The Anderson Group Pty Ltd v Tynan Motors Pty Ltd

Court of Appeal (NSW)|2005-09-23|Before: Santow JA, Basten JA, Young CJ, Yeldham J

CITATION: The Anderson Group Pty Ltd v Tynan Motors Pty Ltd [2006] NSWCA 22

JUDGMENT OF: Santow JA at 1; Basten JA at 2; Young CJ in Eq at 19

DECISION: The appeal is allowed, appellant/plaintiff entitled to verdict.

LEGISLATION CITED: Common Law Procedure Act 1899 (NSW) Corporations Law (Cth) ss 568A(1)(b), 568D(1)

Armory v Delamirie (1722) 1 Strange 505; 93 ER 664; [1558-1774] All ER Rep 121 Biddle v Bond (1865) 6 B & S 225; 122 ER 1179 Boag v Lee (1957) 75 WN (NSW) 77 Butler v The Egg & Egg Pulp Marketing Board (1966) 114 CLR 185 Chabbra Corporation Pty Ltd v Jag Shakti [1986] AC 337 Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107; [1558-1774] All ER Rep 1 Cowell v Rosehill Racecourse Co Ltd (1937) 56 CLR 605 Davis v Garrett (1830) 6 Bing 716; 130 ER 1456 Donald v Suckling (1866) LR 1 QB 585 Esanda Finance Corp Ltd v Gibbons [1999] NSWSC 1094 Fenn v Bittleston (1851) 7 Ex 152; 155 ER 895 Heydon v Smith (1611) 13 Co Rep 67; 77 ER 1476 Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 Hughes & Bremerman v Rooke [1954] St R Qd 45 Jeffries v The Great Western Railway Co (1856) 5 El & Bl 802; 119 ER 680 Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 Lilley v Doubleday (1881) 7 QBD 510 Lockwood v Bull (1823) 1 Cowen (NY) 322; 13 Am D 539 Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 McKenna & Armistead Pty Ltd v Excavations Pty Ltd (1956) 57 SR (NSW) 515 Mennie v Blake (1856) 6 El & Bl 842; 119 ER 1078 CASES CITED: Morris v CW Martin & Sons Ltd [1966] 1 QB 716 North General Wagon & Finance Co Ltd v Graham [1950] 2 KB 7 Pacific Acceptance Corporation Ltd v Mirror Motors Pty Ltd (1960) 61 SR (NSW) 548 Palgo Holdings Pty Ltd v Gowans (2005) 79 ALJR 1121 Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204 R v Judge Leckie (1977) 52 ALJR 155; 18 ALR 93 R v Lilydale Magistrates Court [1973] VR 122 R M Campbell v Machnig (Yeldham J, 22.5.1981, unreported) Rampton Holdings Pty Ltd v Rocom Pty Ltd (Western Australian Full Court, 31.7.1992, unreported) Re Hallett; Ex parte National Insurance Co (1894) 71 LT 408 Re Veron (1966) 84 WN (Pt 1) (NSW) 136 Roberts v McDougall (1887) 3 TLR 666 Rogers Sons & Co v Lambert & Co [1891] 1 QB 318 Russell v Wilson (1923) 33 CLR 538 Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (1998) 45 NSWLR 556 Sandtara Pty Ltd v Abigroup Ltd (1996) 19 ACSR 578 Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657 The Winkfield [1902] P 42 Thorne v Tilbury (1858) 3 H & N 534; 157 ER 581 Union Transport Finance Ltd v British Car Auctions Ltd [1978] 2 All ER 385 Whiteley Ltd v Hilt [1918] 2 KB 808 Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515

PARTIES: The Anderson Group Pty Limited (Appellant) Tynan Motors Pty Limited (Respondent)

COUNSEL: J Gleeson SC and J J Young (Appellant) A S Martin SC and A R Zahra (Respondent)

SOLICITORS: Rockliffs (Appellant) McMahons Lawyers (Respondent)

