ASIC v Rich
[2004] NSWSC 970
•03/11/2004
NEW SOUTH WALES SUPREME COURT
CITATION: ASIC v Rich [2004] NSWSC 970
CURRENT JURISDICTION: Equity
FILE NUMBER(S): 5934/01
HEARING DATE{S): 26, 27 October 2004
JUDGMENT DATE: 03/11/2004
PARTIES:
Australian Securities and Investments Commission (P)
John David Rich (D1)
Mark Alan Silbermann (D4)
JUDGMENT OF: Austin J
LOWER COURT JURISDICTION: Not Applicable
LOWER COURT FILE NUMBER(S): Not Applicable
LOWER COURT JUDICIAL OFFICER: Not Applicable
COUNSEL:
R B S Macfarlan QC with J P A Durack SC, N J Beaumont and J E O'Sullivan (P)
D L Williams SC with M J Steele and S A Goodman (D1, D4)
SOLICITORS:
Jan Redfern, Solicitor for Australian Securities and Investments Commission (P)
Joanne Kelly, Solicitor (D1, D4)
CATCHWORDS:
APPREHENDED BIAS - apprehension of bias by reason of prejudgment - long trial - discretionary evidentiary rulings against defendants, prior to determination of admissibility of plaintiff's documents - whether exercise of discretion involved prejudgment of ultimate question of admissibility of documents - whether comments in judgments on evidence gave rise to reasonable apprehension of bias by prejudgment
ACTS CITED:
Evidence Act 1995 (NSW) ss 135, 136, 138
DECISION:
Application for disqualification dismissed
JUDGMENT:
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
AUSTIN J
WEDNESDAY 3 NOVEMBER 2004
5934/01AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION V JOHN DAVID RICH & ORS
JUDGMENT (application for disqualification for reasonable apprehension of bias)
HIS HONOUR:
The application
In the course of this trial I have found it necessary to publish a substantial number of judgments on evidentiary and interlocutory matters. Whereas in other hearings one might resolve such matters by immediate rulings with only brief reasons or perhaps no express reasons at all, in the present case many points have been strenuously contested, sometimes with written submissions citing authorities, and with substantial oral argument where written submissions have not been prepared. I have taken the view that, by and large, these strenuous contests have been warranted, for evidentiary rulings in the early stages of what is likely to be a very long hearing may have significant consequences for the course of the trial. I have responded by preparing written reasons for judgment where matters have been fully contested, taking the view that the present case calls for such an approach notwithstanding the well-known remarks by Heydon J in his paper to the National Judicial Orientation Programme, 13 October 2003, entitled "Practical Impediments to the Fulfilment of Judicial Duties" (see the remarks by the Court Appeal of New South Wales in Kwan v Kang [2003] NSWCA 336 at [113] - [114]).
I have adopted the course, in most instances, of reserving my decisions, usually overnight, so that I can consider the matters that have been put to me. Normally I have announced my decision as soon as I have completed my consideration, publishing reasons later, when I have had the chance to complete my preparation of them, in order to avoid delay in the conduct of the hearing. Because my reasons for a decision on a particular point have typically had implications for other rulings that I would be called upon to make in the short term, it has been necessary to conduct the process of consideration, decision and publication of reasons expeditiously.
On Friday 22 October 2004 I published three judgments on interlocutory matters, in chambers, as the court was not sitting on that day and it was desirable to provide my reasons to the parties before the hearing resumed on Monday 25 October. One of them, which I shall call "the 22 October judgment" (attached as an appendix to this judgment), related to ASIC's application for relief from compliance with the defendants' 20th notice to produce. ASIC's application raised for consideration some matters overlapping with matters covered by my judgment delivered on 13 October 2004 (ASIC v Rich [2004] NSWSC 951, which I shall call the "the 13 October judgment").
The 13 October and 22 October judgments explained the search warrant issues that the defendants will wish to raise by way of objection when ASIC comes to tender the reports by Mr Carter, the exhibits to those reports and its tender bundle of documents. The defendants wish to establish that electronic material was unlawfully copied during the execution of search warrants on 1 June 2001, and, further, that ASIC subsequently used the search warrant material unlawfully and improperly for a civil investigation and in relation to the present civil proceeding. They wish to show that ASIC's conduct was deliberately or recklessly unlawful or improper.
A substantial part of the evidence so far heard has been cross-examination of ASIC's witnesses directed to the search warrant issues. In a sense, that evidence is in the nature of a voir dire for the purpose of my eventual decision on the admissibility of the search warrant material. However, after a submission by ASIC early in the hearing (Transcript 307.44 – 308.10), and without resistance from the defendants (Transcript 308.18-24), the evidence has been adduced for the general purposes of the hearing rather than solely for the evidentiary issue.
Underlying the decisions in my two judgments is the proposition that evidence concerning ASIC's state of mind after December 2001 is of only marginal relevance and of no material significance with respect to the search warrant issues, because the important questions concerning ASIC's conduct and state of mind, to be taken into account when I come to exercise my statutory and common law discretions with respect to the admissibility of evidence, will relate to the period from 1 June (or perhaps 31 May) 2001 up to the commencement of the present proceeding on 12 December 2001.
I adopted this proposition in my 13 October judgment, to conclude that I should disallow a question by senior counsel for the defendants to Ms Redfern in cross-examination, as to whether she saw thought it important to refer the court to all advices that ASIC had received in relation to the use of search warrant material from 1 June 2001 up to the present time. I then applied the proposition in my 22 October judgment, in which I decided to relieve ASIC of the obligation to comply with the 20th notice to produce, which would have required ASIC to produce documents relating to its deliberations and communications concerning the execution of a deed of consent on 15 October 2004. In doing so, I had in mind that, although in a complex case such as the present one the court ought to be very wary about intervening, of its own motion, in the way a party conducts its case, it is proper to do so in response to an application by a party, after full argument, in order to facilitate "the just, quick and cheap resolution of the real issues" in the proceeding, in accordance with Part 1 rule 3(1) of the Supreme Court Rules.
The defendants have made it plain that they strongly disagree with these rulings, but they have gone further, contending that my 13 October and 22 October judgments, together with some ancillary matters, provide reasonable grounds for apprehension of bias on my part.
On Monday 25 October, after he was granted an adjournment to obtain instructions, senior counsel for the defendant informed the court that his clients wished to apply for me to disqualify myself from the further hearing of the proceeding, on the ground of reasonable apprehension of bias. He made a point of stressing that there was no allegation of actual bias. Recognising the seriousness of the application, he sought and was granted an adjournment to prepare written submissions. The application was heard on the afternoon of Tuesday 26 October 2004. The defendants' written submissions on the application, dated 25 October 2004, were marked for identification as DS 19. The defendants also provided a chronology on the issue, which I marked as DS 20. ASIC was content to proceed by oral submission only.
On Wednesday 27 October, after reviewing the submissions of the parties overnight, I drew attention to some aspects of the hearing relating to the defendants' contentions on the application, with transcript references. My remarks may be found at T 1770 - 1775. I invited the parties to respond to my remarks and they both did so in writing, later on 26 October. ASIC's written submissions were marked AS 23, and the defendants' further submissions were marked DS 21. Shortly after 2pm, having considered the additional written submissions, I announced my decision to reject the application for disqualification. I made an order accordingly, with reasons to follow. I proceeded in this fashion with encouragement from ASIC and without opposition from the defendants. These are the reasons for my decision.
Procedure
An objection to a judge continuing to hear a matter is sometimes made without formal application (Idoport Pty Ltd v National Australia Bank Ltd [2004] NSWSC 270, at [8] per Einstein J), but in the present case the objection was treated as application and a formal order was made to dispose of it. At the commencement of the oral hearing on 26 October, I drew the attention of counsel to the observations of Mahoney JA in Bainton v Rajski (1992) 29 NSWLR 539 at 545ff, in which his Honour addressed the procedure to be adopted where the reasons advanced for the judge’s disqualification are not immediately apparent. I indicated that I was inclined to allow evidence to be tendered if it was relevant to the application, and (subject to receiving any such evidence) to proceed to hear and determine the application on the basis of written and oral submissions. In view of the observations of Mahoney JA, difficulties may have arisen if there had been contested facts. I invited counsel to make submissions if they wished to contend that any other procedure should be followed, but they did not take up that invitation.
In the result, the hearing of the defendants' application for my disqualification was constituted by the defendants' written submissions in DS 19, 20 and 21, their oral submissions on 26 October, ASIC's oral submissions on 26 October and their written submissions in AS 23. No evidence was tendered on the application. ASIC sought to tender some evidence in answer to paragraph 28 a. and b. of DS 19, but senior counsel for the defendants withdrew those two sub-paragraphs and substituted for them a reference to paragraphs [2]-[5] of my 13 October judgment. I rejected ASIC's tender, on the ground that the defendants' change of position had made the tendered material irrelevant.
Legal principles
Bias
There was no disagreement between the parties as to the applicable principles. However, there is now such a large body of relevant case law that is appropriate to set out at some length the principles that are especially pertinent to this case.
Perhaps the best starting point is the requirement to avoid actual bias. In Johnson v Johnson (2000) 201 CLR 488, Kirby J said (at 501):
"It is a 'fundamental rule' [Re JRL; Ex parte CJL (1986) 161 CLR 342 at 351, per Mason J; …] of natural justice and an 'abiding value of our legal system' [Galea v Galea (1990) 19 NSWLR 263 at 277] that every adjudicator must be free from bias."
"Bias", for the purposes of the "fundamental rule", is not to be equated with lack of good faith. As Lord Goff said in R v Gough [1993] AC 646, 659:
"… bias is such an insidious thing that, even though a person may in good faith believe that he was acting impartially, his mind may unconsciously be affected by bias."
Reasonable apprehension of bias
The "fundamental rule" has been extended, by the courts insisting that the appearance of bias must also be avoided. Thus, in R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256, Lord Hewart CJ said (at 259):
"… it is not merely of importance but is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done."
This extension of the "fundamental rule" is based upon the need for public confidence in the administration of justice, for "if fair-minded people reasonably apprehend or suspect that the tribunal has prejudged the case, they cannot have confidence in the decision": R v Watson; Ex parte Armstrong (1976) 136 CLR 248, 263 per Barwick CJ, Gibbs, Stephen and Mason JJ; Johnson, at 493 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ.
The requirement to avoid the appearance of bias is assessed, in Australia, by reference to an objective test, stated by Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in the High Court in Johnson (at 492), namely:
"… whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question that the judge is required to decide."
This test has been described as "Spartan": Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 411, at 448 per Meagher JA.
Realistic criteria in cases of alleged prejudgment
Some older cases laid down a higher threshold for reasonable apprehension of bias. For example, in R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Company Pty Ltd (1953) 88 CLR 100, the court (at 116) spoke in terms of needing to show a "high probability" of a bias inconsistent with the fair performance of judicial duties. But the more Spartan test was established in a series of High Court cases, including R v Watson; Ex parte Armstrong (1976) 136 CLR 248 and Livesey v NSW Bar Association (1983) 151 CLR 288.
