Thomas v Adam

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL

GILES JA HEYDON JA DAVIES AJA

Kay THOMAS v Thomas Laurie ADAM T/AS CUNNINGHAM & ADAM

1 GILES JA: I agree with Davies AJA. 2 HEYDON JA: I agree with Davies AJA. 3 DAVIES AJA: This is an appeal from the judgment of a Judge of the District Court of New South Wales, her Honour Acting Judge Murphy, in a claim brought by the appellant, Kay Thomas, against her solicitor, Thomas Laurie Adam. Although the learned trial Judge found that Mr Adam had been professionally negligent, her Honour disallowed all but one of the items of damage which were claimed. Her Honour gave judgment for $2,500 plus interest of $295.32, a total of $2,795.32. 4 In the proceedings before the learned trial Judge, Mr Adam was represented but he did not give evidence. Her Honour accepted the substance of the evidence given by Mr and Mrs Thomas. Her Honour found that Mrs Thomas and her husband, David Thomas, who was a builder and designer, had lived for many years at the property at 41 Six Mile Road, Raymond Terrace (the "Six Mile Road property"). In 1995, they decided to sell the home and to purchase a smaller block of land on which to build a home. The Six Mile Road property was put up for sale in 1995. There was a lack of bidders and the property was not subsequently sold until August 1997. In the meantime, Mr and Mrs Thomas looked for suitable land which met six criteria which they had set, one of which was that the property would have scenic views. Mr and Mrs Thomas sought land at under $200,000, but price was not an important factor. 5 Mr and Mrs Thomas saw two blocks of land which interested them, one was for sale at $140,000 and another was for sale at $100,000. However, in early November 1996, they inspected the subject land, Lot 9 Koree Island Road, Beechwood ("Lot 9"), the sale price for which was $38,500. Lot 9 was a large rural block which sloped down from Koree Island Road. The land was subject to a restriction under s 88B of the Conveyancing Act, 1919 which provided: (a) No building or part thereof shall be erected or permitted to remain erected closer than 20 metres from the street alignment of Koree Island Road.

The restriction was one which could be varied by the Hastings Council. Mr and Mrs Thomas were aware that an application to vary the restriction would have to be lodged with the Council. 6 On 10 November 1996, Mr and Mrs Thomas paid a holding deposit of $500 on Lot 9 and, on 13 November 1996, Mr Thomas wrote to the real estate agent asking for the names and addresses of adjoining neighbours and concerned parties for the purpose of an application to vary the s 88B restriction. Shortly thereafter, a request to vary the s 88B restriction and an accompanying sketch plan prepared by Mr Thomas for a two storey building at the 10 metres alignment were prepared and sent to the adjoining owners. The response of "no objection" was received from each of the neighbours, one of whom was the vendor. 7 On 18 November 1996, Mr Thomas wrote to Mr Adam stating, inter alia: "To date we have paid $500.00 holding deposit, with the remainder of the deposit ($3,350.00) to be paid on confirmation of alteration to the building setback as mentioned in section 88b; refer to correspondence to the Estate Agent. It is imperative that the ten meter setback be granted due to the nature of the land."

The trial Judge found, and there is no challenge to her finding, that Mr and Mrs Thomas thereby instructed Mr Adam that they would purchase Lot 9 conditional upon there being a variation of the s 88B instrument so as to allow them to build on Lot 9 at a 10 metre setback from Koree Island Road. 8 The balance of the deposit of $3,350 was paid and, on 2 January 1997, a contract or pages of a contract were signed by Mrs Thomas, it having been decided that the land would be purchased in the name of Mrs Thomas rather than in joint names. The pages signed by Mrs Thomas included a special condition in terms different from that which ultimately appeared in the contract. 9 On 16 January 1997, the parts of the contract were exchanged. The contract contained the following special condition: "SPECIAL CONDITIONS IN CONTRACT OF SALE BETWEEN JOKELA PTY LIMITED (VENDOR) AND DT & K THOMAS (PURCHASERS) DATED 1. The vendors agree that should the purchasers so require, they will consent to a variation of the Section 88B instrument to allow: a. Building line set back to be reduced to 10 metres. b. The use of glass on the external walls maybe at least 30%. c. The use of materials in the external walls to be 'hardy-tex' or similar. The Vendor will execute any documents that may be required to give effect to such variation and such variations are to be without cost to the vendor."

