Adaz Nominees Pty Ltd v Castleway Pty Ltd
[2022] VSC 600
•6 October 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
S CI 2019 02312
| ADAZ NOMINEES PTY LTD (ACN 006 228 119) ATF THE RADO NO 2 TRUST (and others according to the Schedule) | Plaintiffs / Defendants by Counterclaim |
| v | |
| CASTLEWAY PTY LTD (ACN 131 870 481) ATF THE CASTLEWAY TRUST (and another according to the Schedule) | Defendants / Plaintiffs by Counterclaim |
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JUDGE: | NIALL JA |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 6 October 2022 |
DATE OF JUDGMENT: | 6 October 2022 |
CASE MAY BE CITED AS: | Adaz Nominees Pty Ltd v Castleway Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2022] VSC 600 |
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COURTS AND JUDGES – Reasonable apprehension of bias – Application that trial judge recuse himself – Trial judge personal friend of Chief Executive Officer of law firm acting for one party – Whether association with Chief Executive Officer gives rise to reasonable apprehension of bias – Chief Executive Officer not involved in conduct of the matter – Association does not give rise to reasonable apprehension of bias – Application that trial judge recuse himself refused.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs / Defendants by Counterclaim | Mr R Garratt KC | Maddocks |
| For the Defendants / Plaintiffs by Counterclaim | Mr M Flynn KC with Mr Mason | Kyriacou Lawyers |
APPEARANCES: | Counsel | Solicitors |
HIS HONOUR:
These reasons address the application made by Defendants/Plaintiffs by Counterclaim (‘Castleway’) that I disqualify myself from hearing the trial on the ground of apprehended bias. After hearing the application I refused to disqualify myself. These are my reasons for taking that course.
A trial of this proceeding is listed to commence before me on Monday 10 October 2022. I have recently been allocated the trial for hearing in circumstances where Riordan J became unable to accommodate the matter.
On 29 September 2022, shortly after I came to appreciate that the solicitors for the Plaintiffs/Defendants by Counterclaim (‘the TPC Group’) was Maddocks, I directed my Associate to write to the parties in the following terms:
The Chief Executive Officer of Maddocks is a personal friend of his Honour and his Honour has a long standing arrangement to holiday with him and others for three days in November. He recognises that Maddocks is the solicitor for one of the parties in the proceeding. There is no reason for him to think that the CEO would have any involvement in the litigation. If any of the parties wish to raise any issue with respect to this, they should advise me as soon as possible and by no later than 4pm Monday 3 October 2022.
Subsequently on the hearing of the application, I advised the parties that my wife and I have arranged, together with three other couples to stay with Mr and Mrs Newman at their house in Queensland for three days at the start of November. It is highly likely that if I hear the trial, judgment will stand reserved at the time that the proposed holiday will take place.
On Monday 3 October, Ms Katherine Styles, a solicitor employed at Maddocks emailed my Associate and the solicitor for Castleway as follows;
The Plaintiffs/Defendants by Counterclaim do not raise any issues with the matters raised in the Associate’s email below.
We do, however, confirm the following matters, to inform his Honour and the Defendants/Plaintiffs by Counterclaim:
•Maddocks’ CEO, David Newman, has not had any involvement in the litigation;
•Prior to Mr Newman’s appointment as CEO in May 2020, he was a partner in Maddocks’ Commercial team. Philip Jones and Marelda Hibberd, who are involved in the litigation, are also partners in Maddocks’ Commercial team. Mr Jones was involved in this litigation prior to May 2020, however Ms Hibberd was not (becoming involved in around December 2020);
•None of the practitioners involved in this litigation, being Mr Jones, Ms Hibberd, Katherine Styles and Max Curtis, have discussed the litigation with Mr Newman, nor will they do so going forward; and
•Although there is no reason to suggest that Mr Newman as CEO would access any of the files relating to this litigation, having now been advised of his friendship with his Honour, an information barrier is being established to ensure that he cannot do so.