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40997/04 DC 7208/02

SANTOW JA BASTEN JA YOUNG CJ in EQ

Tuesday 21 February 2006 THE ANDERSON GROUP PTY LTD v TYNAN MOTORS PTY LTD Judgment 1 SANTOW JA: I agree with the judgment of Young CJ in Eq which deals comprehensively and in depth with all the issues raised by this appeal. 2 BASTEN JA: As noted by Young CJ in Eq, the basic facts, which his Honour sets out at [19]-[28] are straightforward and, for the most part, were not in contention. The primary factual contest concerned the finding made by the trial judge that the Respondent took reasonable care of the goods bailed to it. 3 In relation to this factual dispute, it was common ground between the parties that this Court was in a position to reassess the evidence given at trial and reach its own conclusions with respect to the inferences which could properly be drawn from that evidence. 4 As noted by the Chief Judge at [124] below, the factual question turned on the steps taken to secure the keys to the motor vehicle, rather than the physical barriers to removing the vehicle from the car yard, once the keys had been obtained. Evidence called by the parties was directed to this question, but it was not directly considered by the trial judge. Further, as the Chief Judge has noted, the trial judge gave no consideration to the legal test and the onus placed on the Respondent. 5 I would only add to the Chief Judge's reasons in this respect that the Respondent's office was a demountable building positioned at the back of the car yard, and to which cleaners had access every evening, together with the ability to turn off the alarm system. Precisely how the alarm system came to be turned off for a period of more than an hour on the evening in question, and the role of the cleaners in relation to the events of the evening, were apparently not explored in the course of the trial. The cleaners were not joined as a party to the proceedings, nor were the individuals involved called to give evidence. However, it is sufficient to note that the Respondent failed to establish that it took reasonable steps with respect to securing the keys to the motor vehicle in question. Accordingly, I agree with what Young CJ in Eq has said at [118]-[131] and with his Honour's conclusion that the Respondent did not discharge the onus of demonstrating that it took reasonable steps to prevent the loss occurring. 6 I also agree with his Honour's reasons and conclusion with respect to the quantum of the Appellant's loss. 7 There remains, in my view, only one further question which it is necessary to answer in order to dispose of the appeal. That question is whether it is open to the Respondent to deny the title of the person from whom it obtained the motor vehicle. For the reasons explained by the Chief Judge at [90]-[101] it was not open to the Respondent, as bailee from the Appellant, to deny the Appellant's title on the basis that the Appellant's right to possession had been extinguished by its repudiation of the bailment to it from Esanda Ltd. That proposition holds good for each of the causes of action relied on by the Appellant, namely breach of duty as bailee, breach of contract and negligence: see Palmer, Bailment (2nd ed, 1991) at p 267. 8 However, even if the Respondent were entitled to deny the Appellant's right to possession, it failed to do so in the present case. 9 The Respondent relied upon two acts on the part of the Appellant, which were said to disentitle the Appellant to immediate possession of the vehicle. The first such act was the failure to maintain insurance over the vehicle. This fact, taken alone, hardly supports the Respondent's case. If the Appellant retained an insurable interest in the vehicle, it is difficult to see why it could not rely on that interest to support the present proceedings. 10 The second act on the part of the Appellant said to deprive it of a right to immediate possession was its delivery of the vehicle to the Respondent for sale, without the written authority of Esanda Ltd. Again, this argument sits somewhat awkwardly in the mouth of the Respondent. Any sale by the Respondent would, on this argument, have constituted a conversion of the vehicle by it, for which it might have been accountable to Esanda Ltd. 11 I agree with the Chief Judge's conclusion in respect of this issue, and with his Honour's reasons, subject to his Honour's acceptance of the reasoning of Bridge LJ in Union Transport Finance Ltd v British Car Auctions Ltd [1978] 2 All ER 385, set out at [70] below. In my view, where the conduct which is said to bring the bailment to an end is conduct in breach of a specific condition of a written contract, and the contract provides for a mechanism for termination on default, the contract should not be treated as terminated unless the party entitled to trigger the mechanism has done so, and complied with its terms. Where, as in this case, the written contract, in clause 8, required the finance company to serve a notice of default requesting that the default be remedied within a specified period, before it became entitled to immediate possession, compliance with that provision should be understood as a pre-condition to entitlement to immediate possession, at least in the circumstances to which the clause applies. 12 Whether other circumstances, which might be treated as a repudiation of the contract by the hirer, would give rise to an entitlement in the finance company to immediate possession under the general law need not be determined in this case. The decision in Union Transport should be understood as one based on the proper construction of the contract in question. If a sensible commercial reading of a contract demonstrates an objective intention to limit termination by reference to a prescribed mechanism, there is no reason to read down the effects of the contract, because not to do so would impose a limitation on the operation of the general law rights of the bailor and such an intention is not provided in "the clearest expressed terms". If a finance company wishes to preserve its rights under the general law, without expressly identifying them, it can do so. It will usually be the party which sets the terms on which it is willing to do business with a prospective hirer and hardly needs to rely on some presumption of construction in order to protect its position. 13 Even assuming that it could rely on the right of a third party, the Respondent did not demonstrate that Esanda Ltd took the steps required to terminate the contract of hire and hence did not establish that only Esanda Ltd had a right to immediate possession of the vehicle at the time it was stolen. 14 For these reasons, I do not need to consider the principles relating to "deviation" identified by the Chief Judge at [77]-[89] below. 15 In relation to the argument raised by the Respondent, relying on the disclaimer executed by the liquidator of the Appellant in May 2000, I respectfully adopt the reasoning and conclusion of the Chief Judge at [102]-[108]. 16 At [133]-[146] the Chief Judge deals with the ground of apprehended bias. I agree with his Honour that it is not necessary to determine whether the judgment below should be set aside on this ground, but I also agree with his Honour at [139] that the allegation is a serious one. 17 At [142], his Honour notes the "golden rule" that there should be no communication between a judge and any one legal practitioner, in the absence of representatives of each other party to proceedings. If, as his Honour suggests, "it is not infrequent for equity judges in certain types of case to telephone both counsel", it would seem that the rule has a somewhat tarnished hue. I recall only one occasion on which I received such a telephone call in more than two decades at the bar and the occasion has stayed with me because I thought at the time it was inappropriate. I still do. If it is necessary for the judge to make the communication, because of the "legal intricacies of the point" which needs to be raised, in my view it should be done in writing. Even where the judge drafts the letter, a further level of protection is given by having an administrative officer of the Court send the letter. The latter formality may be unnecessary, but the reduction of an inquiry to writing is not. Even if the judge is meticulous in making the same inquiry of each counsel, and not entering into any discussion as to the point, there is no means of demonstrating that to others. Further, and going beyond the view expressed at [143] below, contact with one counsel must be a contravention of "the golden rule" and therefore cannot be "innocuous". 18 I agree with the orders proposed by the Chief Judge. 19 YOUNG CJ in EQ: The basic facts in this case are extremely simple and uncontested. The appellant, the plaintiff below, took a Mercedes car under a hire purchase agreement from Esanda Ltd. I will mention some of the terms of the hire purchase agreement in due course, but suffice at this point to say that the hire purchase agreement was governed only by the common law and that it contained a provision that the hirer was not to part with possession without prior written consent. 20 The appellant wished to sell the car. Its controller says he telephoned Esanda, obtained a pay-out figure, informed the officer of Esanda that he intended to sell the car and then took it to the respondent's yard at Miranda for sale on consignment. He did not obtain the written consent of Esanda to do this as the hire purchase agreement required. The car had originally been acquired from the respondent. 21 The appellant had also committed other breaches of the hire purchase agreement such as a failure to insure the vehicle. 22 On 3 March 2000, this Court ordered that the appellant be wound up. 23 On 3 May 2000, the car was in the respondent's yard. Thieves broke into the respondent's office where there were displayed on the wall a board on which the keys to the cars in the yard were hung. The thieves took the keys belonging to the appellant's car and also the keys to another Mercedes motor vehicle and cut part of the small perimeter fence. They then drove those two vehicles out of the yard and they have not been seen since. 24 The evidence clearly showed that the appellant's Mercedes could only be moved by a person who had the key. 25 On 24 May 2000, Esanda gave a notice of repossession demanding that the appellant hand over possession of the vehicle forthwith. On 29 May 2000 the liquidator of the appellant gave a notice under s 568A(1)(b) of the Corporations Law that he disclaimed the property described in the schedule. The schedule was "Contract No 210226593 - Mercedes Benz E55 AMG", which was the hire purchase agreement under which the car had been hired by the appellant. 26 The dispute between the appellant and Esanda was later settled by the liquidator of the appellant paying Esanda a sum of money to cover three hire purchase agreements. The amount referable to the hire purchase agreement relevant to the present case is $130,629.39. 27 The winding up of the appellant was terminated by order of this Court on 2 September 2002. 28 The market value of the appellant's car at the relevant time was $166,000. 29 The appellant sued the respondent for breach of duty as a bailee, negligence and breach of contract. 30 Hughes DCJ found a verdict for the defendant. His Honour did so on two bases, first, that the plaintiff had no title to sue; secondly, that the respondent took all reasonable care to look after the vehicle. The appellant challenges both these findings. 31 I will deal with each of the matters that led to the trial judge's conclusions in turn, and then it will be necessary to consider whether, in all the circumstances, the learned trial judge displayed bias and if so, what are the consequences of this. 32 On the appeal, Mr Justin Gleeson SC and Mr J J Young appeared for the appellant and Mr A S Martin SC and Mr A R Zahra appeared for the respondent. 33 It is convenient to structure these reasons under the following headings:

What was the true quantum of the appellant's loss?