The trial Judge accepted the evidence that Mr and Mrs Thomas were not aware that the contract was expressed in that manner. It is not in dispute that the special condition failed to give effect to the written instructions of 18 November 1996. What was required by those instructions was a term by way of precondition or giving a right of rescission should the s 88B restriction not be varied. 10 Settlement took place on 21 February 1997. On 26 February 1997, a request to vary the s 88B restriction was sent by Mr Adam to the Hastings Shire Council. The letter of request dealt with the matter as if it were a formality that the restriction would be varied. However, that was not the case. On 8 April 1997, Mr Adam wrote to the Council enclosing a cheque for fees in relation to the request. On 17 April 1997, the Council wrote to Mr Adam seeking more information. On 1 May 1997, Mr Adam wrote to Mrs Thomas to say that the Council had requested evidence that landowners within the subdivision had no objection to the application and more details of the proposed dwelling and finishes including sketches to support the application for variation of materials. The trial Judge found, on the basis of the evidence given by Mr and Mrs Thomas, that, prior to the receipt of this letter, they had not been aware that the s 88B restriction had not been varied. 11 Mrs Thomas had been in Queensland in early May and she did not see Mr Adam's letter until the third week of May. Thereafter, Mr and Mrs Thomas approached the Council to ascertain what was the position and what could be done to rectify it. 12 On 1 July 1997, Mr and Mrs Thomas spoke to Mr Adam about the problem. Mr Adam said that he would go to Port Macquarie the next day and speak to the Council and get it approved. Mr Thomas did not hear further from Mr Adam. On 11 July 1997, Mr Adam wrote again to the Council requesting that the restriction be varied. On 16 July 1997, the Council wrote to Mr Adam to say that the Council would entertain an application to vary in line with the following restriction: "The front wall of the dwelling shall not be erected closer than 20m from the front boundary."

This letter impliedly refused the request which had been lodged. On 30 July 1997, these proceedings were commenced. 13 Records of the Council show that, on 15 April 1997, there had been an objection lodged by an officer of the Council who apparently lived in the area. In that objection, the objector said: "I am going to strongly object to this setback if this matter gets up to Council because basically my block is equally as steep and difficult to build on but for the sake of preserving the setback I have had to come up with a design that is appropriate for the land and I think that everyone else in that street will be attempting to do the same thing."

On 10 June 1997, an officer of the Council made a formal recommendation rejecting the application to vary on the ground that a dwelling could be suitably located on Lot 9 in compliance with the s 88B instrument without undue building problems, the principal reason for variation which had been put forward by Mr Adam. A handwritten note by a superior officer expressed agreement with the recommendation but said that he would support an amendment to the restriction which would allow the front wall of the building to be constructed on the 20 metre alignment. Such a variation would have allowed the extensive front verandah of the proposed building to encroach over the 20 metre line. The Council's letter of 16 July 1997 communicated this approach. 14 Mr and Mrs Thomas had further discussions with officers of the Council and visited the Council on 23 October 1997. Prior to June 1997, the only plan which had been prepared by Mr Thomas had been a plan for a two storey house at the 10 metre alignment. Subsequently, prior to the meeting on 23 October 1997, Mr Thomas prepared proposals which he called options 1, 2 and 3. Option 1 was for a two storey house at the 10 metre line. Option 2 was for a two storey house at the 20 metre line. Option 3 was for a single storey home at the rear of the block. These alternatives were discussed with officers of the Council. 15 On 13 November 1997, the Development Manager (West) of the Council wrote to Mrs Thomas to say that the Council was unable to provide an "in-principle" approval to any option. However, some comments were made including the following: "Option 1: Council would not support a variation to the front building setback proposed (refer to Council's letter dated 16 July 1997). Concern is also raised with the height of the building and the extent of fill and associated retaining walls. Option 2: No objection is raised with the proposed setback, however, as with Option 1, concern is raised with the height of the building and the extent of fill and associated retaining walls."

