Bates, Michael John t/as Riot Wetsuits v Omareef Pty Ltd

[1998] FCA 1472

FEDERAL COURT OF AUSTRALIA

PRACTICE AND PROCEDURE – appeal – challenge to trial judge’s findings of fact as to period of agreement for manufacture and supply by appellant of wetsuits – constraint on appellate court’s interference with such factual findings – bias – reasonable apprehension – relationship between trial judge and mediator – conversation between mediator and trial judge to effect that mediation had not succeeded, but without discussion otherwise in relation to case or mediation – trial judge and senior counsel for respondents having once had chambers as barristers on same floor, and having dined at same table in bar dining room – all these matters disclosed by trial judge at commencement of case.

Abalos v Australian Postal Commission (1990) 171 CLR 167, applied
Devries v Australian National Railways Commission (1993) 177 CLR 472, applied
The King v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256, referred to
The Queen v Watson; Ex parte Armstrong (1976) 136 CLR 248, applied
Livesey v New South Wales Bar Association (1983) 151 CLR 288, applied
Re JRL; Ex parte CJL (1986) 161 CLR 342, applied
Vakauta v Kelly (1989) 167 CLR 568, applied
Duff v The Queen (1979) 39 FLR 315, referred to

MICHAEL JOHN BATES trading as RIOT WETSUITS v OMAREEF PTY LTD & ORS

NG 917 of 1997

LINDGREN, FINKELSTEIN AND WEINBERG JJ
SYDNEY
20 NOVEMBER 1998

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 917  of   1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

MICHAEL JOHN BATES trading as RIOT WETSUITS
APPELLANT

AND:

OMAREEF PTY LTD (ACN 004 010 806)
FIRST RESPONDENT

QUIKSILVER GARMENTS PTY LTD (ACN 005 575 548)
SECOND RESPONDENT

JOHN ERIC HOWITT
THIRD RESPONDENT

BRUCE ERNEST RAYMOND
FOURTH RESPONDENT

THOMAS VICTOR CARROLL
FIFTH RESPONDENT

RODERICK ANTHONY BROOKS
SIXTH RESPONDENT

ALISTAIR ZORICA
SEVENTH RESPONDENT

BRUCE ANDREW EDWARDS
EIGHTH RESPONDENT

JUDGES:

LINDGREN, FINKELSTEIN, WEINBERG JJ

DATE OF ORDER:

20 NOVEMBER 1998

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

2. Leave to appeal from the orders made on 30 July 1997 and 20 August 1997 be refused.

3. The appellant pay the respondents’ costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 917 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

MICHAEL JOHN BATES trading as RIOT WETSUITS
APPELLANT

AND:

OMAREEF PTY LTD (ACN 004 010 806)
FIRST RESPONDENT

QUIKSILVER GARMENTS PTY LTD (ACN 005 575 548)
SECOND RESPONDENT

JOHN ERIC HOWITT
THIRD RESPONDENT

BRUCE ERNEST RAYMOND
FOURTH RESPONDENT

THOMAS VICTOR CARROLL
FIFTH RESPONDENT

RODERICK ANTHONY BROOKS
SIXTH RESPONDENT

ALISTAIR ZORICA
SEVENTH RESPONDENT

BRUCE ANDREW EDWARDS
EIGHTH RESPONDENT

JUDGES:	LINDGREN, FINKELSTEIN, WEINBERG JJ
DATE:	20 NOVEMBER 1998
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

INTRODUCTION
The appellant (“Mr Bates”) appeals from orders made by a judge of the Court on 28 October 1997. His Honour gave judgment for Mr Bates for $10,213.87, comprising $6,200 and interest under s 51A of the Federal Court Act 1976 (Cth), dismissed a cross-claim by the first respondent (“Omareef”), ordered Mr Bates to pay certain of the respondents’ costs on a party/party basis, ordered Mr Bates to pay the respondents’ costs of the proceedings generally incurred on and after 12 November 1996 on a solicitor/client basis and otherwise made no order as to the costs of the proceeding or the cross-claim.

BACKGROUND
The second respondent (“Quiksilver”) was, at relevant times, a manufacturer and distributor of products which apparently included ski-wear, surf-wear and clothing.  By a “Trademark Licence and Manufacturing Agreement” dated 16 October 1990, Quicksilver granted to Omareef a licence to exploit certain trade marks for a term of five years from that date, that is, until 16 October 1995.