Standing to sue generally 34 As to standing, his Honour was convinced by the respondent's argument that the moment the appellant attempted to have the car sold, there was such a breach of bailment that possession was immediately available to Esanda. He ruled at [12]: "It follows then that not only was the plaintiff not the owner of the chattel but also was not entitled to possession of the chattel and had no possessory title and, therefore, had no standing to sue. That is, at the time of the theft, the plaintiff, because of his attempted conversion, was neither the owner of the goods or entitled to the possession of the goods, nor had any possessory title. At the time of the theft the defendant had possession of the chattel. At the time of the theft only Esanda was entitled to immediate possession. The plaintiff is therefore non-suited by reason of legal reasoning." 35 It is, with great respect to the learned judge, difficult to see how he was able to dismiss hundreds of years of learning on the law of bailment quite so easily. 36 The law of possession is ancient and fairly complicated. It is discussed in great detail in the seminal work on the subject, An Essay on Possession in the Common Law by F Pollock and R S Wright (Clarendon Press, Oxford, 1888). 37 Pollock and Wright is an unusual work in that Parts 1 and 2 by Frederick Pollock are completely distinct from Part 3 which was written by R S Wright, later a Judge of the Queen's Bench Division from 1890 to 1904. 38 Pollock and Wright says at pp 16-17 that possession in law is most easily understood as associated with possession in fact. The normal situation is that the person who in fact holds the chattel possesses it. However, there will be cases where a person who does not actually have possession in fact will be held in law to be entitled to possession. This is denoted as the right to possess and usually confers the same title to sue as if that person had actual possession. 39 Bailment is a very ancient part of our law. Holdsworth takes up the analysis in Vol 3 page 351 of his A History of English Law 5th ed (Sweet & Maxwell, London, 1942) headed "The Medieval Theory of the Possession and Ownership of Chattels". 40 At 352 he says that "The person in possession (of a chattel) is the person who has all the rights of an owner," and then goes on to quote Ames and a Year Book of Edward III for the quotation, "The converter of a chattel, like the disseisor of land had the power of present enjoyment and the power of alienation. If dispossessed by a stranger he might proceed against him by trespass, replevin, detinue, or trover. He could sell the chattel or bail it. … It was forfeited to the crown for felony; and was subject to execution." 41 Holdsworth goes on to say, "Thus a delivery of chattels by a trespasser had a tortious effect very similar to the effect of a feoffment by a disseisor. … On the other hand, the person out of possession had merely a right to recover the chattel; and that right was a chose in action which was inalienable." 42 In Vol 7 page 448, Holdsworth says: "The modern principles of the law as to the ownership and possession of chattels adhere very closely to the medieval principles. They are however both added to and elaborated." He then goes on to say: "Just as in the land law it was necessary to reconcile the rule that two persons cannot exclusively possess the same thing, with the fact that there might be many different classes of tenants of the same piece of land; so in the law as to chattels personal, it was necessary to reconcile the same rule with the fact that such persons as servants or licensees, who have physical control, have not got possession. To meet this situation we talk of the custody of the servant and the possession of the master, or of the servant having actual and the master constructive possession. Similarly, the extension of remedies like trespass, which primarily belong to the possessor, to the person who has only a right to possess, leads sometimes to the attribution of possession to both bailor and bailee. In such cases it is clear that we have no infringement of the principle that two persons cannot exclusively possess the same thing; but rather a use of the term possession in the double sense of physical control and a right to possess." 43 Holdsworth says at 449: "The law as thus developed can be grouped under the following three propositions: (i) The person in possession is treated as the owner save as against him who can show a better right to possession. As against all the world, except the man with the better right, he has all the powers of an owner. … (ii) [p 455] The owner out of possession has nothing save a right to recover his chattel from the possessor. … (iii) [p 458] The owner out of possession, who seeks to recover his possession, must show an absolute right; so that, if the defendant in possession can show that some third person has a better right than either, the plaintiff cannot recover." 44 Holdsworth notes at p 461 that both the bailor and bailee have been held entitled even to bring trespass. This occurred as early as 1375 in the case YB 48 Ed III Mich pl 8 where Cavendish CJ so ruled. 45 The first of Holdsworth's three propositions is supported by a number of cases. In Heydon v Smith (1611) 13 Co Rep 67 at 69; 77 ER 1476 at 1478, Sir Edward Coke wrote: "That he who hath a special property of the goods at a certain time shall have a general action of trespass against him who hath the general property, and upon the evidence damages shall be mitigated; but clearly, the bailee, or he who hath a special property, shall have a general action of trespass against a stranger, and shall recover all in damages, because that he is chargeable over." 46 In Armory v Delamirie (1722) 1 Strange 505; 93 ER 664; [1558-1774] All ER Rep 121 (the Chimney Sweep's case), Sir John Pratt CJ (KB) ruled: "1. That the finder of a jewel, though he does not by such finding acquire an absolute property or ownership, yet he has such a property as will enable him to keep it against all but the rightful owner, and consequently may maintain trover." (Strange 505; ER 664; All ER Rep 122). 47 In the leading authority on conversion of chattels, Penfolds Wines Pty Ltd v Elliott (1946) 74 CLR 204, Dixon J who gave the leading judgment at 225-227 reviewed the law and quoted Pollock & Wright at p 145 with approval. The passage that Dixon J quotes is from the Wright portion of the book and the quotation concludes by saying that the right to sue in trespass "exists whenever the person whose actual possession was violated held as servant, agent, or bailee under a revocable bailment for or under or on behalf of the person having the right to possession." 48 Although the relevant principles go back to the Middle Ages, there is recent authority to the same effect. For instance, I considered the point in Specialised Transport Pty Ltd v Dominiak (1989) 16 NSWLR 657, where after analysing the authority I said at 663: "At common law the possessor of a chattel has a better title as against all the world save the true owner." 49 Again the concept of "special property" is with us today; see, for example the decision of the High Court in the recent case on pawn and pledge, Palgo Holdings Pty Ltd v Gowans (2005) 79 ALJR 1121 at 1125 [17]. 50 It is bizarre and extraordinary that it seems that none of this basic learning was put before the learned trial judge, apart from a reference to Pollock and Wright in materials sent to him after he had reserved his judgment. 51 There is an abundance of authority for the proposition that even if a person breaks a bailment, if that person continues in possession of personal property then that person has a title to sue to defend his or her possession. An example is Mennie v Blake (1856) 6 El & Bl 842; 119 ER 1078. Mennie was the owner of a horse and cart. Facey was its bailee. Facey decided to emigrate. He used the horse and cart to transport his goods to the pier and there he met with the defendant to whom he owed money. Facey delivered the horse and cart to the defendant telling him to take them for his debt but adding that he owed Mennie money as well. Mennie brought replevin against Blake. Replevin tried the question as to who was entitled to possession. However, replevin only lay for the goods and chattels unlawfully taken. As Facey had handed the goods to Blake and that possession was not merely the possession of the plaintiff Mennie, replevin had to fail. We have here a situation where even a parting with possession of the goods in an unauthorised way which might break the bailment did not prevent there being a proper transfer of possession from Facey to Blake. 52 The trial judge's statement that not only was the plaintiff not the owner of the chattel but also was not entitled to possession of the chattel and had no possessory title and therefore had no standing to sue appears to have been derived from his consideration of a passage from N Palmer, Bailment 2nd ed (Law Book Co, Sydney, 1991) at p 1270 and the cases there cited, namely Roberts v McDougall (1887) 3 TLR 666; Hughes and Bremerman v Rooke [1954] St R Qd 45 and Leigh & Sillavan Ltd v Aliakmon Shipping Co Ltd [1986] AC 785 at 809. 53 It is hard to see how any of these cases support his Honour's conclusion. In Roberts, the facts were that the bailee left a cart on a quay where it caught on fire. He should not have left it there. The court merely applied what Grove J had said in Lilley v Doubleday (1881) 7 QBD 510 at 511 that "If a bailee elects to deal with the property entrusted to him in a way not authorised by the bailor, he takes upon himself the risks of so doing …". In Hughes, an aircraft was bailed so that it could be flown from Brisbane to Coolangatta and back. The pilot got lost on the return journey and flew inland. The plane then crashed though negligence was not established. However, the negligent "deviation" was held to make the bailee liable. The Leigh case would not seem to have anything relevant to say to the present dispute. 54 I will consider this line of cases when I consider the alleged principle of deviation from the bailment later in these reasons. However, none of this material justifies the learned judge's finding on the matter. 55 Another key authority in this area which was given no consideration at all below, is the decision of the English Court of Appeal in The Winkfield [1902] P 42. The facts were that two ships, The Winkfield and The Mexican, collided off the Cape of Good Hope and mail was lost. The Postmaster-General sued The Winkfield for loss of the mail caused by negligence. The Postmaster-General was merely the bailee and carrier of the mail, the actual items which were lost were the property of other persons. The Postmaster-General was not liable to the bailors for loss of their mail and it was argued that as the bailee did not have to account to the bailor for the loss of the goods he therefore could not sue, or alternatively, could not sue for the whole value of the property. The English Court of Appeal followed cases like Armory v Delamirie and held that the PMG had a good title against every stranger and that he was entitled to sue for the full amount of the value of the goods. 56 Holdsworth comments that the reason why it was not until 1901 that the real nature of the bailee's right was stated was because of the way in which bailment had developed. 57 Holdsworth says, (see Vol 7 p 453) and what he said appears to be supported historically, that English law adopted bailment from Roman Law principles in the 13th Century probably via Bracton. From early on the bailee had almost a strict liability to compensate the bailor for loss. However, in Tudor times onwards it was customary for people to make special contracts with respect to bailment and the law was otherwise modified so that there were some escape routes for bailees. Its development was affected by the writings of St German in his Doctor and Student which further engrafted Roman law principles onto it. 58 The law of bailment was then restated in its revised form by Holt CJ in Coggs v Bernard (1703) 2 Ld Raym 909; 92 ER 107; [1558-1774] All ER Rep 1, where the duties of bailees under various types of bailment were set out in detail. As a result, there was a considerable number of situations where the bailee did not have to account to the bailor for the loss. This also marked the firm advance of assumpsit into bailment territory. 59 The Winkfield decides that notwithstanding this, the bailee still has an action for the whole value of the chattel. However, as Holdsworth says at Vol VII p 463, "The fact that the bailee was not liable to the bailor for the destruction or injury to the chattel bailed does not affect his liability to return the damages which now represent it. That is not a liability in tort, but a liability on the contract of bailment. It would follow that in a case like that of The Winkfield where the Crown was in effect the bailee, a petition of right would lie for the repayment by the Crown of the damages recovered by it." 60 However, from the 18th century, assumpsit has extended itself to cover the field once occupied by common law bailment. Thus, nowadays, one must ordinarily look to see the terms of the bailment within a contract and the contract may, and often will, modify the consequences that would otherwise follow if there were no agreement and the rules of common law bailment applied. 61 Of course, bailment may exist apart from contract. The classic example is where the owner of a fur coat bailed it to a furrier for cleaning and the furrier then sent it to a specialist cleaner for treatment. Whilst there was no contract between the bailor and the specialist, the relationship of bailor and bailee existed: Morris v CW Martin & Sons Ltd [1966] 1 QB 716. 62 I turn now to the proposition that because there was a fundamental breach of the hire purchase agreement, the appellant's title to sue thereby determined. 63 There is no doubting the general proposition that in a simple bailment, if the bailee repudiates the bailment then the bailment comes to an end; see Penfolds Wines v Elliott at 214 and see Donald v Suckling (1866) LR 1 QB 585 at 615. 64 However, where there is a bailment within a contract, the law is more precisely stated by Swinfen Eady MR in Whiteley Ltd v Hilt [1918] 2 KB 808 at 819 viz: "A bailment may be determined by doing any act entirely inconsistent with the terms of bailment: … but it does not follow from that that if the bailee has any further interest in the chattel of a proprietary kind he forfeits that interest by any dealing with the chattel not warranted by the terms of the bailment. There is no foundation for such a notion. … ". 65 See also Dixon J in Penfolds Wines at 227 quoting Pollock and Wright at 132-133. 66 The contract of hire purchase is in evidence. Clause 3 contains a promise by the hirer that it will not sell, dispose of or encumber the goods or agree or attempt to do so except with Esanda's prior consent in writing. 