It can be seen that the Council refused to vary the building setback, other than as suggested in the Council's letter of 16 July 1997, and raised a concern with respect to the height of the building and the extent of fill and associated retaining walls for options 1 and 2, both of which were two storey dwellings. 16 Ultimately, Mr and Mrs Thomas decided to proceed with a single storey dwelling at the rear of the block. The site selected had an advantage in that it was remote from other homes. The site, like the sites at the 10 metre and 20 metre alignments, had a panoramic scenic view to the south-east and the south-west, but it did not have a view over the Koree Island Road down the Hastings Valley. A home at that site was under construction at the time of the trial. 17 The trial Judge accepted the evidence of Mrs Thomas that she would not have purchased Lot 9 if she had been aware that the restriction would not be lifted. Mr and Mrs Thomas had become interested in Lot 9 because a two storey home at the 10 metre alignment would give an extensive view over Koree Island Road down the Hastings Valley.

Damages 18 The case at the trial as put for Mrs Thomas was that she was entitled to recover the additional costs of building at the rear of Lot 9, rather than at the front of the block, and additional expenses she had incurred, including costs by way of accommodation and storage of goods and costs of preparation of plans, which she said she would not have incurred but for Mr Adam's negligence. Additional costs were said to be incurred in building a home at the option 3 site rather than the option 1 site. Electrical and plumbing services were said to be more expensive and the costs of earthworks were said to be greater, particularly because of the additional length of the drive. The development of landscaping was said to be more than with the option 1 site. As well, Mrs Thomas claimed what was described as "Diminution in value of property by reason of inability to build so as to take advantage of view". Mr A J Jeffrey, a valuer, prepared a valuation, which I find unintelligible, which concluded that a building on the option 1 site would increase the value of the land more than a building on the option 3 site would do. Mr Jeffrey's valuation for some reason included a statement of a "compensation claim" as follows: "Claim for loss of value in difference in property's value due to location of Building area:- $50,000 Additional Costs in regards to providing access costs:- $32,000 Cost to provide maintenance to the overall property including access road and services for a period of 10 years:- $25,760 $107,760"