The third, fourth and fifth respondents (respectively “Mr Howitt”, “Mr Raymond” and “Mr Carroll”) were, at relevant times, the only directors of and shareholders in Omareef, and Mr Howitt was its managing director. Mr Raymond was also a director and the chief executive officer of Quiksilver. The sixth respondent (“Mr Brooks”) was a consultant of Quiksilver. The seventh and eighth respondents (respectively “Mr Zorica” and “Mr Edwards”) were employees of Omareef.

From about 1984, Mr Bates conducted a small manufacturing business in Wollongong under the name “Riot”. As at the end of 1990, his business consisted chiefly of the manufacture of neoprene medical supports. He also produced wetsuits and other types of surfing wear, including lycra garments. Mr Bates sold these from a retail shop adjacent to his home at Mt Ousley Road, Wollongong.

The dispute which gave rise to the proceeding at first instance arose out of a contract made between Mr Bates and Omareef by which Mr Bates was to manufacture wetsuits for Omareef out of material to be supplied to him by Omareef. The contract was oral. There was a conflict in the evidence as to when it was made and as to the period for which it was to run.

The trial judge found that the contract was made no later than 10 January 1991, rather than later in January (on 22 January or, at least, no earlier than 19 January) as claimed by Mr Bates.

Far more important than when the contract was made was the issue of its duration. Mr Bates submitted that it was to remain in force for the same period as the trade mark licence granted by Quiksilver to Omareef, that is, until 16 October 1995. Omareef contended that it was a contract for the manufacture of Omareef’s requirements for the 1991 winter season only, with the result that it would come to an end no later than the end of June 1991, and probably by mid June of that year.  His Honour made findings in conformity with Omareef’s submission.

Omareef purported to terminate the agreement on 9 May 1991. On that date, Messrs Howitt, Zorica, Edwards and, possibly, Griffiths travelled to a factory which Mr Bates was by then operating in Wollongong and took possession of materials which Omareef had supplied to Mr Bates. Omareef sought to support its purported termination on various bases but his Honour rejected its submissions in this respect and concluded that its conduct constituted a wrongful repudiation of its contract with Mr Bates.

Because of the trial judge’s finding that the contract was due to expire no later than the end of June and another finding that it was expected that there would be a break of production for approximately six weeks in June and July, he concluded that production would have ceased by the end of the second week of June. His Honour then addressed the question what damages should be awarded to Mr Bates for the loss of the benefit of the contract for the period from 9 May 1991 to the end of the second week of June.  He arrived at the amount of $6,200.

In addition to his contractual claim, Mr Bates sought to make claims based on contravention of the Trade Practices Act 1974 (Cth), unconscionable conduct, estoppel, conspiracy, the procuring of a breach of contract and shortfalls in the materials supplied by Omareef. The trial Judge dismissed these claims.

THE APPEAL
Mr Bates was not legally represented on the appeal. That was unfortunate because much time has been spent in clarifying the material which was received in evidence before the learned trial Judge, Mr Bates having failed to provide an Appeal Book in proper form. He relied, instead, upon a voluminous body of documents, many of which included material rejected at the trial, and others of which were of no relevance to the grounds of appeal. Mr Bates did, eventually, identify those documents upon which he relied primarily in support of his contentions, and the Court has read the material so identified.

Mr Bates’ amended notice of appeal purports to give notice of appeals from ex tempore interlocutory judgments of the trial Judge given on 30 July, 19 August and 20 August 1997 as well as from the final orders of 28 October 1997. By the first ex tempore judgment, his Honour refused Mr Bates leave to amend his statement of claim by including a count in trespass. By the second, he rejected an application that he disqualify himself. By the third, he refused a further application for leave to amend the statement of claim in various respects.

On the hearing of the appeal, we explained to Mr Bates that he was not entitled to appeal as of right from the interlocutory judgments. We indicated that we would treat the purported appeals from the first and third interlocutory orders (those dismissing the applications for leave to amend) as applications for leave to appeal, to be heard contemporaneously with the appeal from the final judgment, and that we would treat the purported appeal from the second interlocutory order (that by which his Honour refused to disqualify himself on the ground of bias) as part of the appeal from the final judgment.