67 Clause 8 deals with default and says that if during the hiring any of the listed events occur, "Esanda will serve a notice of default on me, requesting that the default be remedied within seven (7) days from the date of the notice, and if after seven (7) days I am not able to remedy the default then Esanda will become entitled to immediate possession of the Goods and Esanda may repossess them. Upon repossession, the hiring of the Goods will terminate." 68 In the hire purchase agreement, the word "will" must mean "must if it exercises its discretion to enforce the default". The word "I" denotes the hirer. 69 As noted earlier, the theft occurred on 3 May 2000. Esanda did not issue any notice of demand until 24 May 2000. 70 There is no doubt at all as Bridge LJ said in Union Transport Finance Ltd v British Car Auctions Ltd [1978] 2 All ER 385 at 391 that "It would be perfectly possible to introduce into a contract of bailment a term expressly limiting the manner in which the bailee's right to possession as against the bailor could be terminated …. It seems to me that it would require the clearest express terms to have that effect. A clause which merely gives a right to terminate by notice for any breach of the contract of bailment could not possibly, in my judgment, be construed as having that effect. Its purpose is to enhance the rights of the bailor and not to curtail them." 71 The hire purchase agreement in the instant case does not contain any such clear words. Accordingly I should follow what Lord Justice Bridge said. However, where Esanda as bailor issues a notice which does not rely on any act which is alleged to be repugnant to the bailment but instead acknowledges that the hirer's rights continue until the notice of demand, then Esanda must be taken in my view to have waived the "forfeiture" that would otherwise have taken place. 72 Even if this were not so, it must be remembered that the act that is necessary to terminate the bailment must be a very serious act and one which is virtually a disclaimer of the contract of bailment: Fenn v Bittleston (1851) 7 Ex 152 at 159-160; 155 ER 895 at 899 (quoted with approval by Pollock and Wright at 132, a passage endorsed by Dixon J in the Penfolds Wines case). 73 The learned judge appears to have adopted the respondent's submission that any act of conversion would determine the bailment, vide [9] of the judgment. With respect, the conduct had to be a great deal more serious than this and there was no finding that the conduct of the present appellant was repugnant to the bailment. Before us it was argued that not only was there a failure to insure, there was also a parting with possession and an attempt to sell. So be it, but the evidence also indicated that there was no attempt, as there was in the Union Transport case, to defraud the hirer, since the appellant had asked for a payout figure from Esanda. I cannot see how it could be found as a question of fact that the hirer had repudiated the bailment. 74 There is one other point that should be made in this connection. In the Union Transport case, Roskill LJ said at 390: "There is no room for doubt that the position at common law is this: if the bailee acts in a way which, to use the phrase used in argument, destroys the basis of the contract of bailment, the bailor becomes entitled at once to bring that contract to an end, and thus at once acquires the right to immediate possession of the article bailed." 75 This highlights a rather odd distinction that a bailment will terminate merely by repudiation of the bailee, but any contractual right will only terminate upon acceptance by the bailor of the repudiation. However, for present purposes this distinction causes no problems. 76 Mr Martin also relied on a doctrine that a bailment was terminated by the bailee deviating from the bailment. 77 Mr Martin put (T56) that there was an analogous principle to a bailee losing possessory title and that is, by committing what was termed a deviation from the terms of the bailment, the bailee became strictly liable as an insurer for the ensuing loss resulting from the theft of the vehicle. It also resulted in the bailee losing its status as a bailee of the vehicle. 78 For this proposition he relied on a passage from N Palmer, Bailment 2nd ed (Law Book Co, Sydney, 1991) at p 989. The learned author says: "Deviation is a legal metaphor used to denote any radical departure from the method of performance agreed upon in the contract. … Three principal consequences appear to follow at common law from an act of deviation by a bailee. First, his responsibility for the goods accelerates from one based upon reasonable care to a strict liability as an insurer. Secondly, any deferred right of possession on the part of the bailor becomes converted into an immediate right of possession, while the bailee's own possessory entitlement (but not, semble, his possession itself) correspondingly expires." 79 With respect to Professor Palmer, whose work in this area of the law is, generally speaking, regarded as authoritative, it is an error to rely too much on material from North America; see eg Paton on Bailment (Stevens & Sons, London, 1952) p 303. There is no doubt at all that there is some principle such as I have already considered when mentioning Lilley v Doubleday (1881) 7 QBD 510 earlier in these reasons. There is no doubt that a bailor is entitled to sue a bailee for damage arising from any use by the bailee of goods outside the term of bailment or for any damage resulting from an unauthorised departure from the terms of the bailment: McKenna & Armistead Pty Ltd v Excavations Pty Ltd (1956) 57 SR (NSW) 515 and see Story on Bailments 8th ed (Little, Brown and Company, Boston, 1870) para 413. 80 However, in my view in Australian law the proposition does not go beyond what I have stated and it is not the case that a deviation short of repugnancy or disclaimer of the bailment amounts to the bailee losing all title or right to possession. 81 It is interesting to observe that although Professor Palmer says that deviation has little to do with deviation of a journey, the English authority seems to commence with cases such as Davis v Garrett (1830) 6 Bing 716; 130 ER 1456. However, it is true that very early on, writers such as Story were treating the term "deviation" in a much wider sense, see para 413 where he instances "if a horse is hired as a saddle horse, the hirer has no right to use the horse in a cart, or to carry loads or as a beast of burden." He quotes Pothier as authority for this proposition but also Lockwood v Bull (1823) 1 Cowen (NY) 322; 13 Am D 539 which on my reading is not authority for the proposition at all. 82 There was debate before us as to whether a deviation from the bailment had been committed. There is little point in delving into the details, as to do so could not affect the result of the case one whit. 83 It thus seems to me that no matter which way one looks at the case the appellant had title to sue. However, I should deal with the cases to which counsel referred in their arguments and show that these do not affect what I have just said. 84 In Thorne v Tilbury (1858) 3 H & N 534; 157 ER 581, the headnote says: "To an action of trover for goods, the defendants pleaded that the goods were delivered by the plaintiff to the defendants to be by them warehoused and taken care of: that before the delivery the goods had been the property of one T deceased, and that there was not at the time of delivery any legal representative of the estate of T; and that this fact was concealed from the defendants: that afterwards H obtained letters of administration to the effects of T and claimed the goods and forbad the defendants to deliver them to the plaintiff. Held a good plea." 85 However, it is most significant that this case was decided in 1858 and that the plea was by way of defence upon equitable grounds. 86 A plea on equitable grounds in England in 1858 and in NSW up until 1957 meant that there was no defence as a matter of law, but if the defendant were to go to Equity, Equity would issue an absolute unconditional injunction against the successful party at law. Accordingly, under what became s 95 of the Common Law Procedure Act 1899 (NSW), the court at law would consider the equitable matter as to whether a common injunction would go. See as to the section Cowell v The Rosehill Racecourse Co Ltd (1937) 56 CLR 605 at 645-6 per Evatt J and Boag v Lee (1957) 75 WN (NSW) 77. 87 In other words, the situation that existed in the Tilbury case meant that, under the strict law, the defendant had no defence, but, because it would have been unconscionable for the plaintiff to have succeeded in the action, equity would grant an absolute and unconditional injunction to prevent the plaintiff at law from recovering. 88 However, by 1891, after the Judicature Act had been adopted, because the principles of law and equity were being administered in the same court, Lopes LJ was able to say in Rogers Sons & Co v Lambert & Co [1891] 1 QB 318 at 327-8, that although the general rule was that a person who had received property from another must restore the property to him from whom he received it, there were exceptions: (a) where the bailor's title had expired; or (b) where there had been an eviction by title paramount. The first exception was really not an exception to the general law of bailment, but his Lordship stated the practical result that now appertained. 89 It is, with respect, doubtful reasoning to take the proposition in the Rogers case as altering the law of bailment. 90 Generally speaking, where a person is sued for conversion of goods by the person who handed those goods to the defendant, the defendant is not able to plead ius tertii; see eg Biddle v Bond (1865) 6 B & S 225; 122 ER 1179. 91 Ius tertii was never allowed as a defence in conversion where the defendant derived the goods from the plaintiff: Jeffries v The Great Western Railway Co (1856) 5 El & Bl 802; 119 ER 680. This was approved by the High Court in Russell v Wilson (1923) 33 CLR 538 at 547. 92 We were referred to a decision of Austin J in Esanda Finance Corp Ltd v Gibbons [1999] NSWSC 1094. 93 That was a case involving a claim of ius tertii where the defendant had not obtained the chattel from the plaintiff. As Pollock and Wright point out at page 92, that is a completely different situation. However, Austin J appears to have thought that in that situation the governing principle preventing playing the ius terii card was some form of equitable estoppel. With respect, ius tertii from the time of Elizabeth I appears to be grounded in common law estoppel by representation, that is, that as the defendant took title from the plaintiff he is as much estopped from denying the plaintiff's title as a tenant of real property is estopped from denying the landlord's title. However, this judgment is already over-burdened by exploring by-ways and I will not pursue this matter any further. 94 The next case to which we were referred is North General Wagon & Finance Co Ltd v Graham [1950] 2 KB 7. In that case a car was taken under hire purchase with the usual clause that the hirer was not to sell or attempt to sell. The bailee attempted to sell and the court held that this was doing something inconsistent with the terms of the contract and terminated the bailment causing the possessory title to revert to the bailor. Accordingly the court held that the bailor was able to sue in trover. The bailor's right to possession occurred immediately on the breach of a fundamental term. 95 In R M Campbell v Machnig (Yeldham J, 22 May 1981, unreported), the facts were that the defendant received a bus chassis from premises at a Brisbane suburb with instructions to carry it to Sydney to the yard of W J George Pty Ltd. R M Campbell Vehicle Sales Pty Ltd, the plaintiff, had an agreement with Esanda whereby Esanda purchased the vehicles in question and then permitted Campbell to display them in its showroom. It did not authorise the display at a bus show. The chassis was damaged beyond repair when the carrier ran off the Newell Highway. Yeldham J had to decide whether R M Campbell Vehicle Sales Pty Ltd had title to sue and secondly, whether it was entitled to the full value of the chassis or some lesser amount. 96 Yeldham J held that the defendant was a bailee and although the plaintiff was not at any material time in actual possession of the goods, it had sufficient property and possession in them and they were at the risk of the plaintiff and that was sufficient to bring an action against the carrier. Following The Winkfield, his Honour held that the plaintiff was entitled to succeed against the defendant for the full amount of the goods. With respect, the decision appears to be completely in accordance with principle. 97 Finally, there is a decision of the Western Australian Full Court in Rampton Holdings Pty Ltd v Rocom Pty Ltd (31 July 1992, unreported). The facts were complicated. But, in brief, Beneficial Financial leased a Mercedes car to Rampton. The only significance of the judgment is that Franklyn J, with whom Malcolm CJ and Owen J agreed, said at the last page of his judgment that the breach of bailment, by delivering the car to a third party, gave the bailor an immediate right to possession, citing the Union Transport case. 98 Counsel did not cite the High Court's decision in Russell v Wilson (1923) 33 CLR 538, but it needs to be considered. 99 The appellant was a police officer. He entered the respondent's premises and seized money and securities which he considered were being held in connection with an illegal business of betting on horse racing. The respondent was convicted for using his premises for the purpose of gambling, but no order for forfeiture was made. After dismissal of the appeal a demand was made by the respondent for the return of the money and securities, but the appellant refused. The NSW Supreme Court ordered the return of the money and securities and this was affirmed by the High Court. 100 At 546-7, Isaacs and Rich JJ said that the contest did not involve any reliance on an illegal transaction, the respondent had actual possession and possession is not merely evidence of title, it confers a title of its own. They said at 547: "If the person taking the goods has a superior right, then to the extent of that superior right, and to that extent only, must the possessory title yield." 101 Accordingly, whichever way one looks at it, the learned judge fell into error on this point and the appellant did have title to sue.
The Disclaimer 102 The next point that arises is the effect, if any, of the disclaimer executed by the then liquidator of the plaintiff in May 2000. It will be remembered that on 24 May 2000, Esanda gave a notice of repossession. On 29 May 2000 the liquidator gave a notice under para 568A(1)(b) that he disclaimed the property described in the schedule. The schedule was "Contract No 210226593 - Mercedes Benz E55 AMG". The contract was the contract of hire purchase between Esanda and the appellant. The learned judge [26] said: "As Mr Renshaw has pointed out that they have no standing because they have issued a disclaimer to the effect that they disavowed the property. How can they sue for property they have disavowed on? In that respect they must fail."