Then the question arose whether the Spartan test might have become diluted by virtue of later cases. In Re JRL; Ex parte CJL (1986) 161 CLR 342, Mason J said (at 352):
"It seems that the acceptance by this Court of the test of reasonable apprehension of bias [in Livesey, inter alia] has led to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in other proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in the particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be 'firmly established': Reg v Commonwealth Conciliation and Arbitration Commission; Ex parte Angus Group (1969) 122 CLR 546, at 553-4; Reg v Watson; Ex parte Armstrong (1976) 136 CLR 248, at 258-263; Re Lusink; Ex parte Shaw (1980) 55 ALJR 12, at 14. 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 the judge, they will have their case tried by someone thought to be more likely to decide the case in their favour." [Emphasis supplied.]
In Southern Equities Corporation Ltd (in liq) v Bond (2000) 78 SASR 339, Olsson J said (at 349) that Mason J's observations should be approached with considerable care, and could not be relied upon as diluting the Spartan approach adopted in the Livesey test (see also at 368 per Bleby J). In Spedley, Samuels JA drew attention (at 447) to the use of the word "will" in the quoted passage from Mason J's judgment, in contrast with the second "might" in the "double might" test enunciated in Livesey, but he concluded that the rule to be applied remained as stated in Livesey. That conclusion was vindicated, if it needed to be vindicated, by the restatement of the "double might" test by Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ in Johnson.
In Kwan v Kang [2003] NSWCA 336, the Court of Appeal of New South Wales (Sheller, Ipp and Tobias JJA) observed:
"[76] Due weight must be given to the change in the test and the lower threshold it articulates; it represents greater awareness and recognition of a foundation of our public system of justice, namely, that the community must have confidence that justice is being administered in a fair and impartial way."
Nevertheless, the observations of Mason J have survived, subject to the qualification that the issue is not whether the hypothetical fair-minded lay observer might reasonably apprehend that the judge will not bring an impartial and unprejudiced mind to the issue, but whether the fair-minded lay observer might reasonably apprehend that the judge might not do so: Kola v District Court of South Australia [2001] SASC 268, at [36] per Doyle CJ. In Johnson, Kirby J referred (at 504) to what he called the "salutary warning" given by Mason J in Re JRL that judicial officers in Australia are obliged to discharge their professional duties unless disqualified by law, and he continued:
"They were told [that is, judicial officers were told by Mason J's observations in JRL] not to accede too readily to suggestions of appearance of bias, lest parties be encouraged to seek such disqualification without justification. Applications of that kind might sometimes be made in the hope of securing an adjudicator more sympathetic to a party's cause. Or they might be made because of the strategic advantage that may thereby be secured, especially in the interruption of lengthy proceedings [cf Lockabail [2000] QB 45 at 479] and the delays consequent upon obtaining a fresh start in a busy court or tribunal."
The same approach has been taken in this State. In Kwan v Kang, the Court of Appeal of New South Wales (Sheller, Ipp and Tobias JJA) said:
" [77] Despite the importance of the appearance of justice being seen to be done, there is a strong need for courts to apply realistic criteria in considering whether a reasonable apprehension of bias has been established. This is particularly so when dealing with a disqualification application based on what is said to be pre-judgment by a judicial officer. This has often been stressed.
[78] Judicial officers are required to discharge their professional duties unless disqualified by law. They should not accede too readily to suggestions of appearance of bias. Nothing should be done that would encourage parties to seek such disqualification without justification. See the observations of Kirby J in Johnson v Johnson at 504 and Re JRL; Ex parte CJL (986) 161 CLR 342 at 352 per Mason J."Later in their judgment in Kwan, the Court (after citing observations concerning the degree of sophistication to be assumed in the hypothetical fair-minded lay observer- see below), continued:
"[82] While the test for apprehended bias by reason of pre-judgment is based on what may be regarded as a fairly low threshold of satisfaction, namely, 'whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind' to the issue, the element of reasonableness needs to be stressed. In Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 100 Gaudron and McHugh JJ pointed out:
'A reasonable bystander does not entertain a reasonable fear that a decision-maker will bring an unfair or prejudiced mind to an inquiry merely because he has formed a conclusion about the issue involved in the inquiry.'
[83] There must be a reasonable apprehension on the part of the fictitious observer that the decision-maker's mind is so prejudiced in favour of a conclusion already formed that he or she might not alter that conclusion, irrespective of the evidence or arguments presented to him or her (see the approach expressed in Laws v Australian Broadcasting Tribunal at 100, varied in the light of Johnson v Johnson)."
Characteristics of the "fair-minded lay observer"
In Johnson, Kirby J said (at 508, omitting case references):
"The attributes of the fictitious bystander to whom courts defer have … been variously stated. Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all relevant circumstances. The bystander would be taken to know commonplace things, such as the fact that an adjudicator sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers. The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted. The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality. Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context. Finally a reasonable member of the public is neither complacent nor unduly sensitive or suspicious."
In Southern Equities, Bleby J drew attention (at 367) to the difficulty of applying the "fair-minded lay observer" test, where the person applying it is a professional judge who is not and never can be a lay observer. He said:
"In order to determine the likely attitude of a fair-minded lay observer, the judge must be clothed with the mantle of someone the judge is not. One must avoid the natural temptation to view the judicial conduct, state of knowledge, association or interest in question through the eyes of a professional judge. An apprehension of bias by pre-judgment is based on a perception of human weakness. Given the double use of 'might' in the current formulation of the test for apprehended bias, one must be particularly careful not to attribute to the lay observer judicial qualities of discernment, detachment and objectivity which judges take for granted in each other."
The reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice: Webb v The Queen (1994) 181 CLR 41 at 73 per Deane J; Johnson at 493 per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ. In Johnson (at 493), their Honours elaborated this point as follows:
"The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx. … Judges are not expected to wait until the end of the case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented."
Although these remarks were directed towards the dialogue between bench and bar, during which a modern judge may from time to time indicate tentative views, they seem to me to have an application, as well, to a case where the judge makes a discretionary ruling on evidence or a notice to produce in response to an application by a party, with case management considerations in mind.
On the other hand, the judge's desire to promote the efficient conduct of the hearing does not entitle him or her to "take over" the conduct of a party's case, for each party is entitled to a fair hearing according to the law, by trial conducted in accordance with the adversarial system: Government Insurance Office of New South Wales v Glasscock (unreported, Court of Appeal of New South Wales, 19 February 1991, BC9102328 at 10 per Handley JA).
Assessment of the conduct complained of, in its context
The facts of Johnson are of some assistance in one respect. In that case the appellant's specific complaint related to a statement by the trial judge during an exchange with counsel at the conclusion of the proceeding, in which he said, inter alia, that he would "rely, principally, on witnesses other than the parties in this matter - and documents - to determine where the truth lies …". The case is not closely analogous with the present case, because there the judge's remarks were not made as part of the reasons for an interlocutory ruling, and the High Court's decision, that the judge's conduct had not created an apprehension of bias, was specifically based on the ground that the judge's remarks were not an expression of a concluded view on the credibility of either party: see especially at 495, per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ. But it is germane to note that their Honours insisted (at 494) that the judge's remarks had to be considered in the context in which they were made. In the same way, any particular statement of mine at the hearing or in an interlocutory judgment must be considered, for the purposes of applying the "fair-minded lay observer" test, in the context provided by the relevant surrounding oral hearing as recorded in the transcript, and the interlocutory judgment read as a whole and in the context of other relevant judgments (see also Webb v The Queen, at 73-4 per Deane J).
Interlocutory judgments
The defendants' complaint in this case relates, in part, to some of the content of my 13 October and 22 October judgments. In Southern Equities, Bleby J explained (at 368) the significance, for the purposes of an allegation of reasonable apprehension of bias, of interlocutory determinations:
"… [A]lthough the previous decisions of a judge may generate an expectation that he or she may well decide issues in the particular case adversely to one of the parties, this does not mean that the judge will necessarily approach the issues otherwise and [scil 'than'] with an impartial and unprejudiced mind. In particular, it should not be assumed that, merely because a judge has been responsible for the pre-trial case management of a particular case and will obviously have made decisions adversely affecting one party or another, the judge is necessarily precluded from conducting the trial. Indeed, there would be few interlocutory applications, a decision on which would be likely to give rise to a reasonable apprehension of bias. This is particularly so because most contested applications are decided on affidavit evidence where either the facts are not in dispute or where, as in the case of an interlocutory injunction, the judge merely has to be satisfied that the facts deposed to raise a serious question to be tried. Usually, findings on such issues will be cast in language which could not possibly found a successful submission of apprehension of bias."
Southern Equities and Kwan v Kang deserve particular consideration, because they were cases where the trial judge was held to have disqualified himself by purporting to resolve, in the course of interlocutory judgment, questions of fact and issues of credit. The defendants rely on these cases in support of their application.
In Southern Equities, the trial judge made findings of fact as to the movement of funds between corporate entities, and findings going to the credit of the defendants, in the course of determining an application for Mareva orders against them. The Full Court of the Supreme Court of South Australia (Olsson and Bleby JJ, Williams J dissenting) held that the trial judge's findings had created a reasonable apprehension of bias.
Olsson J referred to some comments made by the judge, in which the judge held on an interim basis that the evidence then before him justified the making of orders, and expressed the view, prima facie, that a witness had failed to give truthful evidence. Olsson J said that the judge's remarks made it clear that he was acting only on an interim basis, and no fair-minded lay observer could ever reasonably apprehend that the judge might not subsequently bring an impartial and unprejudiced mind to the questions he would ultimately have to decide.
Olsson J contrasted such statements with the two key conclusions that the trial judge had expressed in dealing with the Mareva application. First, the judge had said that it was "never seriously intended" that a certain entity would lend or invest in a joint-venture, but instead statements about the purported loan and investment were made to "cloak a payment to Bond interests". Olsson J said (at 350) that these findings were "expressed in absolute and unqualified terms, as the outcome of a hotly contested inter partes dispute and a close analysis of a considerable quantity of evidentiary material", and a reasonably informed, fair-minded, lay observer would not conclude that they were no more than a provisional product of limited material.
The trial judge's second conclusion was expressed to be an absolute finding that two of the defendants had acted improperly and not in the best interest of the relevant company and had breached their duty as directors of that entity by diverting profits to members of the Bond family. These were matters going to the credit of those defendants, their bona fides, and certain important matters of historical fact, in relation to matters relevant to the final resolution of the case. According to Olsson J, a fair-minded lay observer would be likely to apprehend that the trial judge might not approach a later assessment of the credibility and conduct of the defendants without a significant level of prejudgment (see also at 372-3 per Bleby J).