THE FINDING AS TO THE DURATION OF THE CONTRACT
Mr Bates submitted, in substance, that the trial judge was not entitled to make the finding of fact that the contract was for the 1991 winter season alone and so had a duration of only some five months.  However, in arriving at that finding, his Honour analysed the evidence of Mr Bates and two of his witnesses, Ms Goldman (his factory manager) and Ms Kennedy (his wife), and that of Messrs Howitt, Zorica and Mr Raymond relating to a series of meetings that took place in December 1990 and January 1991. As well, he took into account other conduct of Mr Bates which he found to be consistent with an understanding on his part that his engagement by Omareef was for the “short term”, at least initially.

His Honour also referred to evidence relied on by Mr Bates as pointing to a longer term contract. In particular, he took into account the preparation by Omareef’s solicitors, on the instructions of Mr Raymond, of a draft “Toll Manufacturing Agreement” between Omareef and Mr Bates which referred to the head licence agreement between Quicksilver and Omareef and provided for a co-extensive duration. His Honour accepted that the solicitors had produced this draft by the use of a precedent, and that it was not evidence of instructions from Mr Raymond or anyone else representing Omareef that the contract between Omareef and Mr Bates was also to run until 16 October 1995. In doing so, his Honour had regard to other evidence showing that Mr Raymond was instructing Omareef’s solicitors on 30 April 1991 that “Quiksilver [was] going to pull out in a month”, and the explanation for that instruction.

We think that the case falls within the principle recognised by the High Court in such cases as Abalos v Australian Postal Commission (1990) 171 CLR 167 and Devries v Australian National Railways Commission (1993) 177 CLR 472, that appellate courts should be slow to interfere with findings of fact made by a trial judge in view of the advantage enjoyed by him or her in hearing and seeing the witnesses, an advantage which the trial judge enjoyed in the present case. In Devries, Brennan, Gaudron and McHugh JJ said (at 479):

“More than once in recent years, this Court has pointed out that a finding of fact by a trial judge, based on the credibility of a witness, is not to be set aside because an appellate court thinks that the probabilities of the case are against – even strongly against – that finding of fact (…). If the trial judge’s finding depends to any substantial degree on the credibility of the witness, the finding must stand unless it can be shown that the trial judge ‘has failed to use or has palpably misused his advantage’ (…) or has acted on evidence which was ‘inconsistent with facts incontrovertibly established by the evidence’ or which was ‘glaringly improbable’ (…)”.  (citations omitted)

In the present case as in that case, the evidence supporting a finding that the contract was for the 1991 winter season only was not “inconsistent with facts incontrovertibly established by the evidence” or “glaringly improbable”.

Mr Bates was not able to point to any particular evidence which clearly indicated, let alone established, that his Honour erred in his finding. He referred to a letter dated 27 July 1991 which he sent to Quiksilver which included the sentence:

“My understanding was that our contract was to be for the life of the Omareef contract with Quiksilver.”

While this sentence, written some two and a half months after the purported termination, asserted an understanding on Mr Bates’ part consistent with the case which Mr Bates made at trial, it did not establish that the contractual period did in fact accord with his understanding.

We have seen no appealable error in relation to the learned trial judge’s finding of fact as to the period of manufacture and supply for which the contract provided.

On the appeal, Mr Bates ultimately conceded that if we reached that conclusion, he could not suggest that it was not open to his Honour to assess the amount of damages for breach of contract at $6,200.

BIAS

We turn next to the issue of bias. It is of “fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done”:  The King v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256 at 259. If it were otherwise neither the parties to a case nor the public would have any confidence in the administration of justice in our courts.

Mr Bates contends that a fair minded person would entertain a reasonable apprehension that the trial judge did not bring an impartial and unprejudiced mind to the resolution of his case and for that reason says that the judgment below should be set aside.

Five matters are relied upon in support of this submission.  The first arises as a consequence of an unsuccessful mediation of the dispute between the parties.  The mediation occurred during the week preceding the commencement of the trial and was conducted before Sir Laurence Street.  The trial judge had been informed of the likelihood that the parties would submit their dispute to mediation but had not been requested to make any orders in that regard.  The mediator is the father-in-law of the trial judge, a fact that was known to Mr Bates when the mediator was appointed.  As it happened, the mediator and the trial judge met over the weekend immediately before the commencement of the trial.  During their meeting, Sir Laurence informed the trial judge that the mediation had been unsuccessful, a fact that would have become apparent to his Honour on Monday morning when the trial was to commence. 