On Tuesday 4 October, the solicitors for Castleway sought further information in the following email:
In respect of the first dot point extracted from your email and set out above, please clarify the following issues:
(1)When you state that none of the practitioners involved in this litigation have discussed the litigation with Mr Newman, does that statement apply to the following proceedings between our respective clients:
(a)Proceeding no S ECI 2015 00385;
(b)Proceeding no S CI 2017 2344;
(c)Proceedings no.s S APCI 2019 0014 & S APCI 2019 0024; and
(d)Proceeding no.s M128/2020 & M134/2020,
or in the alternative does the statement only apply to ‘this litigation’, namely:
(e)Proceeding no S ECI 2019 02312.
(2)Does your statement apply to all practitioners at Maddocks, not just Mr Jones, Ms Hibberd, Katherine Styles and Max Curtis as specified in the statement?
(3)When you say no practitioner will discuss the litigation with Mr Newman going forward, are you prepared to offer that assurance in the form of an undertaking to the Court, and if so, who will offer that undertaking, and what is the written form of the undertaking proffered?
In respect of the second dot point from your email extracted above:
(4)Please specify in precise terms:
(a)what are the measures constituting the "information barrier" you refer to; and
(b)the date by which all of those measures will have been fully implemented by Maddocks.
The solicitors for the TPC Group have indicated that their client does not wish to be heard on the application and have not answered those questions although they did, in a further email, set out a chronology of events. It is not necessary to refer to contents of that email.
Pursuant to leave, late on 3 October 2022, Castleway filed a submission in which it submitted that I ought to recuse myself from the hearing of the matter on the basis of apprehended bias.
Castleway’s submissions
Castleway disavows any suggestion of actual bias. In the written submissions the bases for the application appeared to be both my association with Mr Newman and the fact that I planned to be on holiday with him at a time when judgment was likely to be reserved. However in oral submissions, Mr Flynn KC who appeared with Mr Mason of Counsel for Castleway, submitted that the association considered alone would not give rise to a reasonable apprehension of bias and the application was focused on the fact that I would be on holiday with Mr Newman at the relevant time.
Castleway advances two factual matters in support of its application.
(a) First, it submits that Maddocks ‘have played a far more active role than merely acting as solicitor on the record in the litigation’.
(b) Second, it says that the principals of Maddocks who have the carriage of the matter are likely to be well known to Mr Newman, who was appointed CEO of the firm after 18 years as a partner which included a time heading the ‘Restructuring and Insolvency Team’.
The first matter requires some elaboration.
Castleway claims to be entitled to remuneration, in the form of a ‘Service Fee’ under a written agreement entitled the Property Development Services Agreement (‘PDSA’) calculated by refence to the TPC Group’s profit. The PDSA provided for the TPC Group’s accountant, Grant Thornton, to prepare a Service Fee Report for relevant periods which would be provided to Castleway. The PDSA also provided for a mechanism by way of a dispute notice to contest the Service Fee Report. An issue in the proceeding is the extent to which the Service Fee Report constitutes a binding or determinative calculation of profit. There is also an issue as to whether one or more Service Fee Reports were made in accordance with the PDSA.
In order to establish that a particular Service Fee Report was not made in accordance with the PDSA, Castleway contends that Grant Thornton was acting under the direction of the TPC Group. It will seek to establish that by reference to some correspondence by Phillip Jones, a partner of Maddocks.
For present purposes, I am prepared to proceed on the basis that at least some letters written by Maddocks will be important to the case of Castleway on this point. I note that Maddocks is not a party to the proceeding. No partners or employees of Maddocks are to be called as a witness in the proceeding.
Based on those matters, Castleway submits that:
The information barrier the TPC Group's solicitors propose to erect will not displace the apprehension of bias, because it will not in any way preclude the potential for private conversations between Mr Newman and Justice Niall.
Castleway further says that a fair-minded lay observer might take his Honour’s long-standing arrangement to holiday with Maddocks’ Chief Executive Officer to generate an apprehension of bias given the scrutiny that will be directed towards Maddocks’ involvement in procuring the nominated accountant’s Service Fee Reports in the form they were produced, and when they were produced.
