Ashton v Prentice

[1999] HCATrans 161

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S80 of 1999

B e t w e e n -

ANDREW CRAIG ASHTON

Applicant

and

MAXWELL WILLIAM PRENTICE

Respondent

Application for special leave to appeal

McHUGH J
CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 18 JUNE 1999, AT 1.27 PM

Copyright in the High Court of Australia

MR A.J. McQUILLEN:   May it please the Court, I appear for the applicant.  (instructed by Duker & Associates)

MR B.A.J. COLES, QC:   If your Honours please, I appear for the respondent.  (instructed by Clayton Utz)

McHUGH J:   I am sorry that we have had to bring you to Canberra, but having regard to the nature of the claims made by the applicant it was impossible to have a panel of Judges hearing special leaves in Sydney who could hear this case, so that was the reason the matter has been brought to Canberra.  Yes, Mr McQuillen.

MR McQUILLEN:   This application raises matters, in my submission, which go to an overriding public interest that there should be confidence in the integrity of the administration of justice.

In recent times decisions, particularly of appellate courts in this land, have found difficulties, in my respectful submission, in determining in what circumstances a judicial officer may be or is disqualified from interest bias.  It has also become apparent that there is a divergence of views amongst judges sitting at first instance as to the circumstances in which recusal or disqualification is required ‑ ‑ ‑

McHUGH J:   If there has been, there can hardly be now, can there, having regard to the various decisions in Victoria, in New South Wales and in the Full Court of the Federal Court.  Trial judges are bound by those decisions in those jurisdictions.

MR McQUILLEN:   The difficulty is that in two cases, Dovade and Clenae – Dovade being the New South Wales Court of Appeal, and Clenae being the Full Court, as I understand it - is at odds with Ebner, which is a decision of the Full Court of the Federal Court, in so far as Ebner says, or the Full Court there said, that there is a strict rule of automatic disqualification where there is a pecuniary interest, and in Ebner the Full Court explicitly accepted what has been said by the English cases, in particular, Gough, Pinochet and ‑ ‑ ‑

McHUGH J:   Yes, but that does not apply in your case.  There is no question in this case of the judge sitting on a case in which one of the parties to the litigation is a company in which the judge has shares.  The highest you can put your case is that the judge is a beneficiary under a discretionary trust which has 15,000 shares in Westpac, which is a principal creditor in the bankruptcy of your client, and may ‑ ‑ ‑

MR McQUILLEN:   Of Mr Jury, yes.  The difficult is that what Ebner found was that the holding of shares via a trust was sufficiently direct, so as to not attract the proposition that there was not directness in the terms of direct pecuniary interest.  That was not the point.  Where Ebner dealt with it, it was a similar situation to here, where the primary judge here held shares via a trust, in Ebner it was the same situation except that the Ebner decision went on the basis that the principal creditor, namely, here, Westpac Bank, was not a party to the proceedings.  It was the official trustee.  So that Ebner accepted that a judicial officer holding shares via a trust was direct for the purposes of - as understood by lay persons or the fair‑minded lay observer, so that no distinction should be drawn from the fact that a judge holds shares via a trust as distinct from holding them directly.

Where Ebner decided against the applicant there, or the appellant there, was that the shareholding was such that the principal creditor was not, in effect, a party.  But, my contention is, as has happened in the Auckland Casino Case, is where a judicial officer might hold shares in a parent company who is not a party to the proceedings, but the subsidiary company is, what happened in the Auckland Casino Case was the two members sat, and they had shareholdings in Brierley Investments which owns Sky Tower, which was the successful bidder for the casino.  It was held that the holding of shares in Brierley Investments, which had, in turn, 80 per cent shareholding in Sky Tower, was sufficiently direct for the purposes of attracting the exercise, or the consideration of the rule.

What is of concern here, which this application raises, and which is of great importance, in my respectful submission, is, is there an automatic disqualification rule, and Mr Justice Deane says that he adopted what was said in Gough by Lords Woolf and Gough, that there is a special category of class within bias for interest, and that is where a judge holds a direct pecuniary interest.  In Webb v The Queen Mr Justice Deane acknowledged that there was that special class of case.

However, as I understand it, there is nothing from this Court which, so far as any authority, and it is referred to in Ebner, that until such time as the High Court were to rule otherwise, that there is an automatic disqualification rule.  This application, in this case, asks the Court to look at the question of to what extent there is that rule.  To what extent should it be expanded?  Does it apply strictly?  Is it a stringent view?  Even if it does not, my respectful submission is that there should be a rule which the courts of this land can rest on and rely upon, both at appellate level and primary judge level, in determining in what circumstances a shareholding in particular would disqualify a judicial officer.