Olsson J concluded (at 351-2):
"The dilemma with which [the trial judge] was faced was that, although he was dealing with interlocutory applications on a limited range of evidence, the very nature of those applications demanded certain positive findings of fact and the consideration of alleged perjury on the part of both appellants. Unless those findings were heavily qualified as to their provisional nature, the almost certain consequence was that they would lead a fair-minded lay observer to a conclusion that the judge would necessarily come to the trial proper with a mind-set adverse to the appellants, in fundamentally important respects.
"Moreover, while in the strict sense, the factual issues were not all primary, initial core issues to be decided, many of the facts found were matters which were, or were proposed to be and now are, in issue on the pleadings; and would have to be traversed at trial. The findings made in relation to them were highly adverse to the appellants in a case in which their credibility and probity arise as paramount considerations. The very basis of the applications before the learned judge involved a direct attack upon the credit of both appellants (having regard to the content of their sworn testimony on examination, when contrasted with other evidence presented) against the background of an allegation of conspiracy - in relation to which credit and probity was all-important. It was the specific case of the liquidator, on the applications before [the trial judge], that the sworn evidence of the appellants was either false or deliberately misleading. The findings made unequivocally indicated a conclusion that they had not been witnesses of truth as to important matters; and that they had deliberately engaged in a course of highly improper conduct, contrary to their duty as directors. The relevant conduct would plainly arise for consideration at trial.
"With the wisdom of hindsight, it would have been preferable for applications of this type to have been dealt with by a judge other than the trial judge, so as to avoid the situation which has actually arisen. However, as matters now stand, it seems to me that the appellants have demonstrated the situation of apprehended bias. It is almost inevitable that, if [the trial judge] now embarks upon the trial, there will be a strong perception that he comes to his task from a particular point of view, and with a particular feeling towards all-important issues of the credibility and probity of the appellants - from which it is reasonably considered that he may find it intellectually difficult, if not impossible, to retreat."It is plain from these observations that Southern Equities was a different case from the present one, in some important respects, as follows:
(i)In that case the application for Mareva relief required the judge to make a determination, on the basis of such evidence as was before him, on the question whether there was a danger that the plaintiffs, if successful in the action, would not be able to have their judgment satisfied. That necessarily led him into matters of contested fact and matters of credit. In the present case, as I shall explain, it was unnecessary for me to deal with disputed issues of fact, and I did not believe that I was doing so.
(ii)The factual issues in that case included core issues to be traversed at the trial. In the present case, the search warrant issues did not, as I understood them, involve any challenge to Ms Redfern's evidence that she believed in December 2001, in light of counsels' advice, that ASIC was entitled to make use of the search warrant material for the purpose of the civil proceeding that ASIC commenced in that month.
(iii)The trial judge's findings in Southern Equities included findings adverse to the credit of one of the defendants, necessarily affecting his assessment of that witness's credit in other respects. In this case, on my understanding of the matters before me, there was no issue of credit as to the accuracy of Ms Redfern's statement as a statement of her belief in December 2001, but there was an issue of credit as to whether it could be inferred that her belief continued after that time. Consequently my acceptance of a sentence in paragraph 15 of her affidavit did not commit me to a finding, one way or other, as to her credit in respect of matters that would be placed under challenge.
(iv)This is not a case where it would have been preferable for the applications determined by my judgments of 13 and 22 October to have been considered by another judge. They were applications that arose well after the trial had commenced, requiring knowledge and understanding of what had happened over several hearing weeks.
In Kwan v Kang the question for the trial judge was whether a landowner had entered into a spurious mortgage with the appellant, as a contrivance to frustrate the first respondent's recovery under a District Court judgment for services rendered. In the course of the trial, the first respondent sought access to documents for which privilege was claimed, and relied on s 125 of the Evidence Act. Under that section, client legal privilege may be lost if the communication is in furtherance of the commission of a fraud or deliberate abuse of power. Subsection 125(2) entitles the court to make such a finding, where the commission of the fraud or the abuse of power is a fact in issue, if there are "reasonable grounds" for the finding. The trial judge delivered a written judgment, holding that the documents were in furtherance of the commission of a fraud or a deliberate abuse of power, and that s 125 applied.
The Court of Appeal of New South Wales observed (at [48]) that there was "potentially powerful evidence" of fraud or the intent to commit a fraud. They continued:
"[50] Nevertheless, it was not appropriate for a finding of fraud or abuse of power to be made in absolute and unconditional terms at the stage that the evidentiary ruling in question was handed down. Apart from the fact that s 125 of the Evidence Act required only that there be reasonable grounds for finding that a fraud or abuse of power had been committed, the first respondent had not yet closed his case and the appellant had not opened his; in particular, the appellant had not yet gone into evidence and had not had any opportunity to explain the documents in question."
Later they added:
"[86] It is not unknown for judges to make findings on an interlocutory issue and to express those findings in a way that indicates that they have come to a final conclusion. If that conclusion is as to a significant issue on which the ultimate result of the trial depends, and further evidence is still to be led and final addresses are still to be made, the likely consequence is that the judge concerned will have to disqualify himself or herself.
[87] The reason for this is that a finding expressed in terms of finality, when made at an interlocutory stage, will usually give the impression that the judge's mind is made up. If the judge's mind is made up before evidence and final addresses are complete, it will mean that a conclusion has been unfairly arrived at. There is then likely to be an apprehension that, when the time comes to give final judgment, the judge might not be impartial or might be prejudiced against the party who was unsuccessful in the interlocutory judgment. It will then not merely be apprehension that the judge will decide the case adversely against that party."After quoting part of the passage from the judgment of Olsson J in Southern Equities, which is extracted above, they concluded:
"[95] The same considerations apply in the present case. The effect that his Honour's remarks might have had on a reasonable bystander has to be judged not only by the language used in the various judgments, read as a whole, but also by bearing in mind that the fraud, in furtherance of which he was 'satisfied' that the documents had been prepared, was the very fraud the first respondent alleged in attempting to prove that the loan and mortgage were fraudulent shams and not genuine transactions. His Honour stated that he was satisfied about the very allegation of fraud on which the first respondent was still to lead evidence and the appellant was still to rebut."
This passage points to a critically important distinction between the facts of Kwan v Kang and the present case. In this case my judgments of 13 and 22 October were not directed towards the very issue, or any one of the issues, to be resolved when the evidence on the search warrant issues has been fully heard, and argument on those issues has taken place. The issues before me on those two occasions were issues about the relevance and material significance of evidence concerning ASIC's state of mind after December 2001, for the purposes of the exercise of discretions. My determination of the issues before me did not require me to address any aspect of the ultimate admissibility of the search warrant materials, and I endeavoured not to do so.
"Correcting" statements
There is some case law on the question whether, if the judge's conduct has created a reasonable apprehension of bias sufficient to disqualify the judge from continuing to hear the case, he or she can reverse the disqualification, for example by clarification or apology. In GIO v Glasscock, at 17, Handley JA said that once the stage had been reached where the judge had become disqualified, a subsequent apology could not reverse that disqualification:
"The moving hand has written and moved on and in such circumstances a reasonable lay observer would, in my opinion, still retain 'a substantial distrust of the result': see Vakauta v Kelly (1989) 167 CLR 568, at 575."
Glasscock was a case where the judge had very actively intervened during the examination in chief of a witness, asking leading questions repeatedly, and there were exchanges between the judge and counsel which suggested that the judge felt some resentment to counsel's objection and had overreacted to it.
In Johnson, Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ noted (at 494) that they had heard argument, prompted by the trial judge's explanation of what he intended to communicate, about whether the effect of a statement that might indicate prejudgment can be removed by later statement which withdraws or qualifies it. They continued:
"Clearly, in some cases it can. So much has been expressly acknowledged in the cases [citing Re JRL and Vakauta v Kelly]. No doubt some statements, or some behaviour, may produce an irrevocable apprehension of prejudgment. On other occasions, however, a preliminary impression created by what is said or done may be altered by a later statement. It depends upon the circumstances of the particular case. The hypothetical observer is no more entitled to make snap judgments than the person under observation."
Later (at 495) their Honours took into account the trial judge's subsequent explanation, in concluding that on the facts of that case, the judge was not intending to express a concluded view on the credibility of the parties when he said that he would rely principally on witnesses other than the parties and upon documents. They observed (at 494):
"When, on the following day, the judge gave an explanation of what he had intended to convey by his earlier remarks, there was no reasonable ground for not accepting that explanation."
It seems to me that the approaches taken to "correcting" statements by Handley JA in Glasscock and by their Honours in Johnson are consistent. Since the issue is concerned with the fair-minded lay observer's impression of the conduct complained of in its context, a later clarification may serve to remove the grounds for apprehension, for that context includes "any published statement, whether prior, contemporaneous or subsequent" (Webb v The Queen, at 74 per Deane J). But where the judge's conduct is outspoken or aggressive or indicative of resentment, the reasonable apprehension of bias that it has created is unlikely to be overcome by later conduct.
In Kwan v Kang, the trial judge published a revised judgment with respect to the applicability of s 125, after the application for disqualification had been made, in which he endeavoured to make it clear that his findings concerning fraud and abuse of power were only findings of "reasonable grounds" made at the prima facie level. The Court of Appeal affirmed (at [66]) the entitlement of a judge to review and change the judgment he or she had given. However, as they noted (at [68]), the trial judge did not say in the revised judgment that he had said something in the earlier judgment by mistake, or had omitted to say something that he meant to say. He had not corrected two passages in the earlier judgment in which he had expressed his findings "in emphatic language of absolute finality" (at [97]). That being so, the revised parts of the judgment did not cure the impression of absolute findings given by those passages (at [99]).
The Court of Appeal observed that if the trial judge, in his revised judgment, had said that in making what appeared to be absolute and unconditional findings he had made a mistake, and that he had not intended to make findings on that basis, a different conclusion may have been open (at [88] and [102]).
These principles suggest that where, as in the present case, the application for disqualification is partly based on a reading of passage in a judgment that does not reflect the intended meaning of that passage, it is appropriate for the judge, in responding to the application, to explain clearly the meaning he or she intended to convey by that passage. Likewise, where the application is, as in the present case, partly based on the assertion that the judge has inappropriately resolved a contested factual issue and a challenge to the credit of a witness without having heard all the evidence, it is appropriate for the judge, in responding to the application, to address the question whether he or she understood that the matter was controversial, and whether the case was presented in such a manner that a different inference could reasonably be drawn.
It must be remembered, of course, that the question is not about to judge's actual intention or understanding, but the fair-minded lay observer's possible perception.