Other claims including claims for accommodation and travel expenses and incidental expenses brought the total claims above that figure. 19 Mrs Thomas' claim for additional costs was misconceived. Mrs Thomas was not entitled to damages on the basis that, but for Mr Adam's negligence, she would have been able to build a two storey house on Lot 9 at the 10 metre alignment. No such claim was made or established. Therefore, the claims based upon a comparison of option 1, at the 10 metre alignment, and option 3, at the rear of the block, were without substance. The inability to build at the 10 metre alignment arose, not from Mr Adam's negligence, but from the s 88B restriction and the Council's refusal to vary it. As to a comparison of the costs of building at the option 2 alignment and at the rear of the block - and this was not the manner in which the claim for damages was calculated - the fact was that, of those two sites, Mr and Mrs Thomas preferred the option at the rear of Lot 9. Accordingly, Mr Adam's negligence did not result in expenditure of the type claimed. The costs resulted from Mr and Mrs Thomas' own choice. 20 Mrs Thomas' entitlement to damages was for such sum of money as would put her in the position that she would have been in had Mr Adam not been negligent. Such damages are calculated prima facie by reference to the loss in value, if any, between the price paid for the land and its value on resale plus the costs of reselling. In addition, incidental losses arising from delay or the like may be allowed: see Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 145 CLR 625 at 637; Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 11-12; Kyriakou v Hughes (1984) Aust Torts Rep ¶80-646; Ford v White & Co (1964) 1 WLR 885. In this case, as in Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd, it is immaterial whether damages are assessed in contract or in tort: see Gibbs J at p 637. 21 If Mr Adam had not been negligent, Mrs Thomas should have obtained a contract which was conditional in its operation upon the variation of the s 88B restriction or which, if not conditional upon that event happening, gave to Mrs Thomas a right to rescind in the event that the s 88B restriction was not varied. Mr R D H Kirkby, an experienced solicitor called on behalf of Mrs Thomas, gave evidence that a solicitor with the instructions which Mr Adam had should have included in the contract a term which gave a right to the purchaser to rescind, if the s 88B restriction had not been varied, or a right to be compensated if that restriction had not been varied. I put to one side the suggestion of a compensation provision. I would not accept that, in the sale of land for a modest $38,750, any vendor would have agreed to compensate the purchaser for the type of losses which Mrs Thomas claimed in these proceedings. Therefore, the case must be looked at on the footing that, had Mr Adam acted as he ought to have done, the contract, if entered into, would have been conditional or have included a right to rescind in the circumstance which happened. 22 Mr and Mrs Thomas in fact decided to keep the land and not to resell it. The trial Judge held, on the evidence before her, that the land at the time of purchase was worth the $38,500 which was paid for it, but she gave judgment in favour of Mrs Thomas for $2,500 on the basis that there had been a general fall in the value of land in the area between the date of purchase and 21 July 1997, when the Council wrote refusing the application to vary. There was no cross-appeal in relation to this. Mrs Thomas suffered no loss on resale nor any ongoing loss of value other than that assessed by the trial Judge. Indeed, Mr Jeffrey, the valuer called on behalf of Mrs Thomas, put the value of the land in January 1998 at $39,000. 23 The additional costs of building could be allowed only if Mrs Thomas was to be put into the situation where Mr Adam had warranted or ought to have put into the contract a term that the vendor warranted that the s 88B restriction would be varied in the manner sought. Had the position been that Mr Adam had given such a warranty or had negligently failed to put a term into the contract whereby the vendor gave that warranty, then Mrs Thomas would have been entitled to the damages flowing from a breach of that warranty, that is to say, she would have been entitled to be put into the position she would have been in had the warranty not been breached. In such a case, Mrs Thomas would have been entitled to recover damages in the nature of those which she sought to recover. 24 The distinction between the type of claim made in the present case and a claim for breach of warranty was made clear in Kyriakou & Anor v Hughes & Anor (1984) Aust Torts Reports ¶80-646, where Moffitt P and Samuels JA rejected a claim for damages where solicitors had negligently failed to make a proper search and had failed to discover that land which was purchased was affected by a road proposal of the Department of Main Roads. At p 68,724, Moffitt P said: "A comparison of the respondents' position on the one hand if they had rescinded the contract under cl. 17 and had not paid over their money and on the other hand as it in fact was, namely that by reason of the breach they acquired the land which they otherwise would not have acquired, shows that in consequence of the breach they had property which was worth more than the money they parted with so that unless some other damages could be attributed to the breach no loss flows from it. As stated, damages cannot be assessed on the basis that the appellant warranted that the land was free of the road proposal. Damage of that character cannot be attributed to the breach in this case." 25 Samuels JA expressed a like view at p 68,728. Mahoney JA dissented on the facts of the case but, at p 68,733, expressed the general principle as follows: "That principle, in its general form, is that the plaintiff is to be put, as far as an award of damages may do it, in the position in which he would have been if the defendant had performed the contract: see Pennant Hills Restaurants Pty Ltd v Barrell Insurances Pty Ltd (1981) 55 ALJR 258 at p 261." 26 The principles relating to the assessment of damages are not inflexible. Care must be taken to have regard to the circumstances of the particular case, as Giles J pointed out in Sved v The Council of the Municipality of Woollahra (1995) NSW ConvR ¶55-736 at 55,693-5. There is nothing in the present case however, which justifies a special approach. Although Mrs Thomas purchased land which, had she known that the s 88B restriction would not be varied, she would not have purchased, she was not bound to retain Lot 9. The purchase price of $38,500 was moderately low compared with the price which Mrs Thomas and her husband had been prepared to pay for an appropriate block of land. Moreover, the position with respect to the s 88B restriction was known prior to the sale of the Six Mile Road property. Accordingly, Mrs Thomas could have resold Lot 9 and acquired another property if that was what she preferred to do. She conceded this in her cross-examination. However, Mr and Mrs Thomas chose to retain Lot 9 and to build at the rear of the block. The costs of doing so resulted from their own decision, not from the negligence of Mr Adam. 27 Accordingly, the learned trial Judge approached the assessment of damages on the correct basis. On that basis, Mrs Thomas was also not entitled to recover the alleged diminution in value of the property. When Mr Adam did not warrant that the s 88B restriction would be varied, damages could not be claimed for loss of that which depended on variation and consequent building on the option 1 site rather than the option 3 site. Mrs Thomas was entitled to be put in the position she would have been in if Mr Adam had put a term in the contract by way of precondition or giving a right of rescission should the s 88B restriction not be varied. That position was not ownership of Lot 9 with a building on the option 1 site. 28 Some of the expenses claimed by Mrs Thomas related to the cost of travel by Mr Thomas from Sydney to Port Macquarie and Raymond Terrace when endeavours were made to persuade officers of the Council to vary the restriction on the land. However, it was not shown by Mrs Thomas that expenses of this type would not have been incurred absent a breach by Mr Adam of his duties. An application to vary the s 88B restriction had to be made to the Council. It is probable that Mr and Mrs Thomas would at some stage necessarily have become involved in negotiations with the Council officers to vary the restriction. The costs did not result from Mr Adam's negligence. 29 The last item of damage which I need mention is the claim for additional living and storage expenses. Mr and Mrs Thomas sold the Six Mile Road property on 28 August 1997. Thereafter, Mr and Mrs Thomas moved to a unit which Mrs Thomas owned in Elliott Close, Raymond Terrace, which previously had been let. Mr and Mrs Thomas also rented storage space in Carmichael Street, Raymond Terrace, in which their goods were stored, pending the building of a home on Lot 9. Very little was said by the trial Judge about this aspect of the case and very little was said in the submissions of counsel for Mrs Thomas as to how the loss of rent on the Elliott Close property and the cost of the storage premises in Carmichael Street were related to an act and omission on the part of Mr Adam. The trial Judge rejected the claim on the basis that Mrs Thomas had incurred the subject losses by reason of the decision of Mr and Mrs Thomas to sell the Six Mile Road property at a time when they were aware that the s 88B restriction had not been varied. There is no appeal from this finding. It was not shown that the negligence of Mr Adam led to a delay in the construction of the home. That delay was brought about by the fact that Mr and Mrs Thomas were unable to proceed with the construction of the home at the 10 metre alignment. Time was lost in seeking to have this restriction varied and in developing other plans when it became clear that the restriction would not be varied. 30 At least on appeal, Mrs Thomas also relied on professional negligence by Mr Adam in the dilatory manner in which Mr Adam had dealt with the purchase, specifically the delay in the registration of the transfer which ought to have occurred within ten days of the settlement on 21 February 1997 and which did not occur until August 1997. The trial Judge did not make a finding as to this, but I will assume the negligence. It was not entirely clear how this was said to entitle Mrs Thomas to recover the additional costs or the other amounts claimed. Mrs Thomas, in her evidence, accepted that, after the coming into operation in July 1997 of a new building code and of a local building policy, it was impractical for the two storey proposal which Mr Thomas had planned to go ahead. However, she said that the new provisions came into operation on 14 July 1997 and that she and her husband were ready to go to the Council in May 1997 and could have done so had the land then been registered in her name. 31 There are a number of matters which point against this claim. It is sufficient to mention that the proposal to develop a two storey home at the 10 metre alignment could not have gone ahead because of the s 88B restriction. The proposal as put to the Council prior to 14 July 1997 had no prospect of approval. The plans for options 2 and 3 were developed later, in anticipation of a meeting with officers of the Council in October 1997. Therefore, the late registration of the transfer of the land into Mrs Thomas' name caused no relevant loss to Mrs Thomas. Her Honour also held that the two storey proposals prepared by Mr Thomas would not have been approved because the planned heights exceeded the restrictions imposed by the then building codes. I need not discuss this particular finding.

