge. A decision to proceed with a hearing, or not to proceed, likewise would not generally be regarded as an order binding on parties and necessarily requiring them to do or to refrain from doing something, being orders of a type usually made by judges of this Court. For that reason, it is not surprising that four members of the High Court in their joint judgment in R v Watson; Ex parte Armstrong [1976] HCA 39; (1976) 136 CLR 248 at 266 said that a judge who simply continues to sit after it has been submitted that he is disqualified does not thereby make a "decree", and that no appeal would lie from such decision. In that case, "decree" was defined to mean a "decree, judgment or order". Likewise, subsequent decisions holding that appeals against such rulings are incompetent are also not surprising. I refer in particular to Barton v Walker [1979] 2 NSWLR 740, Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272 per Priestley JA at 273, Kapetanos v Selig (1984) 37 SASR 493 and R v Rogerson (1990) 45 A Crim R 253. In each of those cases, the applications made to the judge or magistrate concerned to disqualify himself were held not to be justiciable applications. They could not give rise to an interlocutory order from which an appeal could be brought. The reasoning in those cases was referred to but not passed upon in Nicholson v Griffiths (1988) 143 LSJS 204 at 210 and again by the present Chief Justice in IOOF Australia Trustees Ltd v SEAS Sapfor Forests Pty Ltd [1999] SASC 249.

110 However, some of the reasoning has also been criticised by Kirby P in Rajski v Wood (1989) 18 NSWLR 512 at 518 and by the Full Court of the Federal Court of Australia in Brooks v The Upjohn Company (1998) 156 ALR 622.

111 In Rajski there was an application to the Court of Criminal Appeal, apparently seeking to invoke original jurisdiction, for declarations that the trial judge should have disqualified himself and that the decision of the Chief Justice and/or listing judge to list the matter before the judge in question was invalid. The judges concerned were sued as parties. The application was dismissed as incompetent because it disclosed no reasonable cause of action (Priestley JA and Hope AJA) and because it was vexatious and an abuse of process (Kirby P). However, Kirby P considered that if an ancillary order had been made which was dependent upon the finding of the intended trial judge that he was not disqualified, an appeal, subject to the obtaining of leave, would lie.

112 Brooks was an application made by formal notice of motion, resulting in a sealed order of the judge that the orders sought by the applicant be not made, and providing for costs of the unsuccessful disqualification application. Barton v Walker was distinguished on the basis that in the latter case no notice of motion had been filed nor any formal order made.

113 No objection was taken by the respondents to an appeal against the refusal by the trial judge to disqualify himself in Australian National Industries Ltd v Spedley Securities Ltd (In Liquidation) (1992) 26 NSWLR 411. The majority appears to have distinguished Barton v Walker on the ground that in Spedley the trial judge formally refused a request to list before another judge the hearing of proceedings in which he had earlier made crucial findings as to credit in the course of interlocutory proceedings. In Gas and Fuel Corporation Superannuation Fund v Saunders [1994] FCA 1237; (1994) 123 ALR 323, Gummow and Heerey JJ at 332 - 337 distinguished Barton v Walker on similar grounds as did Kirby P in Rajski v Wood, namely that the attack was on a formal order of the Court made in direct consequence of the trial judge's ruling as to apprehended bias.

114 In this case there was, perhaps fortuitously, an alternative application by one of the appellants for an order that the trial of the action be heard by a judge other than the intended trial judge. That application was formally dismissed by order of the trial judge, who also ordered the appellants to pay the respondents' costs of the application. Barton v Walker and like decisions can therefore be distinguished without passing judgment on the reasoning behind them. The actual order made by Debelle J is properly the subject of an appeal, by leave (which has been given), to this Court.

115 I would also dismiss the alternative applications filed by the appellants, for hearing before this Court, seeking orders that Debelle J be disqualified from hearing the action. They are not necessary, but in any event, could not be granted in the light of the recent dictum of the majority of the High Court in Ebner v The Official Trustee in Bankruptcy [2000] HCA 63 at [74].

116 Although it is not necessary to decide the point in this case, I would be concerned, where no formal order of the type made in this case were made, if form were to triumph over substance, resulting in the inability of an appellate court to rule on such a crucial issue before the commencement rather than at the end of a long trial. The law, in such a case, would be perceived to be no more than an ass.

117 The potential difficulties of a timely resolution of such questions are made no easier by the recently expressed view of a majority of the High Court in Ebner (supra) at [74] that challenges at first instance for apprehended bias cannot be determined by any judge other than the judge asked to disqualify himself or herself. A contrary extra-judicial view has been offered by Sir Anthony Mason in "Judicial Disqualification for Bias and Apprehended Bias and the Problem of Appellate Review" (1998) 1 Constitutional Law and Policy Review 21, at least in respect of multi-member benches. See also Ebner, per Callinan J at [185].

118 The present position could well give rise to unfortunate anomalies, and would justify review by the legislature, at least to enable the court to determine an appropriate means of resolving such challenges, both in respect of a single judge and in respect of a member of a Full Court. Some possibilities for reform are discussed by Campbell_,_ "Review of Decisions on a Judge's Qualification to Sit" [1999] QUTLawJl 1; (1999) 15 QUTLJ 1.

119 If such a review is not undertaken, the matter may well precipitate a constitutional challenge - a possibility hinted at, not only by counsel for the appellants in this case, but in other arenas as well: Johnson v Johnson (2000) 174 ALR 655; [2000] HCA 48 per Kirby J at [37]; Ebner v Official Trustee in Bankruptcy [2000] HCA 63 per Kirby J at [113] - [116]; Tilmouth and Williams,"The High Court and Disqualification of One of Its Own" (1999) 73 ALJ 72.

120 Nevertheless, for reasons already given, the respondents rightly conceded that the present appeals were properly before the Court.

SOUTHERN EQUITIES CORP LTD & ORS v BOND & ORS No. SCGRG-96-113 [2000] SASC 450

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SOUTHERN EQUITIES CORP LTD & ORS v BOND & ORS No. SCGRG-96-113 [2000] SASC 450 (20 December 2000)

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Cases Cited (27)