Ceccattini v ICM 2000 Pty Ltd

[1999] NSWSC 1196

CITATION:	Ceccattini & 1 Ors v ICM 2000 P/L & 1 Ors [1999] NSWSC 1196
CURRENT JURISDICTION:	Equity
FILE NUMBER(S):	2696/97
HEARING DATE(S):	4/11/1999
JUDGMENT DATE:	8 December 1999
PARTIES :	Gualtiero Ceccattini (First Plaintiff) Emilio de Michelis (Second Plaintiff) ICM 2000 Pty Limited (ACN 072 573 785) (First Defendant) Westpac Industries Pty Limited (ACN 069 592 034) (Second Defendant)
JUDGMENT OF:	Santow J

COUNSEL :	M L D Einfeld,QC / D Warren (Plaintiffs) W Haffenden (Defendants)
SOLICITORS:	Lapaine Pomare & Forster (Plaintiffs) Smits Leslie (Defendants)
CATCHWORDS:	PRACTICE AND PROCEDURE — Apprehended bias based on prejudgment in relation to procedural unfairness where the latter is intended to be corrected by orders and submissions requiring further evidence and submissions before the referee’s report is adopted — procedural requirements for a Referee — Waiver.
ACTS CITED:	Evidence Act 1995 (NSW) s140 Supreme Court Rules Pt 72, r 8
CASES CITED:	Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 411 Barbosa v Di Meglio ([1999] NSWCA 307, 26 February 1999, unreported) Bilgin v Minister for Immigration and Multicultural Affairs (1997) 149 ALR 281 Briginshaw v Briginshaw (1938) 60 CLR 336 Burwood Municipality v Harvey (1995) 86 LGERA 389 Challenge Finance Ltd v Forshaw No. 3 (Supreme Court of NSW, 16 February 1995, unreported) Dovade Pty Ltd & Ors v Westpac Banking Group & Anor [1999] NSWCA 113 Galea v Galea (1990) 19 NSWLR 263 Gascar v Ellicott [1997] 1 VR 332 Goktas v GIO (1993) 31 NSWLR 684 Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 32 ACSR 625 Livesey v New South Wales Bar Association (1983) 151 CLR 288 Locobail (UK) Ltd v Bayfield Times Law Reports 9 November 1999 Raybos Australia Pty Limited v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272 Re JRL; Ex parte CJL (1986) 161 CLR 342 R v Carter and the Attorney-General (Supreme Court of Tasmania, Cox, Underwood and Spicer JJ, October 1991, unreported) R v Gough [1993] AC 646 R v Lars (NSW Court of Criminal Appeal, 30 June 1994, unreported) R v Lusink Ex parte Shaw (1980) 32 ALR 47 R v Masters (1992) 26 NSWLR 450 R v Watson ; Ex parte Armstrong (1976) 136 CLR 248 Rozenes & Anor v Judge Kelly [1996] 1 VR 320 Smits v Buckworth (Supreme Court of NSW, 22 September 1997, unreported) Telecomputing PLC v Bridges Wholesale Acceptance (1991) 24 NSWLR 513 Vakauta v Kelly (1989) 167 CLR 568 Webb v the Queen (1994) 181 CLR 41
DECISION:	Not satisfied there is a reasonable apprehension of bias. Not satisfied there is any such failure on the Referree's part as should result in a fresh referral to a new referee.

IN THE SUPREME COURT
OF NEW SOUTH WALES
IN EQUITY

SANTOW J

No. 2696/97
GUALTIERO CECCATTINI
First Plaintiff
EMILIO DE MICHELIS
Second Plaintiff

ICM 2000 PTY LIMITED (ACN 072 573 785)
First Defendant

WESPAC INDUSTRIES PTY LIMITED (ACN 069 592 034)
Second Defendant

JUDGMENT

8 December 1999

THE CENTRAL ISSUE

1    Are breaches of the rules of procedural fairness — in a referee making additional enquiries about a matter of significance to his Report but only informing the parties in his report or in the aftermath — of such significance as in the circumstances to give rise to a reasonable apprehension of bias against the party dissatisfied with the referee’s valuation? Should such apprehended bias be found, though subsequent orders be made to permit the parties to make submissions and augment the evidence before the Referee on those matters of further enquiry, where the Referee’s report was not adopted but referred back to him for further report? And finally does a refusal to participate in a further hearing, to enable the Referee to state his or her position, amount to an imputed waiver of any claim of apprehended bias?