The defendants' objections
The defendants contended that a reasonable apprehension of bias arose out of the 22 October judgment, read in the context of the 13 October judgment and the course of events generally in the proceeding in relation to the search warrant issues. Properly analysed, their submissions raise four contentions:
that the 13 October and 22 October judgments, and especially the latter, are premature adjudications of the likely probative value of evidence not yet led, as to issues not yet fully argued;
that in the 22 October judgment the court prematurely accepted some evidence of Ms Redfern, when that evidence and her credit were under challenge and her cross-examination had not been concluded;
that in various passages of the 22 October judgment the court adopted views inconsistent with the defendants' contentions on the search warrant issues, before the evidence had been concluded and argument had been heard;
that the impression of prejudgment created by the above three matters is strengthened by putting them into the context of the history of the defendants' application in relation to the search warrant issues.
First objection - premature resolution of evidence
The defendants pointed out, correctly, that (in contrast with Johnson) this is not a case in which the court has merely expressed preliminary views in argument. Here, the court has made rulings on interlocutory questions which involved it in making assessments of the potential materiality of various matters, so as to it foreclose the possibility of those matters being further explored in evidence.
The defendants submitted that by making its judgments of 13 and 22 October, the court has foreclosed any realistic possibility of altering its views. They said that the court's determination of the admissibility of the search warrant material will involve a balancing exercise which ought fairly to be undertaken when all of the evidence is before the court, and the court should not have abridged that process by weighing the balance too early, for to do so has created a reasonable apprehension of bias.
In fact, the judgments of 13 and 22 October have the same status as any other rulings on evidence or other interlocutory rulings made during the course of a final hearings: see, generally, Ritchie's Supreme Court Procedure NSW (looseleaf), at [40.9.2]. They are determinations that stand unless and until they are revisited. The reasoning for those two decisions is set out more fully than is normally the case for evidentiary rulings. In part, that is a consequence of the fact that the points were fully argued, and in part, it reflects my desire to avoid undue waste of time by identifying the line of questioning and the limit to the process of production of documents to which my reasoning led.
It appears to me that there is a logical or semantic difficulty with the defendants’ submissions on this point. They asserted that the matters that were the subject of the two rulings would be relevant to the exercise of the court's discretions under ss 135 and 138 the Evidence Act and under the Ridgeway principle (Ridgeway v R (1995) 184 CLR 19). They said that the exercise of those discretions requires the court to weigh in the balance evidence that will show that ASIC deliberately or recklessly acted unlawfully or improperly. They then submitted that the court should not have adjudicated, at an early stage, on the likely probative value of evidence not yet led, to issues not yet fully argued. The defendants' conclusion was put starkly in oral submissions (Transcript 1747.41-45):
"Then your Honour went further when asked to deal with the matter on a discretionary basis and determined at that time the balancing exercise without the evidence being in and without submissions being finally made on that evidence once it was in."
The problem it is that the very articulation of the argument assumes that when it comes to exercise its discretions, the court will have before it evidence relating to ASIC's conduct and state of mind. That implies a distinction between evidence that is admissible, on what is effectively a voir dire for the purpose of the ultimate decision of admissibility of the search warrant material, and evidence that is inadmissible for that purpose. The distinction implies, in turn, a process for the determination of the evidence that will be admissible for the purpose of the exercise of the discretions. That determination must necessarily take place before the question of admissibility of the search warrant material has been fully argued, and by a process that will prevent the inadmissible evidence from being adduced.
It seems to me that the defendants' argument is an argument against the court ever exercising its discretion to exclude evidence during the course of a voir dire, where the purpose of the presentation of evidence is to provide the factual basis for the court to exercise its discretion as to the admissibility of evidence at the hearing. That would deny any relevant utility to s 135 of the Evidence Act, notwithstanding that the evident purpose of that section is to permit the court to exclude evidence on grounds which include avoidance of undue waste of time. It would prevent the court from taking steps, when asked to do so, to keep the hearing within reasonable bounds.
Once it is accepted that s 135 is available to the court for the purpose of excluding evidence during the course of a voir dire designed to provide the factual grounds for the ultimate decision on admissibility, the defendants' submission on this point is reduced to an assertion that the court should not have intervened to exclude evidence of the state of mind of ASIC after December 2001, because such evidence is relevant and (in their view) an important part of their case that ASIC has acted deliberately or recklessly. Seen in this way, the submission is nothing more than an attempt to agitate again points on which their argument has been rejected on two occasions.
The court’s use of s 135 to limit the defendants' line of questioning of Ms Redfern in cross-examination, and the extension of the same reasoning to relieve ASIC from compliance with the 20th notice to produce, are interlocutory decisions rather than expressions of prejudgment on the ultimate issue of admissibility of the search warrant materials. The issue of admissibility of the search warrant materials remains at large, but it will not be considered by recourse to evidence as to ASIC's state of mind after December 2001. It is tolerably clear from the case law that distinguishes interlocutory judgment from prejudgment of the ultimate issue, that a fair-minded lay observer could not possibly form a reasonable apprehension of bias as to the ultimate issue, by virtue of the judge having made these interlocutory determinations.
Second objection - treatment of Ms Redfern's evidence
The defendants drew attention to some passages in my 22 October judgment (at paragraphs 9, 23, 24, 25 and 26), in which I referred to Ms Redfern's evidence, in paragraph 15 of her affidavit made on 1 October 2004, where she said that after she received the Brereton/Stack advice dated 7 December 2001:
"In light of counsel's advice, I took the view that this consent ensured that ASIC was entitled to use the documents in the civil proceedings then under contemplation."
The defendants pointed out that the cross-examination of Ms Redfern has not been completed. They said that the credibility of her evidence is under challenge. In those circumstances, they submitted, the court's observations in the passages of its 22 October judgment that I have listed amounted to the premature acceptance of a component of Ms Redfern's evidence, and disclosed a preconceived opinion as to the credit of a material witness. Therefore, they said, a fair-minded lay observer might reasonably apprehend from those passages that the court had made a firm decision that would prevent the judge from subsequently bring an impartial and unprejudiced mind to the resolution of the ultimate question about admissibility of the search warrant material.
I reject these submissions on three grounds, namely:
(a)The identified passages in my 22 October judgment, when considered in the context of the hearing of the applications to which my 13 October and 22 October judgments related, do not provide grounds for a reasonable apprehension of bias under the Johnson test;
(b)if Ms Redfern's evidence were rejected, there would be even stronger grounds for ruling, as I did in my 13 October and 22 October judgments, that evidence concerning ASIC's state of mind after December 2001 is of no material significance to the question of admissibility of the search warrant material; and
(c)if there is any doubt as to whether, in my 22 October judgment, I purported to resolve contested factual issues and make a determination as to the credit of a witness, I am in a position to remove that doubt and, by these reasons for judgment, I now do so.
I shall deal with each of these three matters in turn.
I turn to the first ground. I found the defendants' submissions on this point troubling, when I read them and heard them developed in argument on 26 October. The general concern that judicial officers of this court always have to avoid creating any ground for apprehending bias had been enhanced in this case, both by the intensity with which matters in issue had been contested, and by the defendants' reference to the risk of bias in another context (DS 12, paragraph 14). Therefore the need to avoid creating any apprehension of bias was very much on my mind when I prepared my 22 October judgment, and I was surprised and concerned that the defendants had found in it the basis for their application.
In my 22 October judgment (paragraph 23), I proceeded on the basis that it was appropriate to make factual determinations only to a limited extent, for the purpose of determining ASIC's application to be relieved from compliance with the 20th notice to produce. Although I did not expressly say so in the judgment, I had in mind not only the Court of Appeal's warning to trial judges about the general undesirability of supporting interlocutory evidentiary rulings by commenting on evidence (Kwan v Kang at [114]), but also the fact that it would be unacceptable, in interlocutory circumstances, to seek to resolve contested factual issues, let alone to make findings as to the credit of a witness – a fortiori, when the cross-examination of the witness had not been completed and submissions on contested facts had not been received. As far as I was aware on 22 October, I did neither of these things in my judgment. My understanding was that the particular sentence in paragraph 15 of Ms Redfern's affidavit was not controversial, as a statement of her belief in December 2001, after she received the Brereton/Stack advice (for convenience, I shall refer to this sentence, understood as referring to her state of mind in December 2001, as "the Para 15 sentence"). It was only when I read and listened to the defendants' submissions on 26 October that it became apparent to me that the defendants wish to challenge the Para 15 sentence, and not merely any inference from it that Ms Redfern continued to have the same state of mind at later times.
On the evening of 26 October, I reviewed the transcript relating to Ms Redfern's evidence and the applications by ASIC that had led to my rulings of 13 and 22 October. I identified the transcript records of the events that had in fact led me to the conclusion that the Para 15 sentence was not under challenge. As the case law shows, a judge's conduct may create a reasonable apprehension of bias where he or she acts in good faith but under a misapprehension as to the scope of matters appropriate to be decided by interlocutory judgment: Southern Equities and Kwan v Kang are examples. The correct question relates not to the judge's perception but to the perception of a fair-minded lay observer. Bearing that in mind, I formed the provisional view that there was a reasonable and plausible basis for my conclusion in what had transpired at the hearing, and that a fair-minded lay observer who took all relevant matters into account would not apprehend bias on the basis of my observations about the Para 15 sentence in my 22 October judgment.
I decided that the appropriate course would be to draw the attention of the parties to the relevant transcript references, and give them the opportunity to make further submissions, particularly bearing in mind the risk that in the limited time available to me, I may have overlooked something. I did so 10 a.m. on Wednesday 27 October (T 1770 - 1775). The parties each provided me with written submissions (AS 23 and DS 21). Having considered those submissions, I reached the conclusion that my provisional view was correct.
I shall set out below the aspects of what transpired at the hearing that formed the basis for my belief that the Para 15 sentence was not controversial, and that in my opinion remove any reasonable grounds for apprehending bias under the Johnson test. I disagree with the defendants' submission that the matters set out below rely on "careful construction of nuances arising from what was said", or that my conclusion on this point attributes to the fair-minded lay observer a degree of sophistication and close attention to fine details which is at odds with the proper approach to the test.
On 12 October senior counsel for the defendants asked the question to which ASIC objected (T 1375), and in response to intervention by me, he made it expressly clear that the question was intended to extend to advices received by ASIC in the period from 1 June 2001 to the present time, not merely to advices received prior to the commencement of the present proceeding on 12 December 2001. Submissions were then made on the objection. The focus of attention was whether it was permissible for the defendants to cross-examine as to ASIC's and Ms Redfern's states of mind in respect of the period after December 2001.
At T 1388.17 and following, senior counsel for the defendants drew attention to the Para 15 sentence, and at line 27 and following he said:
"If your Honour does not permit me to ask questions about this, your Honour will be left with the material that is in the Redfern affidavit."