The principles on apprehended bias
In Ebner v Official Trustee in Bankruptcy the High Court explained that where a question arises as to the independence or impartiality of a judge on the ground of apprehended bias, the governing principle is that a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide.[1]
[1](2000) 205 CLR 337, 344 [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ) (citations omitted); [2000] HCA 63 (‘Ebner’).
The application of this governing principle requires a two-stage analysis. First, it requires the identification of what it is said might lead a judge to decide a case other than on its legal or factual merits. The second stage requires the articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits.
Where the matter is an association that the judge has to some other person or entity, the High Court said:
[T]he question must be how it is said that the existence of the ‘association’ or ‘interest’ might be thought (by the reasonable observer) possibly to divert the judge from deciding the case on its merits. As has been pointed out earlier, unless that connection is articulated, it cannot be seen whether the apprehension of bias principle applies. Similarly, the bare identification of an ‘association’ will not suffice to answer the relevant question. Having a mortgage with a bank, or knowing a party's lawyer, may (and in many cases will) have no logical connection with the disposition of the case on its merits.[2]
[2]Ibid 350 [30] (Gleeson CJ, McHugh, Gummow and Hayne JJ).
In Re J.R.L.; Ex parte C.J.L.,[3] Gibbs CJ and Mason J adopted a passage from the judgment of McInerney J in R v Magistrates’ Court at Lilydale; Ex parte Ciccone.[4] That case concerned a magistrate traveling in a car with the lawyers engaged in the case for one party to the cause. 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.[5]
[3](1986) 161 CLR 342; [1986] HCA 39 (‘Re J.R.L.’).
[4][1973] VR 122 (‘R v Magistrates’ Court at Lilydale’).
[5]Ibid 127.
In Bienstein v Bienstein the High Court referred to the ‘conventional rules that govern such professional associations’ and noted that ‘a reasonable apprehension of bias may exist where the presiding judge has a substantial personal relationship with a party to, or a person involved in, proceedings or a substantial personal relationship with a member of the family of that party or person’.[6]
[6][2003] HCA 7, [33] (McHugh, Kirby and Callinan JJ).
In Charisteas v Charisteas,[7] the High Court considered whether numerous private interactions between a barrister retained in a case and the judge hearing it gave rise to a reasonable apprehension of bias. In concluding that an apprehension of bias had been established, the High Court observed that there were, in that case, many private and personal interactions between the trial judge and barrister, and the judge’s impartiality might have been compromised by something said in the course of those communications or by some aspect of the personal relationship exemplified by the communications.[8] The contents of the communications were unknown.
[7][2021] HCA 29.
[8]Ibid [15] (Kiefel CJ, Gageler, Keane, Gordon and Gleeson JJ).
I also note the observation of Mason J in Re J.R.L. that it is the duty of the judge to sit where proper grounds for disqualification do not exist. His Honour emphasised that it is important that judicial officers discharge this duty 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’.[9]
[9](1986) 161 CLR 342, 352; [1986] HCA 39.
Decision
The basis for the disqualification application is association between the judge listed to hear the trial and a partner of a firm of solicitors which is acting in the litigation for one of the parties, but who does not have conduct of the litigation. In my view, an association of that kind does not provide a proper foundation for a reasonable apprehension of bias. I am not persuaded that Castleway has identified how the association might cause that deviation from a neutral evaluation of the merits or that any apprehension that might arise to that effect is a reasonable one.
The notion that a judge would favour one party because they are represented by a firm of solicitors, and the judge is friends with a partner in that firm is not in itself logical. The notion that the judge might seek to favour one side because to do so might favour the judge’s friend or relative who is a partner of the firm cannot be sustained. In the usual course, although all of the partners of a firm might benefit from the conduct of the litigation, it does not follow that each partner has an interest in the outcome of the litigation. There is no suggestion here that Mr Newman has a relevant interest in the outcome of the litigation.