"They" presumably means the appellant. 103 The appellant says that the effect of the notice of disclaimer was to terminate the appellant's rights and interests in the hire purchase agreement. The Court was told that the dispute between the appellant and Esanda had since been settled. The appellant submitted that the respondent was not affected by the disclaimer. It had no right or interest in the hire purchase agreement and it did not extinguish any cause of action that the appellant may have had against the respondent. 104 The respondent submitted that s 568D(1) of the then Corporations Law provided that the disclaimer terminates the company's rights, interests, liability and property in or in respect of the disclaimed property. The words, it is put, "in respect of" have the widest possible meaning and the cause of action against the respondent was connected or related to the hire purchase agreement, therefore the cause of action was extinguished. 105 With great respect, this is not so. 106 I accept the argument of the appellant. In addition, a disclaimer only has effect in the future and does not have an effect on any accrued rights or liabilities so that, for instance, the bankrupt is still liable for calls on shares made before the disclaimer: Re Hallett; Ex parte National Insurance Co (1894) 71 LT 408. 107 Although there is little material on the point, perhaps the most useful authorities by way of analogy are Sandtara Pty Ltd v Abigroup Ltd (1996) 19 ACSR 578 and Sandhurst Trustees Ltd v 72 Seventh Street Nominees Pty Ltd (1998) 45 NSWLR 556. It is clear to me that the appellant's submission is consistent with the way in which the disclaimer section of the Corporations and Bankruptcy Acts have been construed over the years. 108 Accordingly, because the right of action accrued before the disclaimer, namely, on the date of the theft on 3 May 2000, the disclaimer can have no effect. 109 It is clear from what I have said that the appeal must be allowed and there must be a verdict for the appellant. The next question is the amount of that verdict.