The context in which that was said is evident from the surrounding transcript, and, in particular, lines 40 to 45 of T 1388. On a fair reading of the transcript, it can be seen that the focus of counsel's attention was the period after December 2001, and it was reasonable to infer, as I did, that the questions he wished to ask related not to Ms Redfern's state of mind on 7 and 12 December 2001, but to her continuing state of mind from and after January 2002. That inference is more directly supported by the later statement of senior counsel for the defendants at T 1430.2-5.
The defendants' supplementary submissions drew attention to three statements by their senior counsel during the course of his exchange with me at T 1387-1388. In my opinion, the reference by counsel (at T 1387.46-T 1388.2) to "the time of the Brereton advice" was, in its context, a reference to the post-December 2001 period, rather than the period between 7 and 12 December 2001. In my opinion, counsel's submission (at T 1388.9) that the court was being invited to proceed on a basis that may be false, related to the post-December 2001 period. The reference (at T 1386.38 and following) to the defendants being prevented from exploring ASIC's state of mind at earlier and later times seems to me to reinforce the view that I have taken.
At T 1389.16, I intervened to make a statement in which I said, on a certain hypothesis:
"… I cannot see how I would be troubled at all if the fact were that an advice contrary to Mr Brereton's advice was received by ASIC last week."
At lines 33 and following of T 1389, senior counsel for the defendants responded to my hypothesis, without conveying any intention to challenge the Para 15 sentence. In my opinion, a fair-minded lay observer, reading this exchange between bench and bar, in its context, would find nothing in it suggesting that the defendants wished to challenge the Para 15 sentence as an account of Ms Redfern's state of mind in the period from 7 to 12 December 2001.
At T 1392.29 and following (and also at T 1408.39 and T 1409.36), senior counsel for the defendants informed the court that the question to which ASIC had objected (a question intended to cover the period up to the present time) was relevant, inter alia, because it went to Ms Redfern's credit in the sense of what she had disclosed in her affidavit and what she had not. As the defendants have pointed out, there are two substantive paragraphs in Ms Redfern's affidavit of 1 October 2004. One of them (paragraph 7 of the affidavit) relates to her state of mind in October 2001, at a time when the effect of consent by the liquidators of One.Tel was apparently not taken into account, and the other (paragraph 15) relates to her state of mind after the Brereton/Stack advice had been given. In my opinion, in its context, counsel's statement that Ms Redfern's credibility was in issue would convey to a fair-minded lay observer that the defendants wished to challenge paragraph 7 of her affidavit, and also paragraph 15 to the extent that it might be taken as evidence of her state of mind after December 2001. The way in which the Para 15 sentence was handled in other submissions (referred to above and below) would lead the fair-minded lay observer to conclude that there was no challenge to paragraph 15 as a statement of Ms Redfern's state of mind as at 7 and 12 December 2001.
I do not accept the submissions by the defendants that counsel's estimate of the length of cross-examination of Ms Redfern, or the contents of any notice to produce, would have countermanded the impression created in other ways, that the Para 15 sentence was not under challenge.
The next relevant event was the publication of my 13 October judgment. At paragraph 31 of the judgment, I set out the Para 15 sentence. In paragraph 38 of the judgment, I noted the defendants' submission that the court would be invited by ASIC to infer, from the Para 15 sentence, that from the time of the advice given by Mr Brereton SC and Mr Stack until the present time, ASIC and its relevant officers had been of the belief that they were acting properly. I returned to that submission at paragraph 58 of the judgment, after I had reached the conclusion that the question under objection, and other questions about the state of mind of ASIC after December 2001, should be disallowed, saying:
"A corollary is that I reject any contention, were it to be made, that Ms Redfern's evidence in her affidavit warrants an inference as to the continuing corporate state of mind of ASIC. It is evidence going only to her state of mind, and by inference the corporate state of mind of ASIC, in the period to which it relates."
At paragraph 41 of the judgment, I expressed the opinion that it was unlikely, given the contents of the Brereton/Stack advice, that any evidence that ASIC had received contrary advice in 2002 or subsequently, or that it became aware through Ms Redfern of legal opinion contrary to the opinion of Mr Brereton SC and Mr Stack, would have any material significance.
In my opinion a fair-minded lay observer would infer from those passages that I had proceeded, in my 13 October judgment, on the basis of, or assuming the correctness of, the Para 15 sentence, as a matter that was not controversial.
On 14 October senior counsel for the defendants made application under s 136 of the Evidence Act, the gist of which was that the Para 15 sentence should be received in a manner which prevented it from being treated as evidence of Ms Redfern's state of mind after December 2001: see T 1429.13 and following. Counsel said (at line 43-45) that "there is likely to be an issue in the future about where we stand in evidentiary terms in that period beyond 12 December", and (at line 46 and following) that "it would be incumbent on ASIC to demonstrate to your Honour the state of mind that it had in the period thereafter, as it bears the onus". There was no suggestion made in that application that the Para 15 sentence, as a statement of Ms Redfern's state of mind in December 2001, was subject to a challenge. I expressed my conclusion on the s 136 application (T 1430.26 and following) by saying that in my view the Para 15 sentence related Ms Redfern's state of mind on either or both of 7 and 12 December 2001. Then senior counsel for the defendants said (T 1430 .42 and following):
"Why was concerned about the matter is because of the presumption of continuity that might be urged upon your Honour."
I regard what was said on the s 136 application as a matter of some significance. It would have been reasonable for a fair-minded lay observer, listening to what was said on the application, to have inferred that the defendants' concern about the Para 15 sentence was not about its effect as evidence of Ms Redfern's state of mind in December 2001, but was a concern about treating it as the basis for an inference about her state of mind at subsequent times.
Although the cross-examination of Ms Redfern was incomplete when I delivered my two judgments and it remains incomplete, some parts of what occurred in cross-examination prior to my 22 October judgment should be noted. On 14 October, senior counsel for the defendants asked Ms Redfern the following question (T 1490.32 and following), to which she eventually answered affirmatively (at line 47):
"Q. To the extent that you needed to make decisions about search warrant matters, you were heavily reliant on advice from counsel?"
Shortly afterwards, there was another question and answer (T 1491.23 and following):
"Q. Did you receive any other advices in relation to the use to which search warrant material could be put other than those disclosed in your affidavit and the advice of Mr Bathurst and Mr Payne of 5 December 2001 in the period up to the end of December 2001?
A. Did I, personally, receive any advice? No, other than those ones."The cross-examination then proceeded to other issues, and this particular subject matter had not been revisited when I delivered my 22 October judgment. Thus, when I came to deliver that judgment, Ms Redfern's evidence included the Para 15 sentence, reinforced in cross-examination by her evidence agreeing with the cross-examiner that she was heavily reliant on advice from counsel as to search warrant matters, and that in the period to the end of December 2001 she had no other advices than those disclosed in her affidavit and the advice by Mr Bathurst QC and Mr Payne. That is consistent with the inference, available to a fair-minded lay observer from the other matters to which I have referred, that the Para 15 sentence was uncontroversial.
The defendants drew my attention to other parts of the transcript (T 1374-5, T 1436-1530), and emphasised in particular T 1467.32-38 and T 1437-1447. At the former of these two specific references, Ms Redfern was accused of giving untruthful evidence with respect to the matters discussed at a meeting with counsel on 6 June 2001. A fair-minded lay observer would have seen this as related to Ms Redfern's state of mind in June 2001, well before any question arose as to the legal effect of the liquidators' consent. At the latter reference, there was cross-examination to suggest that Ms Redfern's state of mind was informed by the advice of Mr Bathurst QC and Mr Payne of 5 December 2001 and that she had deliberately omitted to refer to that advice in her affidavit. But it was not suggested that the Bathurst/Payne advice addressed the effect of the liquidators' consent, and so a fair-minded lay observer would have seen it as relating to her state of mind before she received the advice on the effect of the liquidators' consent given by Mr Brereton SC and Mr Stack. The other matters to which I have referred and will refer would have led the fair-minded lay observer to believe that there was no challenge to the Para 15 sentence.
On 19 October 2004, at T 1634.19 and following, during the course of the hearing of ASIC's application for relief from compliance with the 20th notice to produce, I posed what I thought was the nub of the matter that was exercising my mind, as follows:
"… [W]hat evidence that might be produced about conflicting legal advice in the period from January 2002 until now, conflicting with the Brereton advice, would have any impact on my decision of any significant kind?"
There was no submission that I should reformulate the issue to take into account that Ms Redfern's state of mind was not, after all, affected by the Brereton advice. Counsel addressed the question that I had posed at T 1637.9 and following. He put before the court number of hypotheses without any suggestion that the Para 15 sentence was under challenge.
In their supplementary written submissions on the application for disqualification, the defendants complained that neither the court nor counsel for ASIC had directly stated any assumption or understanding to the effect that the Para 15 sentence was not controversial. That is true. But the fact that no clarification was sought tends to support the proposition that no clarification was needed. Other uncontroversial factual matters set out in paragraph 24 of the 22 October judgment were not put to the defendants and have not been challenged.
My second ground is this. The defendants complain that my 22 October judgment proceeds on the basis that the Para 15 sentence is correct. But if the Para 15 sentence is incorrect, there is (if anything) a stronger basis for accepting the proposition upon which my 13 October and 22 October judgments are based, namely that evidence going to ASIC's state of mind after December 2001 would not be of any material significance. If the Para 15 judgment is incorrect, so that Ms Redfern did not believe in December 2001, after she received the Brereton/Stack advice, that ASIC was entitled to use to search warrant material for the purposes of the civil proceeding which ASIC commenced on 12 December, evidence that ASIC subsequently had confirmation of its knowledge of the impropriety or unlawfulness of its conduct in having commenced the proceeding would not add to the defendants' case in any significant way.
It follows that my reliance on the Para 15 sentence in my 22 October judgment was not necessary to my ruling, and I would have reached the same result if I had approached the matter on the basis that the Para 15 sentence was wrong. A fair-minded lay observer would realise, if he or she reflected on the matter, that acceptance of the Para 15 sentence was not necessary to my decision.
Thirdly, if (contrary to my views) the references in my 22 October judgment to the Para 15 sentence might lead a fair-minded lay observer to apprehend bias on my part, that apprehension is capable of being reversed by a correcting statement, in the circumstances of this case. This is a case where the problem complained of (if there is one) has arisen out of a genuine mistake made on reasonable grounds, as shown above. The authorities show that in such a case, a correcting statement which addresses the mistake will remove the basis for apprehension of bias: see, especially, Kwan v Kang at [88] and [102]. As I have made clear, I had no intention in publishing my 22 October judgment to make a finding on any contested issue of fact or to take any position with respect to the credibility of Ms Redfern's evidence, in circumstances where acceptance of the Para 15 sentence was not necessary to my decision. In fact, not having heard all the relevant evidence or any submissions on the matter, I have not formed any view as to Ms Redfern's credit.