The second matter is concerned with an association between the trial judge and senior counsel for the respondents.  While at the Bar, the trial judge and senior counsel occupied chambers on the same floor in the Wentworth/Selborne Chambers building in Phillip Street, Sydney.  Moreover, on the Friday before the trial commenced, the trial judge and senior counsel sat at the same table for lunch in the dining room on the lower ground floor of that building.  That dining room is frequented by judges and barristers. 

His Honour advised Mr Bates of both of these matters on the first day of the hearing.  The transcript reveals that he made the following disclosure:

“[T]here are two other matters that, perhaps, ought to be mentioned.  I understand that the parties endeavoured to mediate on Friday.  I had occasion to see Sir Laurence Street over the weekend and he mentioned that he did not resolve – I thought I ought to mention the fact that I did speak to him, although we did not discuss this case at all.  I perhaps also should tell you, Mr Bates, that [senior counsel for the respondents] and I, at one stage, were on the same floor as barristers and we sat at the same table at lunch on Friday; but, again, we did not discuss the case.  It is perhaps something you ought to know about.”

The remaining matters arise out of the conduct of the trial itself.  For the first fourteen days (the trial ran for twenty eight days) Mr Bates conducted his own case.  Counsel appeared for him for the last fourteen days of the trial.  During the time that he was unrepresented, Mr Bates called a number of witnesses to give evidence in support of his case.  Over objection by the respondents, the trial judge questioned those witnesses to elicit evidence in admissible form.  Mr Bates complains that by taking this course, his Honour so conducted himself that the respondents had available to them a ground of appeal, namely, that there was a reasonable apprehension that the trial judge was biased against them.

Next, complaint is made that the trial judge failed to draw to the attention of Mr Bates s 128 of the Evidence Act 1995 (Cth) in relation to answers he gave to certain questions that were put to him during his cross-examination. The questions were concerned with the failure by Mr Bates to pay to the Commissioner of Taxation group tax that had been deducted from the wages paid to his employees. The trial judge did warn Mr Bates that he was entitled to decline to answer those questions on the ground of self-incrimination but Mr Bates elected to provide answers.

It is accepted that his Honour did not refer to s 128 of the Evidence Act. Section 128 provides, in substance, that if a witness objects to giving evidence on the ground of self-incrimination or exposure to penalty and the court finds that there are reasonable grounds for that objection, the court is not to require the witness to give the evidence. However, if the evidence is given the court must provide the witness with a certificate the effect of which is to prevent the evidence being used against that person in other proceedings.

The section has no application to Mr Bates for the reason that he took no objection to giving evidence. Presumably, the argument is put on the unwarranted assumption that the trial judge was under an obligation to explain the effect of s 128 to Mr Bates so that he could take the objection and thereafter give the incriminating evidence and obtain a certificate.

The final complaint is that, during the cross-examination of certain witnesses called by Mr Bates, questions were allowed to be put to them relating to Mr Bates’ conduct when the same questions had not been put to Mr Bates himself.  It is regrettable that we cannot be more specific about this issue but we were not referred to the relevant parts of the transcript where the questions and answers are to be found and the complete transcript is not in the papers that have been filed on the appeal.

The applicable principles of law concerning apprehended bias have been settled by the High Court in a series of cases, the most important of which are The Queen v Watson; Ex parte Armstrong (1976) 136 CLR 248; Livesey v New South Wales Bar Association (1983) 151 CLR 288; Re JRL; Ex parte CJL (1986) 161 CLR 342 and Vakauta v Kelly (1989) 167 CLR 568.

Shortly stated, the relevant principles are as follows: (a) a judge should not hear a case if, in all the circumstances, a fair minded observer would entertain a reasonable suspicion that the judge would not determine the case impartially; (b) the test is an objective one, the fair minded observer being a hypothetical person; (c) speaking generally, in cases where the disqualification is not based on pecuniary interest, the reasonable suspicion must be “firmly established”; and (d) the objection that a judge should not have heard a case on the ground of apprehended bias can be waived.