One of the difficulties that confronts particularly a primary judge, is, and as has been raised in the English authorities, where a judge, for instance, even has a small shareholding compared to the capital of a large corporation, which shareholding may not have any bearing on the outcome of litigation in the particular case, in particular here the judge’s shareholding in Westpac Bank, and it was expressly conceded by me that even that amount of shares could have little or no effect upon the capital of Westpac.  Nevertheless, the English authorities - their Lordships in Pinochet adopted what was said in Gough’s Case, going back to Reg v Rand, and, indeed, Dimes Case where it seems this principle was first enunciated ‑ ‑ ‑

CALLINAN J:   But, Mr McQuillen, what about the point that Westpac is not a party?

MR McQUILLEN:   Your Honour, Westpac ‑ ‑ ‑

CALLINAN J:   Westpac is a creditor, and was the petitioning creditor, I think.

McHUGH J:   And the only creditor. 

CALLINAN J:   Is that right?

McHUGH J:   Not at the moment.

MR McQUILLEN:   The BAC?

CALLINAN J:   Was not BAC a creditor to the extent of $4 million?

MR McQUILLEN:   Westpac owned BAC.

CALLINAN J:   Yes.  There are bound to be other creditors, are there not?

MR McQUILLEN:   Certainly, if there were, the fact was that when the case started it was clear to his Honour that Westpac was significantly interested, and had a significant interest in the outcome of this application, as in most of these cases where the trustee is seeking to recover assets on behalf of a creditor, and here it was clearly Westpac.  His Honour was seized of that very early on and made a disclosure very much at the outset of the case without prompting at all, because his Honour was seized of what had gone on in Dovade so far as the issue that was being raised there, and that was also a Westpac matter.  So his Honour came forward with the, having been seized of what the argument was in Dovade, came forward with saying that, “I am a shareholder in Westpac, and I have these shares, and I make that disclosure at the outset”.  Then his Honour went on, subsequently after the first announcement, to declare his specific interest of the number of shares that he held in convertible notes.  His Honour decided that he would not disqualify himself, and that rather than apply any automatic disqualification rule, I think that his Honour treated the matter as one where no fair‑minded person would have an apprehension of bias.

McHUGH J:   What do you say about the fact that on the admitted facts and the indisputable facts in this case, no court could come to any other conclusion but that this transaction had to be set aside?

MR McQUILLEN:   There are two transactions, your Honour.  There is the house transaction ‑ ‑ ‑

McHUGH J:   Yes, and the lease.

MR McQUILLEN:   First of all it dealt with the creditor, Mr Ashton, my client.

McHUGH J:   What about the value, for a start?  He has to set aside the first limb of section 124.  You paid $550,000 for this, and the only evidence of valuation was it was worth $595,000, was it not?

MR McQUILLEN:   That is so, your Honour.

McHUGH J:   You fail on that for a start.

MR McQUILLEN:   Can I say this firstly, your Honour:  there is another transaction which is the lease which affects, in my respectful submission, innocent third persons.

McHUGH J:   They are not parties to this.  We are concerned with your client.

MR McQUILLEN:   They were parties.

McHUGH J:   Yes, but we are concerned with your client.  This is your special leave application.

MR McQUILLEN:   Your Honour, so far as Mr Ashton was concerned, he had no intention, it could be gleaned from the evidence, of preventing Westpac from being paid.  He provided accommodation to people who were already there.  It was their home.

McHUGH J:   But the evidence is overwhelming.  The only inference that can be drawn is that this scheme was entered into for the express purpose of preventing the creditors getting their hands on this property.  It shouts from the rooftops.

MR McQUILLEN:   With respect, your Honour, what is not taken into account was the fact that the moneys actually obtained from the transfer of the house were used to pay legal expenses for the litigation in the Supreme Court some three months later.  Mr Jury was in the position where the bank had appointed a receiver to his companies.  He had no access to funds.  He then had to go about raising funds.  There was no lender who was willing to lend in the circumstances of the litigation that was about to be heard in November 1995.  Mr Ashton suggested, as his accountant, that one way it could be done is that the property be transferred to him and he could borrow the money, and then he was responsible as the mortgagor.

What was done with Mr Milton was, an attempt was done to demonstrate by way of corroborative material, that in fact that money went to pay those legal expenses, and that was established.  Where the transaction gets caught is because of the presumption that his Honour the primary judge found, and the Full Court found, that exists under the legislation in section 121 by way of the ‑ ‑ ‑

McHUGH J:   But you do not get over the first ground.  You do not establish the first limb of 124.  The consideration was less than its value.  You have to establish two things.