Refusal of Adjournment 32 The next issue is whether the trial Judge should have adjourned the proceedings for hearing at a later date. An application was made for such adjournment. At the commencement of proceedings on 10 August 1998, her Honour was informed by counsel for Mrs Thomas that, amongst other matters, she was prejudiced both by the state of the pleadings and the late service of a report by the architect, Ms Janet Grey. Counsel said that there was an issue raised by Ms Grey which she could not meet, that is, the issue as to whether Mr Thomas' proposal infringed the building codes. Counsel for Mr Adam said at the time that, if there was a real problem with this issue, he would seek instructions to withdraw that part of Ms Grey's report. Her Honour said that she was minded to start the case, keeping in mind any difficulty that counsel for Mrs Thomas may have in meeting the issues to which reference had been made. The trial then proceeded. 33 On the following day, counsel for Mrs Thomas renewed her application for an adjournment but put her request on the basis of the state of the pleadings. At one stage in the interlocutory proceedings, liability on the part of Mr Adam had been conceded. At the trial, counsel for Mr Adam conceded only that there had been breaches of duty. I need not discuss this difference in approach. Counsel for Mrs Thomas thought the matter significant. The question of the pleadings was resolved and the trial Judge granted leave to amend the Statement of Claim to add additional paragraphs as to breach of duty. Counsel for Mrs Thomas then said that she did not proceed with her application for an adjournment but, nevertheless, she still needed to obtain further expert evidence. Counsel for Mrs Thomas said that she was proposing to continue with her other witnesses until such time as she was in a position to know whether the matter needed to be adjourned. In due course, Ms Grey's report was admitted without objection. Matters in this report were put by counsel for Mrs Thomas to witnesses whom she called, particularly Mr Hopkins. 34 On the fourth day of the hearing, counsel for Mrs Thomas announced that she would have an architect's report the following morning. Ms Grey was then called to give evidence and was examined in chief. Counsel for Mrs Thomas went as far as she could by way of cross-examination but then asked for an adjournment until she had received the report of the architect who was to be called for Mrs Thomas. The matter was adjourned to the following day. On that day, the architect, Mr King, was called and gave evidence. The cross-examination of Ms Grey was then completed. 35 In the appeal, the submission has been put that the application for an adjournment which had been made at the start of the trial should have been granted and that counsel for Mrs Thomas was put in an impossible position and was unable to cope properly with the problems which Ms Grey's report raised. This submission was made, however, without any supporting affidavit. No evidence was adduced from counsel who appeared at the trial for Mrs Thomas that she was embarrassed by or prejudiced by the manner in which the trial Judge conducted the hearing. 36 In my opinion, her Honour's rulings were entirely appropriate and served the useful purpose of having the case proceed when there was a judge available to hear it. Her Honour made it clear more than once that she did not wish counsel for Mrs Thomas to be prejudiced by the case proceeding and that she would entertain an application for an adjournment if counsel found herself in a situation of difficulty. When counsel gave such an indication in the course of Ms Grey's cross-examination, an adjournment was granted. Counsel for Mrs Thomas withdrew her application for an adjournment, being content to proceed with the trial so far as she could. Thereafter, no application for an adjournment was made which the trial Judge did not grant. There is no merit in this ground of appeal.