The Quantum of the verdict 110 Mr Martin submits that the loss to the appellant is the amount which it paid to settle with Esanda, namely $130,629.39. However, Mr Gleeson submits, on the authority of The Winkfield, that all the authorities support the proposition that the proper amount is the value of the goods, $166,000. 111 The Winkfield is clear authority for Mr Gleeson's proposition. However, Mr Martin argues that more recent authority has departed from The Winkfield on this issue. 112 The cases to which Mr Martin primarily refers are Butler v The Egg & Egg Pulp Marketing Board (1966) 114 CLR 185 and Maynegrain Pty Ltd v Compafina Bank [1982] 2 NSWLR 141 (reversed on other grounds in the Privy Council (1984) 58 ALJR 389). 113 However, to my mind, for present purposes the cases only have the effect in the present situation of varying the standard rule in The Winkfield, since affirmed by the Privy Council in Chabbra Corporation Pty Ltd v Jag Shakti [1986] AC 337, in the way referred to by Owen J in this Court in Pacific Acceptance Corporation Ltd v Mirror Motors Pty Ltd (1960) 61 SR (NSW) 548 at 550 that: "A plaintiff who, as between himself and the defendant, only has a limited interest in the property converted, cannot be entitled to recover more than the total value of that property at the time of conversion."