MR McQUILLEN:   If a property is sold – and there was evidence of value of $595,000.

McHUGH J:   That was the only evidence as to value, and the sum you paid was less than that.

MR McQUILLEN:   Yes.

McHUGH J:   That, in itself, is sufficient to blow you out, is it not?

MR McQUILLEN:   No, your Honour.

McHUGH J:   Do you not have to establish both things under section 121?  Section 121(4) says:

Despite subsection (1), a transfer of property is not void against the trustee if:

(a)  the consideration that the transferee gave for the transfer was at least as valuable as the market value of the property; and

b)  the transferee did not know –

et cetera, and “could not have inferred”.  You fail on the first limb.

MR McQUILLEN:   Yes, “was at least as valuable”, your Honour.  I cannot argue with the fact that $595,000 was not paid, and a lesser sum was paid, but whether or not it should be used in those strict terms, at least it was a value that was within reach of what was a proposed value, and it was done – the money had to be raised quickly.

McHUGH J:   It may be, but whether you have to bring yourself within it, or whether or not the trustee has to negative that defence, the fact is that on the facts it is negatived.

MR McQUILLEN:   The market value, so far as a value was concerned, is expressed by an expert valuer.  As to what the property would have fetched on an open market is another matter.  I would submit that this was a section 139ZQ notice which was issued by the trustee and in respect of which an application was made to set it aside.  All that my client had to do was raise sufficient material, which his Honour found, to put that notice into question.  What was the real market value of the property could only be determined, perhaps, on a sale, but it was done at a time when the bankrupt was looking to raise funds for the purposes of meeting his legal expenses, and the applicant here, Mr Ashton, facilitated that means for the purpose of assisting Mr Jury in attempting to defend a claim by Westpac Bank, the ultimate creditor.

It was the home of, and it is the home, presently of some five people, two of whom are in their nineties.  The others are in their seventies - the bankrupt and his wife - and there was two children.  I think one of them is no longer there, but effectively there are five people there.  Mr Ashton was not seeking to prevent the property from being other than used for legitimate purposes at the time.  It was not being done for the purposes of preventing Westpac from ‑ ‑ ‑

McHUGH J:   It is a hard argument to put forward, having regard to the terms of the lease and the options.

MR McQUILLEN:   Can I just say this:  be that as it may, nevertheless, no inquiry should be gone into as to what would have happened, or what would happen in any event if this matter were to go back for retrial, because the automatic disqualification rule applies - if applied stringently, this question is not entertained at all.

McHUGH J:   That might be so, ordinarily, but this Court has a discretion as to whether or not it grants special leave in a case, and whether or not the applicant would be likely to succeed eventually is clearly a matter of very considerable importance in many cases.

MR McQUILLEN:   Could I just say the lease point could be construed as the tenants being bona fide purchasers for value.  The lease was held to be effective by his Honour, and it is a matter which if the Code, section 121, is a Code for the purposes of dealing with transactions and bona fides, then clearly, that lease would be protected on a rehearing.  In other words, they have rights.  The question arises as to what extent that lease would persist, or subsist, notwithstanding the setting aside of the sale transaction.  But what is important, in my respectful submission, for this application is the question of the automatic disqualification rule and whether this Court now – and, in my respectful submission, it should - look at the question of whether that rule exists and what its parameters are.

In my submission, a judicial officer who holds shares in a company has, by virtue of his shareholding, an interest in the cause.  That has been decided in Pinochet, Ebner, Reg v Gough and, indeed, in Webb.  In so far as Gough is concerned, that was a 1993 case, 1993‑1994 in Webb, Ebner is this year, and Pinochet is this year. 

In so far as the lease is concerned, your Honours, there is a need to protect, as his Honour the primary judge said, “innocent third persons who take from a transferee”, here, the applicant, and that is the matter which, if when coming to consider the important question of automatic disqualification, that this question of the lease would exercise, or would be determinative of this application in so far as determining that it should go back for a retrial.  They are my submissions.

McHUGH J:   Yes, thank you.  Yes, the Court need not hear you, Mr Coles.

This application for special leave to appeal is refused.  The decision of the Full Court is not attended with sufficient doubt to warrant the grant of special leave to appeal.

MR McQUILLEN:   May it please the Court.

MR COLES:   If the Court pleases.  With costs, if your Honour pleases.

McHUGH J:   You cannot say anything in opposition to that, Mr McQuillen?

MR McQUILLEN:   Only what has been said in the application, your Honour.

McHUGH J:   Yes.  The application is refused with costs.

The Court will now adjourn until Brisbane on Monday at 2.15.

AT 1.49 PM THE MATTER WAS CONCLUDED