Third objection - particular passages in the 22 October judgment
The defendants have drawn particular attention to statements made in paragraphs 23, 24 and 25 of my 22 October judgment. I believe their submissions misunderstand those passages in the judgment. Given that this has occurred, it is appropriate for me to make a clarifying statement now, to remove any possibility of doubt.
Of course, a reasonable apprehension of bias may arise from the meaning conveyed by the words that a judge has used, even though the judge did not intend to convey that meaning. The issue is not about the judge's intention but about the impression created by his or her words and conduct in the mind of a fair-minded lay observer. However, the fair-minded lay observer should be taken to have observed the course of the hearing up to the pronouncement of the interlocutory judgment, to have read the interlocutory judgment as a whole without taking particular passages out of context, and to have taken into account any subsequent correcting or clarifying statement to the extent that it is appropriate to do so.
The 22 October judgment was concerned with whether ASIC should be required to produce documents evidencing its deliberations and communications concerning the preparation and execution of a formal deed of consent by the liquidators of One.Tel to ASIC's copying and use of the search warrant material. The deed was dated 15 October 2004, and the documents in question would in all probability have been created not long before that time. ASIC contended, inter alia, that the production of such documents would be of so little utility that the court should exercise its discretion against requiring it to comply with the notice. ASIC submitted that to require production of those documents would be inconsistent with my 13 October judgment, in which I had held that a question in cross-examination relating to the witness's state of mind after December 2001 would be of no material significance to my eventual decision on the admissibility of the search warrant material.
The defendants contended that my 13 October judgment was distinguishable on several grounds, one of which was that it had been concerned with statutory discretions, whereas in the defendants' submission there was also a common law discretion to which evidence concerning ASIC's state of mind after December 2001 would be material.
In paragraphs 11-22 of the judgment I analysed the case law to which senior counsel for the defendants had taken me concerning the common law discretion, which I came to refer to as "the Ridgeway principle". The question to be determined was whether reliance on the Ridgeway principle had any impact on my previous ruling concerning the materiality of post-December 2001 evidence. My decision, expressed in paragraphs 23-27 of my 22 October judgment, was that it did not.
When I referred, in paragraph 23 of the judgment, to "the facts of this case", I was plainly referring to the matters that I then set out in paragraph 24, which refers to the importance of the period up to December 2001 and explains why evidence relating to the period after December 2001 would not be significant. I said in paragraph 23 that the circumstances were well outside the scope of the Ridgeway principle, an observation developed in paragraph 25. The point made was that any evidence suggesting a change in ASIC's state of mind in the period leading up to the deed of consent of 15 October 2004, or, for that matter, in any period after December 2001, would not be sufficient to attract the Ridgeway principle. When I said, in paragraph 25, that "any such evidence would not outweigh the public interest in using ASIC's evidence (if otherwise admissible) for the purpose of civil penalty proceedings", I had in mind evidence with respect to the post-December 2001 period, exemplified in the previous sentence, as my use of the word "such" makes plain.
It would have been gratuitous and unjustifiable to express any view as to the application of the Ridgeway principle to the admissible evidence concerning the ultimate evidentiary question, evidence which was at that stage, and remains, incomplete. I did not intend to do so, and I believe that on a fair reading of my 22 October judgment, there was no basis in any part of the text for a hypothetical lay observer to form a reasonable apprehension of bias. To the extent that, contrary to my view, any part of my 22 October judgment might be read as conveying the idea that I regarded the admissible evidence for the purposes of the ultimate evidentiary question to take this case outside the Ridgeway principle, or that I had formed any opinion as to the outcome of the balancing exercise that I will be asked to undertake for the purpose of ruling on the ultimate evidentiary question, I say now that it was not my intention to convey any such idea or opinion, and that I do not hold any such idea or opinion. The relevant part of the reasoning in my 22 October judgment was intended to be confined to the question whether evidence concerning the period after December 2001 would attract the Ridgeway principle.
My conclusion, that there is no basis in the 22 October judgment for a reasonable apprehension of bias, is supported by other contextual matters. If the transcript of argument on the applications that led to my 13 October and 22 October judgments is reviewed, what emerges is that the question of admissibility of the search warrant material, having regard to the admissible evidence going to the exercise of my relevant discretions on that ultimate issue, is left entirely at large. That is expressly made plain in my dialogue with senior counsel for ASIC concerning the 19th notice to produce, on 19 October 2004. I asked counsel (T 1661.19 and following):
"Isn’t it quite material to the search warrant issue to know when it was that ASIC decided to use the search warrant materials for civil purposes and, therefore, when it was that ASIC decided to conduct a civil investigation?"
Later (at T 1661.35 and following) I said:
"I would have thought if on 31 May [2001] ASIC had formed the view that it intended to use the search warrant materials for the purposes of a civil investigation, that would be just the sort of evidence Mr Williams [senior counsel for the defendants] would want to see to show that ASIC had always intended to do something which was improper."
In my reasons for judgment on ASIC's unsuccessful application for relief from compliance with the 19th notice to produce, published in chambers at the same time as publication of the 22 October judgment, I said:
"[6] … The documents (if any) that would be produced in answer to paragraph 2 of the 19th notice to produce would be communications between ASIC and the DPP about the details of the investigation and its future anticipated direction (civil or criminal or both), at the first assessment stage. In my opinion such documents, if they exist, may well be relevant to the discretionary issues that the defendants seek to raise concerning the execution of the search warrant and the use of the search warrant material. They might tend to identify the time at which ASIC decided to pursue a civil investigation, and hence the time at which, and the circumstances in which, ASIC decided to use the search warrant material for civil purposes."
I then made similar points with respect to paragraphs 3 and 4 of the 19th notice to produce.
My oral remarks in the course of ASIC's application concerning the 19th notice to produce, and the observations in my judgment on that application to which I have referred, make it very plain that at the time of publication of the 22 October judgment I regarded the ultimate question of admissibility of the search warrant material as an open one.
Fourth objection - history of the proceeding as regards the search warrant issues
The defendants submitted that the impression of apprehension of bias on the part of a fair-minded lay observer arising from my 22 October judgment is strengthened by putting it in the context of the history of the defendants' application in relation to the search warrant issue. They contended that such an observer might reasonably apprehend that the 22 October judgment was part of the course of events directed to bring an early end to an application which the court had, from an early stage in the proceeding, prejudged as having no prospect of success.
The "course of events" to which the defendants refer did not give rise to any objection when the relevant events occurred. The submission seems to be that when they are revisited in light of the 22 October judgment, they have the effect of strengthening the conclusion that there are reasonable grounds for apprehending bias.
That course of events is summarised in my 13 October judgment. ASIC contended that any possible irregularity concerning the use of the search warrant material in the period from 1 June 2001 until 7 December 2001, when the liquidators first executed an instrument of consent, was cured by that consent, and therefore it was pointless to explore, in evidence, the question whether ASIC had used the search warrant material without authority during that period. I formed the view, responding to a proposal by ASIC, that it would be conducive to the efficient conduct of the trial to hear and determine some legal questions as to ASIC's use of the search warrant material for civil purposes and the effect of the liquidators' consent, as "preliminary issues" within the context of the wider hearing. Rather than becoming res judicata between the parties, my determination of the preliminary issues would constitute a statement of reasons to be invoked when I subsequently dealt with relevance objections to the admissibility of ASIC's evidence. In this sense, the determination of the preliminary issues would become operative only when rulings of admissibility were subsequently made by course to the determination. After attempts by the parties to formulate preliminary issues for determination had apparently broken down, I thought of a way of formulating satisfactory questions and placed that formulation before the parties for further consideration. There was nothing unusual in my doing so.
Having heard and considered argument on the preliminary issue, and in an effort to keep the trial moving, I published summary reasons for judgment on the preliminary issue on 17 September 2004, with the intention of publishing a fuller judgment when it had been prepared. Then the hearing took a different course, raising new issues about the execution of the search warrants, and on 22 September, in response to submissions by ASIC that I should do so, I withdrew my summary judgment and some evidentiary rulings I had subsequently made on the basis of it, publishing reasons for that decision on 24 September.
I said in my judgment of 24 September that in consequence of withdrawal of the summary judgment on the preliminary issues:
"I intend to treat my summary reasons the judgment as having no more significance than the expression of an indicative view, of the kind that a court occasionally proffers during the course of argument. It follows that the questions of law that were argued at the hearing of the preliminary issues remain open to be revisited by counsel and also by me. However, I am sure that counsel will bear in mind, when the legal and discretionary issues of admissibility come to be considered, that there has already been extensive argument of some points, in the context of the preliminary issues, which need not be repeated."
That remains the position. The history records an attempt to promote the just, quick and cheap resolution of the issues, which unhappily failed, because of the subsequent progress of cross-examination at the hearing. But it provides no basis for a reasonable apprehension of bias. The fact that rulings were subsequently made in favour of ASIC on other matters arising in connection with the search warrant issues has no bearing on that history of events.
Finally, the defendants complained about paragraph 49 of my 13 October judgment, coupled with paragraphs 31 and 32 of my 22 October judgment. In the former judgment, I found it appropriate to take into account the additional time and cost that would be consumed if the new line of questioning implied by the question under objection were permitted, and I said:
"Doing the best I can, my estimate is that the additional time that would be taken to pursue the line of questioning, as I have defined it, in Ms Redfern's cross-examination would run to some days, at least. There would be a possibility, the likelihood of which I cannot assess, that ASIC might wish to adduce some additional evidence in chief with respect to the subject matter of the line of questioning, and that could lead to some additional cross-examination. It therefore seems to me that a significant amount of time and cost would be taken up if I were to allow the question and the line of questioning."
After I published that judgment, senior counsel for the defendants informed me that in his estimate, the additional cross-examination of Ms Redfern would have taken hours rather than days. In their submissions on the disqualification application, the defendants complained that I expressed my estimate without seeking the view of their counsel. But I had heard full argument on ASIC's objection to the question, in circumstances where a fair-minded lay observer would conclude that the parties had ample opportunity to make submissions on all relevant discretionary matters. The time had come to me to make a decision, and I did so, as I said, doing the best I could.
The defendants complained that in my 22 October judgment, I "discounted" their counsel's estimate by reference to "the speculative possibility of ASIC having not properly complied with the 14th notice to produce". It seems to me that a fair-minded lay observer would regard this submission as an attempt to re-contest a point upon which the defendants were unsuccessful, having nothing to do with any reasonable apprehension of bias.
In my opinion, there is no basis in any of this material, or in all of it considered together, for a fair-minded lay observer to be concerned that the court has formed a firm view that the defendants' case on the ultimate evidentiary question has no prospect of success.
Conclusion
In opening his address in response to the application for disqualification, senior counsel for ASIC submitted that nothing that had occurred to provide any basis for any apprehension of bias, much less a reasonable basis. In my view, that submission is correct, for the reasons I have given.