In assessing the reasonableness of the apprehension, it is relevant to take into account that judges are likely to have friends, relatives and acquaintances in the profession. They will inevitably have past and ongoing associations with those who appear before them and those that instruct Counsel to appear. Professional convention, etiquette and training serve to ensure the maintenance of objectively and detachment.
There is ample authority that the fact that the judge is related to a partner of a firm who is acting on the record but who is not responsible for the carriage of the matter does not provide a logical reason for thinking a judge might not bring an impartial mind to the issues in the litigation. The same must hold true where the relationship is not familial but based on friendship.
In Viscariello v Tamasauskas (No 2),[10] Doyle J declined an application for recusal on the basis that his sister was a principal at the firm of solicitors representing the defendant, in circumstances of his sister not having any involvement in the proceedings.
[10][2019] SASC 40.
After noting the necessity to identify a logical connection between the asserted interest or association and the feared deviation from impartial decision making, Doyle J noted that the test requires identification of a cogent and rational link that gives the interest or association the capacity to influence the decision to be made in the particular case.[11] If the connection or link is tenuous or remote, then the requisite apprehension will not be made out.
[11]Ibid [61].
Doyle J said, ‘There are several authorities that have likewise acknowledged that a first degree relationship with a solicitor who is connected in some way to, but does not have the conduct of, the particular matter may not be sufficient to establish a reasonable apprehension of bias.’[12] The reference to a first degree relationship is taken from the Guide to Judicial Conduct,[13] which identities a first degree relation as being a parent, child, sibling, spouse or domestic partner.
[12]Ibid [69].
[13]The Guide to Judicial Conduct is published for the Council of Chief Justices of Australia and New Zealand by the Australasian Institute of Judicial Administration Incorporated and provides principled and practical guidance to judges as to what may be an appropriate course of conduct, or matters to be considered in determining a course of conduct, in a range of circumstances.
It follows that my existing relationship with Mr Newman is not sufficient to give rise to a reasonable apprehension of bias.
In my view, the conclusion that there is no reasonable apprehension of bias does not depend on social isolation being maintained during the relevant period that the case is on foot, the trial conducted or when judgment is reserved. Castleway’s submission that the reference in McInenerny J’s judgment in R v Magistrates’ Court at Lilydale to contact with parties and legal advisers extends to every practitioner or partner of the firm of solicitors engaged by a party cannot be accepted.
In this aspect, an obvious and important distinction can be drawn between lawyers who are engaged in the case and other employees or partners of the solicitors firm on the record. The solicitors involved in the case will have received the instructions of the client and are retained to act for the client and will often became associated in the eyes of opposing parties with the interests of their client. Given the role of a solicitor in the conduct of litigation and the knowledge that the solicitor will have gained, contact with the solicitor ought to be treated in a similar way to contact with the client. Obviously the opportunity for innocent casual or professional contact is more likely with practitioners and will not give rise to any issues, but there is a strict and well understood convention that there should be no private communication between judges and lawyers engaged in matter at least once the trial has started. The same does not hold true for every person who works in, or is a principal in, a firm of solicitors who are retained to act.
In those cases where a practitioner involved in the conduct of a matter has an association with the judge, then, unless the nature of the association is such as to itself give rise to an apprehension of bias, the integrity of the system is ensured by the convention that there is no contact between the judge and the practitioner during the hearing and when judgment is reserved.
In my view there is no convention or understanding that a judge should have no social contact with a person employed in, or a member of a firm of solicitors who are on the record in, proceedings if that practitioner has no involvement with the matter. In those cases, the integrity of the system is adequately secured by professional and ethical obligations that support the understanding that a judge would not discuss a current proceeding with a person who is not involved with it, and a practitioner in such a position would not seek to discuss the matters with a judge.
Ms Styles, the solicitor for the TPC Group wrote to the Court advising that Mr Newman had no involvement ‘in the litigation’. In his email of 4 October 2022, the solicitor for Castleway sought further details and asked for an undertaking. On the hearing of the application Senior Counsel for Castleway said that his clients had concerns about my hearing the case in light of the proposed holiday but said that in the event an undertaking was forthcoming he would seek instructions on whether it would allay his clients’ concerns.