Bias 37 The final ground of appeal seeks a retrial on the ground that there was a reasonable apprehension of bias on the part of the trial Judge. 38 This contention was based on an unusual situation. The Legal Profession Act, 1987 provides for a Solicitors' Mutual Indemnity Fund managed by LawCover Pty Limited ("LawCover"), a company of which the Law Society of New South Wales is the sole shareholder. All New South Wales solicitors must take out with LawCover an approved insurance policy which provides for indemnity in circumstances such as liability for professional negligence. Mr Adam had such a policy and the solicitors for Mr Adam, Turtons, had been appointed by LawCover to handle the claim on Mr Adam's behalf. Acting Judge Murphy was a solicitor and a partner in the firm of Tress Cocks & Maddox. She had been appointed an Acting Judge of the District Court of New South Wales and served from time to time as a Judge of the Court under arrangements made by the Chief Judge of the Court. One of the partners of Tress Cocks & Maddox was Mr R K Heinrich. Mr Heinrich was a director of LawCover. 39 The trial Judge did not disclose to the parties at the commencement of the proceedings that one of the partners of Tress Cocks & Maddox was a director of LawCover and I am prepared to accept an assertion from counsel that Mrs Thomas and her solicitors and counsel were unaware of that fact. Senior counsel for Mrs Thomas, Mr M R Aldridge SC, submitted on the basis of these facts that there was reasonable apprehension of bias on the part of the trial Judge in favour of Mr Adam. 40 The basic principles to be applied are not in dispute. It is sufficient to cite the following passage from the reasons of Mason J in Re J.R.L.; Ex parte C.J.L. (1986) 161 CLR 342 at 351-2 where his Honour said: "The problem is governed by the principle that a judge should disqualify himself from hearing, or continuing to hear, the matter if the parties or the public entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the issues: Reg v Watson; Ex parte Armstrong (1976) 136 CLR 248, at pp 258-263; Livesey v NSW Bar Association (1983) 151 CLR 288, at pp 293-294. This principle, which has evolved from the fundamental rule of natural justice that a judicial officer should be free from bias, reflects a concern with the need to maintain public confidence in the administration of justice. This concern is expressed in the cognate principle that, not only must justice be done, it must be seen to be done. … Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour." 41 More recently, in Dovade Pty Ltd v Westpac Banking Group (1999) 46 NSWLR 168 at [92], Mason P, Sheller and Stein JJA cited the following comments of Tadgell JA in Gascor v Ellicott [1997] 1 VR 332 at 342: "Although the criterion of apprehension of partiality or prejudice is possibility, not likelihood, a reasonable apprehension is to be established to the court's satisfaction: it is a reasonable and not a fanciful or fantastic apprehension that is to be established; and the apprehension is to be attributed to an observer who is 'fair-minded' - which means 'reasonable'. As Mason CJ and McHugh J pointed out in Webb v R , at 52, '… it is the court's view of the public's view, not the court's own view, which is determinative'. Even so, the court is to be satisfied that the criterion is met, not that it might be."