The hearing is complex, and many interlocutory points have arisen for determination along the way. It has taken a course that I did not expect, and evidently ASIC did not expect, because of the defendants' development of the search warrant issues. ASIC's initial timetable contemplated that evidentiary questions would be resolved within the first two weeks of the hearing, and that its case would have been fully presented in a little over three months, and before the court's summer vacation commences. At this stage, after eight weeks of hearing, resolution of the evidentiary issues still seems to be some weeks away, and the "substantive" evidence has not begun. All these matters naturally create stresses in the hearing process and pressure on all of those who are participating in it. It is important for all concerned that any sense of impatience or frustration that these matters may occasionally engender should not be allowed to become a distraction from rational and systematic exploration and resolution of the issues to be determined.
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APPENDIX
JUDGMENT (Application for relief from compliance with 20th notice to produce
HIS HONOUR: On about 18 October 2004, ASIC gave the defendants a copy of a deed dated 15 October 2004. The deed was between One.Tel Ltd, its Australian subsidiaries, and ASIC, and its substance was that One.Tel and its subsidiaries consented ASIC's use of documents first obtained upon the execution of a search warrant at One.Tel's premises. It was executed behalf of One.Tel and its subsidiaries by their liquidators, Messrs Sherman and Walker. On 19 October ASIC tendered the deed in evidence and it became Exhibit P9.
The defendants' 20th notice to produce, dated 18 October 2004 and issued after the defendants received their copy of the deed, requires ASIC to produce all documents evidencing its deliberations and communications concerning preparation of and entry into Exhibit P9.
On 19 October ASIC made an application under Part 36 Rule 16 of the Supreme Court Rules, for an order that it be relieved from answering the 20th notice to produce. Part 36 Rule 16 allows a party to any proceedings to serve a notice to produce on another party requiring production of a document in the possession, custody or power of the party served, for the purpose of evidence in the proceedings. The Rule says that the party served must, "unless the Court otherwise orders", produce the document or thing in accordance with the notice, without the need for any subpoena for production. ASIC's application invites the court to "otherwise order".
ASIC contends that:
the documents required to be produced under the notice do not have any relevance to any issue in the proceedings;
if, contrary to the first submission, the documents have some relevance, their production would be of so little utility that the court should exercise its discretion against the issue of the notice;
the requirement for production of documents under the notice is inconsistent with my decision and reasons for judgment made on 13 October 2004;
having regard to the course that the hearing has taken and the time consumed in responding to notices to produce, the court ought not to require compliance with any further notices to produce, including the present one, unless the documents sought are clearly relevant and necessary in the defendants’ interests; and
compliance with the notice to produce would involve production of many documents for which claims for privilege would be made, in circumstances imposing a very great burden on the plaintiff to assemble, identify, classify and describe the documents and to pursue appropriate privilege claims, in a fashion not warranted in the context of this litigation.
I have decided to make the order sought by ASIC, on ground (2) above, taking into account grounds (3) and (5).
The discretion given to the court by Part 36 Rule 16 to "otherwise order" is, in terms, unqualified. Senior counsel for the defendants suggested that the principles to be applied in deciding whether to relieve a party from compliance with a notice to produce are the same as the principles applied in determining whether to set aside a subpoena. But he did not contend that any of the grounds relied upon by ASIC was an irrelevant consideration outside the scope of the court's discretion. I shall proceed on the basis (which derives some support from the case law on setting aside subpoenas: see Ritchie's Supreme Court Procedure NSW, looseleaf, Volume 1, [37.4.2] - [37.4.4]) that the grounds relied upon by senior counsel for ASIC are available grounds, the critical question being whether any of them has been made out.
ASIC proposes to read affidavits by Paul Carter, a forensic accountant, and tender his reports and the exhibits to his reports and affidavits, and it will also tender its tender bundle of documents. The defendants will object to this evidence on several grounds, some of which have been referred to as the "search warrant issues". Essentially, the defendants will say that in the course of execution of the search warrants that were executed on 1 June 2001, electronic records were unlawfully and improperly copied; and they will also say that ASIC unlawfully and improperly used documents obtained through the execution of the search warrants for the purposes of its civil investigation and the present civil proceeding, and that is has unlawfully and improperly retained those documents.
My reasons for judgment delivered on 13 October 2004 (ASIC v Rich [2004] NSWSC 951) dealt with whether I should disallow a question directed by senior counsel for the defendants to ASIC's witness, Ms Redfern, on 12 October. Ms Redfern had sworn an affidavit to which were exhibited certain advices by counsel on the use of material obtained by execution of a search warrant. One of the advices, by Mr Brereton SC and Mr Stack, expressed the opinion that a properly informed owner of material obtained by the execution of a warrant under the Crimes Act 1914 (Cth) could consent to that material being used in a civil proceeding commenced by ASIC, and where such consent had been obtained, ASIC would be entitled to use that the material in respect of a civil proceeding. On the day that this advice was given, the liquidators of One.Tel signed an instrument of consent by which they consented to ASIC’s use of the search warrant material obtained from One.Tel's premises, for its investigation and the present civil proceeding. Ms Redfern said in her affidavit that in light of counsel's advice, she took the view that the liquidators' consent ensured that ASIC was entitled to use the search warrant material in present civil proceeding (which was then in contemplation, and was commenced five days later).
The question to which objection was taken asked the witness whether she thought it important to refer the court to all advices ASIC had received in relation to the use of search warrants in the period from 1 June 2001 to the present time. I decided to disallow the question, and other questions in the same line of questioning, on the ground that, given the contents of the Brereton/Stack advice, any contrary advice received by ASIC in 2002 or subsequently (after it had commenced the present proceeding in the belief that the liquidators' consent ensured that it could use the search warrant material in the proceeding) would not have any material significance to my decision on the admissibility of ASIC's evidence. I held that evidence of such marginal relevance should not be allowed, bearing in mind that a significant amount of time and cost would be taken up if I were to permit the question and the line of questioning. I expressed that conclusion in response to a submission by senior counsel for the defendants that questions going to ASIC's state of mind after December 2001 would be relevant to the exercise of the court's discretions with respect to the admissibility of ASIC's evidence under ss 135 and 138 of the Evidence Act.
In answer to ASIC's application to be relieved from producing documents in response to the 20th notice to produce, senior counsel for the defendants submitted that documents produced in response to the notice would be relevant to ASIC's state of mind regarding use of the search warrant material in the period leading up to the execution of the deed on 15 October 2004. That submission implies that ASIC's state of mind after December 2001 is relevant and material to the decision I am to make on the admissibility of ASIC's evidence, notwithstanding my judgment of 13 October 2004. But counsel submitted that the notice was not inconsistent with my findings of 13 October 2004 for three reasons.
First, he submitted that, while my judgment of 13 October 2004 considered the relevance and materiality of evidence about ASIC's state of mind after December 2001 to an argument objecting to ASIC's tender of evidence under ss 135 and 138, in fact the defendants will also object to ASIC's tender of evidence under the common law established in a line of High Court cases including R v Ireland (1970) 126 CLR 321, Bunning v Cross (1978) 141 CLR 54, Pollard v R (1992) 176 CLR 177 and Ridgeway v R (1995) 184 CLR 19. He said that the common law cases establish an "administration of justice" principle that differs from the statutory discretions because it does not focus on the time of obtaining the evidence.
The history of the common law principle was traced by Brennan CJ in Nicholas v R (1998) 193 CLR 173, at 193-197. He described the principle (at 194) as a "public policy discretion to exclude evidence that is otherwise relevant and admissible".
In the first of the cases cited by Brennan CJ to trace the development of the principle, R v Ireland, evidence was admitted that had been illegally obtained (evidence of a police interrogation after the suspect had refused to answer further questions, and evidence of photographs and a medical examination made without consent). Barwick CJ said (at 335) said that the trial judge had a discretion to reject the evidence, in the exercise which "competing public requirements" were to be considered and weighed against each other:
"On the one hand there is the public need to bring to conviction those who commit criminal offences. On the other hand there is the public interest in the protection of the individual from unlawful and unfair treatment. Convictions obtained by the aid of unlawful or unfair acts may be obtained at too high a price."
In later cases, the High Court explained more fully and in different contexts the nature and content of this balancing process. There was a shift of emphasis in the description of the second balancing element, from Barwick CJ's simple reference to unlawful and unfair treatment, to a broader consideration in which unfairness became only a factor, and emphasis was placed on the undesirability of the court encouraging unlawful conduct, especially having regard to the nature of the unlawful conduct and its effect on individual liberties. Thus, in Bunning v Cross, another case about the admissibility of unlawfully obtained evidence, Stephen and Aickin J referred (at 74-5) to the "apparent conflict between the desirable goal of bringing to conviction the wrongdoer and the undesirable effect of curial approval, or even encouragement, being given to the unlawful conduct of those whose task is to enforce the law." Their Honours said (at 77-8):
"Were there to occur wholesale and deliberate disregard of these safeguards its toleration by the courts would result in the effective abrogation of the legislature's safeguards of individual liberties, subordinating it to the executive arm. This would not be excusable however desirable might be the immediate end in view, that of convicting the guilty … [I]t may be quite inappropriate to treat isolated and merely accidental non-compliance with statutory safeguards as leading to the inadmissibility of the resultant evidence when of their very nature they involve no overt defiance of the legislature or calculated disregard of the common law and when the reception of the evidence thus provided does not demean the court as a tribunal whose concern is in upholding the law."
In that case evidence of the results of a breathalyser test was obtained without proper compliance with the statutory requirements by mistake, rather than from deliberate or reckless disregard of the law, and the illegality did not affect the cogency of the evidence. It was held at the evidence of the breathalyser test was admissible.
Perhaps the most comprehensive statement of the principle was given by Deane J in Pollard v R, another case about the admissibility of unlawfully obtained evidence. His Honour said (at 202-3), after referring to the observations of Stephen and Aickin JJ in Bunning v Cross:
"As that passage makes plain, the principal considerations of 'high public policy' which favour exclusion of evidence procured by unlawful conduct on the part of investigating police transcend any question of unfairness to the particular accused. In their forefront is the threat which calculated disregard of the law by those empowered to enforce it represents to the legal structure of our society and the integrity of the administration of criminal justice. It is the duty of courts to be vigilant to ensure that unlawful conduct on the part of the police is not encouraged by an appearance of judicial acquiescence. In some circumstances, the discharge of the duty requires the discretionary exclusion, in the public interest, of evidence obtained by such unlawful conduct. In part, this is necessary to prevent statements of judicial disapproval appearing hollow and insincere in a context where curial advantage is seen to be obtained from the unlawful conduct. In part it is necessary to ensure that the courts are not themselves demeaned by the uncontrolled use of the fruits of illegality in the judicial process."