Our conclusion on the question whether the matters raised by Mr Bates do raise a reasonable apprehension of bias on the part of the trial judge can also be stated shortly.  None of the matters referred to disqualified his Honour from sitting or continuing to sit on the case.

Taking each of them in turn we make the following observations.  As to the meeting with Sir Laurence Street and the lunch with senior counsel for the respondents, these events were disclosed by the trial judge at the first available opportunity.  Once disclosed, together with the disclosure as to what was said (in the case of Sir Laurence) and what was not discussed (in the case of Sir Laurence and senior counsel for the respondents) it would not be open to any person, thinking about the matter in a sensible manner, to entertain the view that the trial judge would not bring an impartial and unprejudiced mind to the assessment of Mr Bates’ case: compare Duff v The Queen (1979) 39 FLR 315 at 336-338. To the contrary, a fair minded observer would form the view that the disclosure made by the trial judge was evidence of his impartiality and of his determination to try the case fairly.

The remaining matters do not warrant any more than passing comment.  It is not even arguable that any of them establish apprehended bias.  The trial judge did not err in law in asking questions to facilitate Mr Bates’ presentation of his case and in failing to disallow questions put to Mr Bates or to his witnesses.  Even if there had been an error of law, that error could hardly excite the suspicion of the ordinary bystander and lead him or her to think that his Honour was partial. 

OTHER CAUSES OF ACTION, THE COSTS ORDERS AND THE APPLICATION FOR LEAVE TO APPEAL AGAINST THE INTERLOCUTORY ORDERS

Mr Bates did not address submissions to the other causes of action or to the costs orders. Again, however, we have not perceived any basis for a challenge to his Honour’s dismissal of Mr Bates’ application in so far as it was based on those other causes of action. In relation to costs, his Honour delivered separate Reasons for Judgment on 28 October 1997, his Reasons for Judgment on the substantive issues having been delivered earlier on 16 October 1997.  His Honour had the benefit of the parties’ subsequent submissions on costs. Mr Bates had rejected offers of settlement. The respondents had been put to expense as a result of the filing of voluminous inadmissible affidavits by Mr Bates. There were other factors too, which his Honour took into account. The costs orders made were plainly within the trial judge’s discretion.

We would not grant leave to appeal from the two interlocutory orders refusing leave to amend. No appealable error has been shown in the exercise of his Honour’s discretion in respect of those orders.

CONCLUSION

We volunteer the following observations.

It was obvious to us on the hearing of the appeal that Mr Bates genuinely believes that he has suffered a gross injustice. He said that he had told the truth and had urged his witnesses to do the same.  He also complained, in relation to proof of loss (an issue which has not had to occupy us for the reason stated earlier) that he had not been able to afford the thorough preparation of financial and expert accounting evidence that the law of evidence apparently required of him.

We attempted to explain to Mr Bates that the Court’s function had been not to favour him as against the respondents but to be even-handed. The trial judge did not find that he or his witnesses had lied.  His Honour was called upon to determine, in a situation of conflicting evidence of an oral contract, where there was room for misunderstanding, which version of the facts should be accepted.

It may be difficult for a person such as Mr Bates who believes that he suffered a legal wrong, has approached a court for redress and put considerable effort into an appeal (he prepared ten lever arch files of papers for the appeal), to understand how it can be just that he should now be worse off than when he began.

However strong Mr Bates’ sense of grievance may be, we are satisfied that he has not demonstrated an appealable error in the Reasons for Judgment of the learned trial judge.

Since the foregoing material was written, Mr Bates has written to the Court on 19 November 1998 making further submissions and asking that judgment be delayed in case he wishes to make yet further submissions. We have taken into account the submissions made in his letter. We do not accede to his request that we delay giving judgment.

The orders of the Court are that:

1. The appeal be dismissed.

2. Leave to appeal from the orders made on 30 July 1997 and 20 August 1997 be refused.

3. The appellant pay the respondents’ costs.

I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Court

Associate:

Dated:             20 November 1998

The appellant appeared in person
Counsel for the Respondent:	Mr L G Foster SC with Mr P G Whitford
Solicitors for the Respondent:	Corrs Chambers Westgarth
Date of Hearing:	16 November 1998
Date of Judgment:	20 November 1988