That exception has no relevance to the instant case. 114 Mr Martin puts that the larger sum gives the appellant a bonus. If it only had a limited interest in the goods, why should it receive as damages the whole value of the goods? 115 The answer is that in law, either bailor or bailee might sue for the loss. However, there could be only one action and so, if the bailee sued, the bailor was prevented from suing. The bailee, however, may well have to account to the bailor for a proportion of the damages. 116 Accordingly, in my view, the proper verdict is the full amount of the value of the vehicle, namely $166,000.

The liability of the respondent for the loss 117 The next issue is whether, on the basis that there was standing to sue, the respondent was liable for the appellant's loss. 118 As to this, his Honour said at [29]: "I am satisfied on that the relevant standard of care that was applicable was the reasonable standard of the industry. I am further satisfied that a more secure regime of say high fences or higher gauge steel in the boom gates, chains or padlocks was not reasonable in the circumstances. With those findings of fact that if the defendant owed a duty of care to the plaintiff, he did not breach that duty of care. I am satisfied the defendant took all reasonable care to look after the vehicle, bearing in mind that second hand car sales or any car sales have to be such that the vehicle has to be well displayed so that it will sell. In those circumstances I don't find that the defendant breached its duty of care." 119 The appellant attacks that passage in many ways. First it is put that there was no evidence before the learned Judge as to whether there was a standard in the industry. Mr Smith gave expert evidence. He was a director of a company trading as Security Risk Management Consultants. Neither his report, nor the oral evidence he gave, made out the proposition that there was some standard in the industry. 120 A Ms Bryant gave oral evidence. She said she was the Co-ordinator of Accredited Training at the Motor Traders Association of NSW, a position that she had been in for two years and prior to that she had worked for a Holden dealer at Tuggerah since 2000. She gave evidence as to what happened when she worked at Tuggerah and she was then asked at Black 116: "Q. Can you tell us what the practice in respect of security of motor vehicles at dealerships throughout NSW, in so far as you have observed them, is? A. The keys are kept on a key board. During the day they may be kept in an office that's an unlocked, unsecured area. At night they're generally put somewhere. It can be just from a cabinet to manager's offices and I've seen that demonstrated everywhere." 121 At Black 118, Ms Bryant was asked in cross-examination: "Q. So you're familiar within the industry, it is common within the industry for second hand motor car dealers to store keys within cabinets? A. In some situations yes, they're stored in a cabinet. It depends on the policy of each site. They all basically undertake - and our position is not to say this is how you do it or this is how it's run, it's to identify the process for what they do it, and so for each section there's various ways that they do it and the two most common ones that we come across is generally either a cabinet or in the manager's office." 122 The Black Appeal Book shows that a little later at the trial, Mr Newton for the present appellant asked: "Q. Is it your experience that it is common within second hand motor vehicle dealers when keys are being simply stored in a manager's office for that office to be locked by a lockable door? A. Definitely not in all situations. A lot of the time it would just be a door, might have a big open window to it. It's usually a room that they can take extra - or take the sales consultant's clients into as well." 123 It must be remembered in the present case that essentially what occurred was that the keys to the motor vehicles in an open yard were kept on a key board in an office. The office was protected by a burglar alarm. However, at a certain time during the early evening the cleaners turned the burglar alarm off. It would appear that the thieves became aware of this practice. They struck at a time when the burglar alarm was turned off. They forced their way into the office, removed the keys to the two Mercedes vehicles from off the key-board and then went into the yard, smashed open a vehicle which was in the way of the two Mercedes and moved it and then drove the two Mercedes out of the yard. 124 The evidence was that the Mercedes were so built that they could not be moved unless the driver had the key. Accordingly, security of the keys was the touchstone for security of the vehicle. The appellant says that a bailee should have taken more precautions to keep the keys out of the reach of people and to store them overnight in such a way that they were not clearly on display. 125 I must confess I find it difficult to see how anyone could find that there was sufficient material to find that there was a standard in the industry as to security of keys, even accepting that Ms Bryant was a suitably qualified person to proffer expert evidence on the subject. 126 Before going further one must look at the duty that was owed by a sub-bailee in the circumstances. The bailment was a bailment for reward in that it was for the benefit of both parties. A bailee for reward must take reasonable care of the goods bailed, but the onus of proving that the loss was not due to his default is on the present respondent; see eg Hobbs v Petersham Transport Co Pty Ltd (1971) 124 CLR 220 at 233-4. His Honour did not direct his mind to the question of onus. 127 Next, his Honour did not deal with the question as to whether keys on display with an alarm not activated and no security guards was material which made it hard to find that the respondent had proved that the loss was not due to its careless act. 128 The factual material before the District Court and this Court is either agreed or clear. There is no question of any demeanour or advantage of seeing the witnesses to be taken into account. This Court is in as good a position as his Honour was to evaluate the evidence on this material. 129 With respect, the judge's treatment of this matter was quite inadequate. He did not direct his mind to the key questions and his decision cannot stand. 130 In my view, evaluating the material, it is clear to me that the defendant below, the present respondent, did not discharge the onus upon it of showing that the loss was without its negligence. 131 It is not necessary to deal separately with the claim in tortious negligence. Mr Martin put that, applying Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 216 CLR 515, as the present was a case of economic loss only, it was necessary for the appellant to show that it was vulnerable to the economic consequences of any negligence of the respondent. 132 If it were necessary to consider this matter, I would have thought that there is a lot to be said for the proposition that if one has care of an expensive car, one must realize that, if it were stolen, the owner or hirer of the car would be vulnerable to adverse economic consequences.