Mason P, Sheller and Stein JJA went on to say at [93]: "A claim of apprehended bias should be considered in the context of the judicial function and the public perception of it. There is a presumption that public officers have acted with honesty and discretion: Broom's Legal Maxims , 10th ed at 642. In the case of a judicial officer, this is no empty form. It is reinforced by the accountability necessarily inherent in the public processes of litigation and the disappointed litigant's right of appeal. Every judge swears to 'do right to all manner of people according to law without fear or favour, affection or ill-will'. This public oath is not a talisman against error, but it forms the constant back-drop to the way in which each judge functions on and off the bench. The history and reach of the oath were discussed by Sir Gerard Brennan on his swearing in as Chief Justice of the High Court of Australia: see 183 CLR at ix-x. The level of public confidence in the judiciary is based upon experience and a general perception of the rule of law." 42 A similar approach was taken by the Court of Appeal in the United Kingdom in Locabail (UK) Ltd v Bayfield Properties Ltd [2000] 1 All ER 65. Lord Bingham CJ, Lord Woolf MR and Sir Richard Scott V-C said at 75-6: "When members of the Bar are appointed to sit judicially, whether full-time or part-time, they may ordinarily be expected to know of any past or continuing professional or personal association which might impair or be thought to impair their judicial impartiality. They will know of their own affairs, and the independent, self-employed status of barristers practising in chambers will relieve them of any responsibility for, and (usually) any detailed knowledge of, the affairs of other members of the same chambers. The position of solicitors is somewhat different, for a solicitor who is a partner in a firm of solicitors is legally responsible for the professional acts of his partners and does as a partner owe a duty to clients of the firm for whom he or she personally may never have acted and of whose affairs he or she personally may know nothing. While it is vital to safeguard the integrity of court proceedings, it is also important to ensure that the rules are not applied in such a way as to inhibit the increasingly valuable contribution which solicitors are making to the discharge of judicial functions. Problems are, we apprehend, very much more likely to arise when a solicitor is sitting in a part-time capacity, and in civil rather than criminal proceedings. But we think that problems can usually be overcome if, before embarking on the trial of any assigned civil case, the solicitor (whether sitting as deputy district judge, assistant recorder, recorder or s 9 judge) conducts a careful conflict search within the firm of which he is a partner. Such a search, however carefully conducted and however sophisticated the firm's internal systems, is unlikely to be omission-proof. While parties for and against whom the firm has acted, and parties closely associated, would (we hope) be identified, the possibility must exist that individuals involved in such parties, and parties more remotely associated, may not be identified. When in the course of a trial properly embarked upon some such association comes to light (as could equally happen with a barrister-judge), the association should be disclosed and addressed, bearing in mind the test laid down in R v Gough . The proper resolution of any such problem will, again, depend on the facts of the case."