I am satisfied on the basis of Ms Styles’ assurance that Mr Newman has no involvement in the conduct of the litigation, including the connected litigation. I do not require an undertaking and am satisfied that an undertaking is not required in the circumstances. It is well understood that practitioners, as officers of the Court, have a duty of candour.[14] The purpose of the email from Maddocks was to provide to the Court and Castleway further information as might be relevant to the application. I am satisfied that the duty of candour has been discharged.
[14]Forster v Legal Services Board (2013) 40 VR 587, 619–20 [161]–[163] (Kyrou AJA); [2013] VSCA 73.
I accept that Castleway and the principal of Castleway, Mr Keeghan have expressed concerns to their lawyers. As their Senior Counsel observed the litigation has been conducted over a long period of time, in the context of widespread disputation and a lack of trust. However, the test for bias is objective and does not depend on the strength of the feelings of a party.
The test for apprehended bias, with its ‘double might’ admits of the possibility of human frailty[15] and is based on a possibility rather than a probability. The test accommodates the fact that parties to litigation are heavily invested and appearances of bias are acutely distressing and undermine the administration of justice. But they must be reasonably based and it is not sufficient that the reasonable bystander ‘has [only] a vague sense of unease or disquiet’.[16]
[15]Ebner (2000) 205 CLR 337, 345 [8] (Gleeson CJ, McHugh, Gummow and Hayne JJ) (citations omitted); [2000] HCA 63.
[16]MZXLD v Minister for Immigration and Citizenship [2007] FCA 1912, [21] (Gordon J), quoting Jones v Australian Competition and Consumer Commission [2002] FCA 1054, [100] (Weinberg J).
It was for these reasons that I dismissed the application.
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SCHEDULE OF PARTIES
BETWEEN:
| ADAZ NOMINEES PTY LTD (ACN 006 228 119) ATF THE RADO NO 2 TRUST | First Plaintiff/ First Defendant by Counterclaim |
| CORTEK DEVELOPMENTS PTY LTD (ACN 004 997 773) | Second Plaintiff/ Second Defendant by Counterclaim |
| ASPHALT ROADS PTY LTD (ACN 005 374 247) | Third Plaintiff/ Third Defendant by Counterclaim |
| ROADING GROUP PTY LTD (ACN 097 993 292) ATF THE RADO INVESTMENT TRUST NO. 2 | Fourth Plaintiff/ Fourth Defendant by Counterclaim |
| ROADING INVESTMENTS PTY LTD (ACN 104 325 797) ATF THE RADO INVESTMENTTRUST NO 3 | Fifth Plaintiff/ Fifth Defendant by Counterclaim |
| LOOILLA PTY LTD (ACN 092 067 322) ATF LOOILLA TRUST | Sixth Plaintiff/ Sixth Defendant by Counterclaim |
| BELLONIC PTY LTD (ACN 092 015 828) ATF BELLONIC TRUST | Seventh Plaintiff/ Seventh Defendant by Counterclaim |
| TYNONG PASTORAL CO PTY LTD (ACN 060 828 364) ATF TYNONG PASTORAL UNIT TRUST | Eighth Plaintiff/ Eighth Defendant by Counterclaim |
| PIP MELBOURNE PTY LTD (formerly PARTNERS IN PROPERTY PTY LTD) (ACN 120 760 125) | Ninth Plaintiff/ Ninth Defendant by Counterclaim |
| TYNONG PROPERTY DEVELOPMENTS PTY LTD (ACN 081 950 647) ATF AMARCO SERVICES TRUST | Tenth Plaintiff/ Tenth Defendant by Counterclaim |
| - and - | |
| CASTLEWAY PTY LTD (ACN 131 870 481) ATF THE CASTLEWAY TRUST | First Defendant/ First Plaintiff by Counterclaim |
| GERARD DAMIEN KEEGHAN | Second Defendant/ Second Plaintiff by Counterclaim |
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