The bias point 133 The final point is an unusual one and not at all connected with the law of bailment. It would seem that after the learned judge reserved judgment he telephoned counsel for the respondent. Just what was said is unclear because, despite very strong hints from the bench, that counsel has not put on any evidence. On one version, the judge asked the respondent's counsel whether he could obtain copies of certain pages from text books etc. Counsel faxed the judge on 30 September 2004 with the message "Herewith extract from Fisher 'Commercial & Personal Property Law'. The relevant section is 3.13 quoting Pollock which is to the same effect. If you Pollock 21.22 is also enclosed." 134 The then counsel for the appellant has put on an affidavit saying that on 11 October 2004 he saw counsel then appearing for the respondent at the Downing Centre and was told by the then opposing counsel "I hear that judgment is going to be delivered in our matter next week". Appellant's counsel said: "How do you know that?" The reply was, "The judge told me. He contacted me to obtain copies of some exhibits." 135 The appellant's solicitor phoned counsel to tell him that judgment was being delivered on 22 October 2004. She says that counsel's reply was, "That doesn't surprise me. I had a conversation with the defendant's counsel recently. He said he had been contacted by the judge last week to chase up some documents … ." The solicitor said she was extremely upset about the matter but was advised that there was not much she could do. 136 Ground 23 in the notice of appeal is: "That by reason of the undisclosed contact between counsel for the defendant and the trial judge in the period between trial and verdict, the verdict and judgment should be set aside on the ground of apprehended bias." 137 The appellant submits that on the basis of the evidence of his instructing solicitor and the counsel formerly briefed by her in the matter, a reasonable observer would have a clear apprehension that the trial judge may not have brought an open mind to deciding the case. Of particular concern is said to be the invitation or receipt (it is not clear which) by the trial judge of what are effectively submissions from one party, after judgment has been reserved, without informing the other party of this or giving the other party an opportunity to do likewise or respond. 138 These problems, it is put, are exacerbated when no evidence is put on by opposing counsel and the judgment is defective in stating adequate reasons for findings adverse to the appellant. The appellant said that these matters would entitle the appellant to a new trial, but it prefers for the Court to be able, on the evidence, to give a verdict in its favour. 139 As things have turned out, it is actually unnecessary to deal with this matter because, for reasons I have already given, the appeal succeeds. However, the allegation is a serious one and must be dealt with. 140 In R v Lilydale Magistrates Court [1973] VR 122 at 127, McInerney J said: "The sound instinct of the legal profession - judges and practitioners alike - has always been that, save in the most exceptional cases, there should be no communication or association between the judge and one of the parties (or the legal advisers or witnesses of such a party), otherwise than in the presence of or with the previous knowledge and consent of the other party. Once the case is under way, or about to get under way, the judicial officer keeps aloof from the parties (and from their legal advisers and witnesses) and neither he nor they should so act as to expose the judicial officer to a suspicion of having had communications with one party behind the back of or without the previous knowledge and consent of the other party. For if something is done which affords a reasonable basis for such suspicion, confidence in the impartiality of the judicial officer is undermined." 141 However, in R v Judge Leckie (1977) 52 ALJR 155 at 158; 18 ALR 93 at 98, Gibbs J in the High Court said that whilst that passage was perfectly correct, "that does not mean that if a communication has been made to the judge on behalf of one of the parties the judge will necessarily and in all circumstances be disqualified. The question remains whether the fact that such a communication has been made would raise a reasonable suspicion that the judge will not or cannot deal with the case fairly and impartially." 142 Whilst the rule that there should be no communication with the judge pending delivery of a reserved judgment remains the golden rule, it must be said that it is not uncommon for equity judges in proceedings where there is no factual dispute to telephone both counsel, mention a proposition or case which has not been dealt with in oral submissions, and ask whether they have anything to say about it by filing further written submissions. As counsel are not on the same telephone line, of necessity, each counsel will need to be telephoned separately. It is usually the judge that has to do the ringing because only he or she knows the legal intricacies of the point on which assistance is required. This practice is, I believe, efficient and does not break the general rule provided that the judge is satisfied that both counsel are aware that the other has been given an identical message. Indeed, Mr Gleeson SC does not attack that practice. 143 It is different, however, where only one counsel is contacted. Such contact may be completely innocuous. Members of the profession knowing the judge and counsel involved would almost certainly take that view without further evidence. However, a reasonable lay observer may very well take a different view. Why would the time-honoured practice not be adhered to? 144 Furthermore, when suspicion is raised and the court that has to investigate the suspicion intimates that it would be assisted if the lawyers involved gave evidence and they do not, then a stronger than usual Jones v Dunkel inference arises. Again, although this Court probably cannot compel evidence to be given, by analogy with what this Court said in Re Veron (1966) 84 WN (Pt 1) (NSW) 136 at 141-142, it is recognised that lawyers have a professional responsibility to assist the court in these matters and when this is not complied with, the court's suspicions deepen. 145 If all the judge wanted was copies of library material which he found it difficult to obtain, it would have been best if he had had his associate fax both counsel with a request to obtain it for him. Just what did happen between the judge and counsel for the respondent is unclear. It would seem that there may have been a request for documents, but whether this means that the exhibits had been released to counsel or something else is unclear. It would seem that the judge told counsel for the respondent that he intended to give judgment within a short time, but what else was said we do not know. 146 Although I do take a serious view of this matter, it may be that it is just a storm in a teacup which, if it were able to be fully investigated, would just pass one by. As I believe the appeal should be allowed in any event, the appellant would not want any order to be made on this ground because that would mean that there was a new trial. Accordingly, I will merely content myself with saying what I have just said.

The Result of the Appeal 147 Thus in my view the appeal should be allowed. The orders below are vacated and in lieu there should be a verdict for the appellant for $166,000 with costs, both in this Court and in the District Court. The respondent is to have a certificate under the Suitors' Fund Act if qualified to receive such a certificate.

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Common Law Procedure Act 1899(NSW)

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