Ridgeway v R was a different kind of case. The unlawfulness did not arise out of collection of evidence, but by the commission of a crime (unlawful importation of drugs) by law enforcement officers in order to establish an element of an offence alleged against the accused (unlawful possession of a prohibited import). Therefore the issue was not whether to exclude a certain component of the evidence against the accused, because it was illegally obtained, but was whether to shut the prosecution out from proving guilt at all: see Mason CJ, Deane and Dawson JJ at 38; Brennan J at 49, 52; Gaudron J at 74. Nevertheless the High Court applied the common law principle to quash the conviction obtained by proof of the unlawful importation, seeing no relevant distinction between the two kinds of cases (see esp at 64, per Toohey J). The legislature endeavoured to reverse the effect of Ridgeway by amendments to the Crimes Act, which were held to be constitutionally valid in Nicholas v R.
In Ridgeway, Mason CJ, Deane and Dawson JJ (at 31) said that the principle was based on the inherent or implied powers of the courts to protect the integrity of their processes (see also at 60-61, per Toohey J). This suggests that the principle is not merely a rule of evidence, and therefore would not be subsumed by the statutory reforms effected in the Evidence Act. Although it was not necessary for their decision, their Honours expressed the opinion (at 36) that the principle extends to circumstances where a criminal offence has been induced by improper though not unlawful conduct on the part of the authorities. They added (at 38):
"The weight to be given to the principal considerations of public policy favouring the exclusion of the evidence - the public interest in maintaining the integrity of the courts and in ensuring the observance of the law and minimum standards of propriety by those entrusted with powers of law enforcement - will vary according to other factors of which the most important will ordinarily be the nature, the seriousness and the effect of the illegal or improper conduct engaged in by the law enforcement officers and whether such conduct is encouraged or tolerated by those in higher authority in the police force or, in the case of illegal conduct, by those responsible for the institution of criminal proceedings."
In Nicholas, Brennan CJ (at 196) referred to balancing the public interest in bringing the offender to conviction against the public interest in upholding the law when law enforcement officers have deliberately flouted it and said that to admit evidence of conduct "in flagrant and deliberate breach of the Parliament's statutory command" so as to confer a "curial advantage" on law enforcement officers would "demean the court as a tribunal whose concern is in upholding the law" (citing Bunning v Cross at 78). But he insisted that the principle was not a device calculated to protect the reputation of the courts, and continued (at 197):
"It simply reflects the court's duty to ensure that it does not exercise its discretionary powers to achieve an objective which flagrant and deliberate breaches of the law are designed to achieve, especially when the breaches are committed by agents of the Executive Government whose duty is to uphold the law. By weighing the competing public interest factors, the court seeks to strike the right balance between them. It is by a proper balancing of the interests served by the general criminal law - the law which governs the conduct of law enforcement officers as well as the general public - against the interests served by the law relating to the admission of evidence of guilt in a criminal prosecution that the integrity of the court's processes are preserved and the repute of the courts as the administrators of criminal justice is protected."
There are some unresolved issues about the common law principle. One is whether it has any application outside the criminal law, or to the unlawful or improper activities of persons other than law enforcement officers. The extract from Deane J's judgment in Pollard speaks in terms of the police, and Brennan CJ's observations in Nicholas refer to the criminal law. But other cases, such as Jago v The District Court of New South Wales (1989) 168 CLR 23, seem to have in mind an abuse of process principle capable of applying to civil proceedings, and in Ridgeway the joint judgment speaks of "impropriety", evidently going beyond the criminal sphere.
Another question is whether the principle continues to exist as an independent principle about the administration of justice, outside the statutory discretions as to admissibility contained in ss 135-138 of Evidence Act, or should now be regarded as merely illustrative of the discretionary considerations arising under the statute. I have identified observations in the High Court cases suggesting that the principle is more than a rule of evidence, with the consequence that it would survive independently of the Evidence Act.
A third issue relates to the nature of the unlawful or improper conduct that would be sufficient to outweigh the public interest in securing convictions of the guilty. Some of the observations in the High Court appear to set the threshold at a high level: for example, in the passages quoted above, the reference in Bunning v Cross to "overt defiance or calculated disregard" of the law, and Brennan CJ's reference in Nicholas to "deliberate flouting" and "flagrant and deliberate" contraventions. It seems to me plausible to argue that, in the civil context where there is nothing as strong as the public interest in securing convictions of the guilty, conduct falling short of deliberate and flagrant contraventions might be sufficiently serious to warrant the exclusion of evidence obtained by virtue of that conduct. On the other hand, Bunning v Cross establishes that accidental non-compliance with the law in the course of obtaining evidence will not normally warrant rejection of the evidence. I am inclined to think that other "non-blameworthy" unlawfulness would be in the same category as accidental non-compliance, because there would be nothing in such conduct to compromise or demean the court if it were to decide to admit the evidence.
In the present case, however, it is unnecessary resolve any of these three questions. In my opinion, the facts of this case, to the limited extent that it is open to me to determine them for the purposes of this application, are well outside the scope of the principle - assuming that it is an independent principle capable of applying to ASIC in civil circumstances, and whatever the precise formulation of the requisite conduct may be.
The search warrant materials were obtained on 1 June 2001. ASIC commenced its investigation, extending to possible contraventions of purely civil provisions, shortly after that time, and used the search warrant materials for the purposes of its investigation over the ensuing months. It supplied search warrant materials to Mr Carter, who was at the time assisting the investigation. Through the initiative of Ms Redfern, written advice from Mr Brereton SC and Mr Stack was obtained and given in final form on 7 December 2001. The advice addressed the effect that the liquidators' consent to use would have, and their consent was given on the same day, and a few days after that, the present proceeding was commenced. Ms Redfern says in her affidavit that in light of counsels' advice, she took the view that the liquidators' consent ensured that ASIC was entitled to use the documents in the civil proceedings then under contemplation. Mr Carter was retained early in 2002 to prepare an expert's report for the purposes of the proceeding and was given access to the search warrant materials that ASIC had been using over a period of months. The important time, for the purposes of admissibility of ASIC's evidence, is the time of use the search warrant material for the civil investigation and in respect of the decision to commence this proceeding, as I pointed out in paragraph 44 of my reasons for judgment of 13 October 2004. If, for example, ASIC subsequently received one or several advices categorically disagreeing with the Brereton/Stack advice, that would only serve to establish ASIC was aware that there were legal opinions inconsistent with the opinion in reliance on which it had decided to act.
My view is that any evidence (if it were to exist) suggesting a change to ASIC's state of mind in the period leading up to the deed of consent of 15 October 2004 - for example (to put it at a high level in the defendants' favour) evidence that ASIC had come to believe on the basis of subsequent advice that the consent of 7 December 2001 was ineffective to authorise continued use of the search warrant material - would not be sufficient to attract the Ridgeway principle. Any such evidence would not outweigh the public interest in using ASIC's evidence (if otherwise admissible) for the purpose of civil penalty proceedings, bearing in mind Ms Redfern’s evidence that when ASIC commenced the civil proceeding in December 2001, she believed in reliance on the Brereton/Stack advice that ASIC was entitled to use the documents for the civil purpose.
The position might have been different if there were no foundation for Ms Redfern's belief in December 2001 as to ASIC's entitlement to use the search warrant material. It is not appropriate for me, pending further submissions, to purport to determine the legal effect of the liquidators' consent of 7 December 2001. But it is appropriate for me to say, and I do say, that in my opinion the Brereton/Stack advice is plausible and presents at least an arguable point of view.
While evidence of ASIC's state of mind leading up to the execution of the deed of 15 October 2004 may have some marginal relevance to the Ridgeway question, that evidence cannot be regarded as having such material significance as would justify requiring ASIC to go to the effort of producing the documents sought in the 20th notice to produce, and classifying them and making the inevitable privilege claims which would be made in respect of some (and probably many) of those documents.
Secondly, the defendants submit that, by obtaining a new consent on 15 October 2004, ASIC has made its state of mind about the propriety of use of the search warrant material until that time a matter of relevance and significance to the question of admissibility. I reject this submission. I assume that the new deed of consent was prepared and executed at the instigation of ASIC. But its creation does not alter the analysis that led to my conclusions of 13 October 2004.
In DS 7, the defendants raised some new contentions about the admissibility of the search warrant material, relating to allegedly unlawful copying of electronic information. The new deed recites the defendants' allegations including the new allegations about copying. By its terms, the liquidators on behalf of the One.Tel companies, confirm and ratify the earlier consent dated 7 December 2001, and consent in apparently comprehensive terms to matters including the seizure and copying of materials in June 2001. On its face, the new deed purports to reinforce the earlier consent, and to do so in more comprehensive terms than the earlier consent. In my opinion evidence about the thought processes that led to the execution of new deed will not assist me to make my decision about admissibility of ASIC's evidence.
The execution of the deed of 15 October 2004 is consistent with ASIC having decided, after the defendants had raised the search warrant issues at the trial, and particularly after the question of unlawful copying was raised in DS 7, that the efficacy of the liquidators' consent should be put beyond doubt by the execution of a further deed. The tendering of the deed is consistent with my decision, in my reasons to judgment of 13 October 2004, that evidence going to ASIC's state of mind after December 2001 would not generally be of material significance sufficient to justify the time that would be taken to hear it.
Thirdly, senior counsel for the defendants notes that in paragraph 49 of my reasons for judgment of 13 October 2004, I said that my estimate of the additional time that would be taken to pursue a line of questioning in cross-examination of Ms Redfern about ASIC's state of mind after December 2001 would be measured in days, at least, and there would be a possibility that ASIC might wish to adduce some additional evidence on the issue. Senior counsel for the defendants informed the court that the additional cross-examination of Ms Redfern, to explore her state of mind and therefore the state of mind of ASIC from December 2001 to the present time (including her state of mind at the time of and prior to the execution of the new deed) would be measured in hours rather than days.
Senior counsel for the defendants has much experience in such matters, and he is in a better position than anyone else to make an estimate. But on the other hand, the estimate is expressly made on the assumption that there has been full production of documents pursuant to the 14th notice to produce, which seeks production of all advices and memoranda on the search warrant issue. If, in the witness box, Ms Redfern recalls some document that has not been produced, there will have to be a further process of production and additional questioning. Without wishing to condone anything other than full compliance by ASIC with its obligations under a notice to produce, in my opinion it would be understandable if some piece of advice or document relating to search warrants in connection with any investigation by ASIC over a period of three years were overlooked.
All things considered, I would have a concern, if I allowed the 20th of notice to produce and then permitted questioning in relation to ASIC's state of mind after December 2001, that the amount of time taken up by the entire process (including any additional evidence that ASIC may seek to introduce) would be much more substantial than a period of hours.
These reasons have led me to the conclusion that ASIC has made out its case for an order relieving it of the obligation to comply with the 20th notice to produce. I have also concluded that none of the matters referred to by senior counsel for the defendants justifies any qualification to the reasoning set out in my judgment of 13 October 2004.
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LAST UPDATED: 03/11/2004
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