Their Lordships went on to cite the passage in the reasons of Mason J in Re: J.R.L. which I have set out above to the effect that judicial officers should not accede too readily to suggestions of appearance of bias. 43 As I have mentioned, Mr Aldridge said that it was not known by the legal advisers to Mrs Thomas at the time of the trial that a partner of the trial Judge was a director of LawCover. Nevertheless, as the trial Judge was not a member of the Bar, I assume that it would have been understood that she was a well respected solicitor and a member of the Law Society of New South Wales and had at least a professional interest to see that the Solicitors' Mutual Indemnity Fund was well administered. Mr Aldridge did not rely upon this association but merely upon the "professional link between Mr Heinrich and LawCover and the judge and Mr Heinrich and the obvious potential benefits, both pecuniary and non-pecuniary, that could reasonably be envisaged as flowing". Mr Aldridge described the "obvious potential benefits" as follows: "… that's a reasonable thing for a person to think, that he [Mr Heinrich] might if possible direct work to his own firm. There is impression that as a director he would wish to be seen as a successful and effective director, a successful and effective director of course minimises the payout that LawCover has. There's the natural relationship that one would expect that between partners one would do what one could to help out a partner, to look after someone with whom you have a professional association and someone who has a joint pecuniary interest in obtaining work from insurers." 44 That, in my opinion, is an extraordinary and fanciful suggestion, which no reasonable person would be likely to have in mind. A reasonable person would pay some regard to professional integrity. Even apart from the fact that it was not suggested that Tress Cocks & Maddox were solicitors for LawCover - and indeed it was said by counsel that they were not - it is fanciful to think that Mr Heinrich would so degrade his position as a director of LawCover that he would seek the assistance of the trial Judge to give other than a proper verdict or that the trial Judge would for one minute tolerate such an approach or assist Mr Heinrich in an evil endeavour. The duty of a director of LawCover is to ensure that the Solicitors' Mutual Indemnity Fund is administered well and justly taking account the interests of both solicitors and the persons who claim against solicitors. The Solicitors' Mutual Indemnity Fund is maintained in accordance with the statute, the Legal Profession Act, and the community has an interest in seeing that the funds are properly administered. It is fanciful to suggest that either Mr Heinrich or the trial Judge would have sought to have Mrs Thomas' claim decided in favour of Mr Adam with a view to encouraging LawCover to direct work to Tress Cocks & Maddox. 45 Most cases of apprehended bias raise the suggestion of unconscious bias on the part of the judge by reason of previous contact with an interested person or the earlier expression of a relevant view. Mr Aldridge submitted, however, that it might reasonably have been thought that Mr Heinrich and the trial Judge might act improperly so as to attract work to Tress Cocks & Maddox. This submission goes well beyond unconscious bias. Yet the submission has no supporting facts. It is not suggested that there was any improper conduct, actual bias or hint of actual bias. 46 Mr Aldridge, in argument, widened his submission when he said: "But she [the trial Judge] has an indirect pecuniary benefit in attracting work to the firm, whether it be from LawCover or any other insurer, because they carry out work for defendants in insurance cases."

However, no evidence was adduced other than an affidavit which showed that the trial Judge had a partner who was a director of LawCover. An allegation of apprehended bias is a serious matter. If made, it must be supported by evidence of the facts on which it is based. There is no evidence as to the nature of the practice of Tress Cocks & Maddox or of the trial Judge. The Court cannot speculate about such a matter. 47 Mr Aldridge relied upon the fact that the trial Judge did not, at the commencement of the trial, disclose that one of the partners of Tress Cocks & Maddox was a director of LawCover. However, in Dovade Pty Ltd v Westpac Banking Group, Mason P, Sheller and Stein JJA warned against too ready a disclosure saying, at [104]: "It is capable of generating confusion and unnecessary suspicion where threshold disclosure does not lead to recusal in the absence of waiver."

In my opinion, the connection with one of the parties was too tenuous to warrant disclosure.

Orders 48 For these reasons, the grounds of appeal fail. The appeal should be dismissed with costs. **********

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