OVERVIEW

2    The Plaintiffs on 29 June 1999 by Notice of Motion sought the removal of Mr Frank Fischl as Referee, alleging reasonable apprehension of bias by reason of the likelihood of pre-judgment. Mr Fischl was appointed as an expert to determine the value of units in a unit trust. He had been originally appointed by order dated 30 October 1997. He has since reported but, by virtue of orders I have earlier made he was required to review his determination of value, following further submissions from the parties. Those orders were made because I was satisfied that the parties were denied procedural fairness and my orders were directed to redressing that position. This was because the referee had, as he disclosed openly in his Report, made certain enquiries into receivership files bearing upon his conclusions, though after they had been reached; this was without advising the parties at the time, so they were denied the opportunity to then consider that material and make any submissions. Subsequently, further enquiries form two possible potential buyers of the underlying assets were revealed by the Referee. The Plaintiffs rely on the cumulative effect of those events for their contention that the Referee should be disqualified for apprehended bias by reason of prejudgment and a new Referee appointed in his stead to redetermine the same questions. 3    The Defendants contend that there can be no reasonable apprehension of bias in the circumstances. They contend that the present Referee should rather be required, as contemplated by my previous orders, to afford the parties the opportunity to review the consulted material, call the two possibly potential buyers to test why they did not proceed insofar as relevant to value, and to make any further submissions arising therefrom. 4    Following written and oral argument, I concluded on 4 November 1999 against the Plaintiffs’ application, with reasons to follow. I now set out those reasons as well as foreshadow the orders which should be made, subject to hearing the parties on their final form.

CONTENTIONS OF THE PARTIES

5    The Plaintiffs submit that in the circumstances of this reference, a fair-minded observer might reasonably doubt that the questions now before the Referee could be dealt with by him without bias by reason of the likelihood of pre-judgment (Livesey v New South Wales Bar Association (1983) 151 CLR 288). 6 The Plaintiffs rely on the test propounded in Livesey by the High Court (at 300) quoted below:

“A fair minded observer might entertain a reasonable apprehension of bias by reason of pre-judgment if a Judge sits to hear a case at first instance after he has, in a previous case, expressed clear views either about a question of fact which constitutes a live and significant issue in the subsequent case or about the credit of a witness whose evidence is of significance on such a question of fact.”

7    The Plaintiffs refer to the fact that the Referee in this instance has already expressed clear views about a question of fact as set out in paragraph 7.6 of the Referee’s report of 12 March 1999 which I quote below:

“7.6 In my opinion, there can be no better indication of value of the plant and equipment than that ($450,000) which was realised by the Receiver and Manager after having advertised the business for sale and not having received any offer other than from Mr Wong.”

8    The Plaintiffs contend that in the circumstances described below, the further consideration by the Referee of additional evidence and submissions, as contemplated by my orders of 21 April 1999 and 10 June 1999, would involve that Referee having as a live and significant issue in that further consideration, that very question of fact about which the Referee had already expressed clear views. That, they contend, necessarily gives rise to a reasonable apprehension of bias by reason of pre-judgment on that matter. 9    The Plaintiffs also put the case for bias as within either the third or fourth categories identified by Deane J in Webb v the Queen (1994) 181 CLR 41 at 74:

“The area covered by the doctrine of disqualification by reason of the appearance of bias encompasses at least four distinct, though sometimes overlapping, main categories of case. The first is disqualification by interest, that is to say, cases where some direct or indirect interest in the proceedings, whether pecuniary or otherwise, gives rise to a reasonable apprehension of prejudice, partiality or prejudgment. The second is disqualification by conduct, including published statements. That category consists of cases in which conduct, either in the course of, or outside, the proceedings, gives rise to such an apprehension of bias. The third category is disqualification by association. It will often overlap the first (28) and consist of cases where the apprehension of prejudgment or other bias results from some direct or indirect relationship, experience or contact with a person or persons interested in, or otherwise involved in, the proceedings. The fourth is disqualification by extraneous information. It will commonly overlap the third (29) and consists of cases where knowledge of some prejudicial but inadmissible fact or circumstance gives rise to the apprehension of bias.”
(28) e.g., a case where a dependent spouse or child has a direct pecuniary interest in the proceedings.
(29) e.g., a case where a judge is disqualified by reason of having heard some earlier case: see, e.g., Livesey v NSW Bar Association (1983) 151 CLR 288; Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 411.
LEGAL PRINCIPLES

10    It is convenient that I first set out the applicable legal principles, in a series of propositions.

Bias - the legal test

11    The proper test for judicial or quasi judicial bias in Australia is as stated by the High Court in Webb v The Queen (supra) at 47 (per Mason CJ and McHugh J, affirming the statements of principle in Livesey v New South Wales Bar Association (1983) 151 CLR 288 and Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352):

"When it is alleged that a judge has been or might be actuated by bias, this Court has held that the proper test is whether fair-minded people might reasonably apprehend or suspect that the judge has prejudged or might prejudge the case. The Court has applied the same test to a Commissioner of the Australian Industrial Relations Commission and to a member of the Australian Broadcasting Tribunal. The Court has specifically rejected the real likelihood of bias test. The principle behind the reasonable apprehension or suspicion test is that it is of ‘fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done’ ".
Courts are reluctant to ascertain whether the decision-maker was actually biased; Deane J in Webb at 74 went so far as to indicate that the Australian test is so broad as to make an appellate court enquiry into whether an impugned decision maker was in fact biased both unnecessary and inappropriate but so far no other High Court judge has gone as far. In any event, reasonable apprehension of bias requires no finding of actual bias; contrast R v Gough [1993] AC 646 with its test of "real danger of bias" in the UK. See generally Aronson and Dyer "Judicial Review of Administrative Action," LBC Information Services 1996 at 590-591.

12    The fair-minded person has been described in different ways: for example, the reasonable person (Vakauta v Kelly (1989) 167 CLR 568); the reasonably minded observer (Goktas v GIO (1993) 31 NSWLR 684); an objective and reasonable person (Raybos Australia Pty Limited v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272 at 275). Thus Deane J in Webb at 67 quoting Livesey (supra) at 293:

"whether, in all the circumstances, a fair-minded lay observer with knowledge of the material objective facts ‘might entertain a reasonable apprehension that [the judge] might not bring an impartial and unprejudiced mind to the resolution of the question’ in issue."
As was said in Livesey at 294 per Mason, Murphy, Brennan, Deane, and Dawson JJ, this does not mean that a judge should automatically stand aside at a suggestion of prejudgment or apprehended bias:

"…it would be an abdication of judicial function and an encouragement of procedural bias for a judge to adopt the approach that he should automatically disqualify himself whenever he was requested by one party so to do on the grounds of a possible appearance of prejudgment or bias, regardless of whether the other party had desired that the matter be dealt with by him as the judge to whom the hearing of the case had been entrusted by the ordinary procedures and practice of the particular court."

13    Proof of bias in either sense is determined according to the civil standard of proof. What must be established in relation to apprehended bias is a "reasonable" apprehension of "a possibility" of bias; Webb per Deane J at 71. Section 140 of the Evidence Act 1995 (NSW) directs the Court’s attention to the nature of the subject matter of what has to be proven, in applying the civil standard of proof. Because s140(2) preserves the doctrine in Briginshaw v Briginshaw (1938) 60 CLR 336 at 361-2, an allegation of the gravity of bias, even apprehended, must be "firmly established": R v Lusink Ex parte Shaw (1980) 32 ALR 47; R v Carter and the Attorney-General (Supreme Court of Tasmania, Cox, Underwood and Spicer JJ, October 1991, unreported). Nonetheless it is "the possibility" of bias that must be so established, based on a criterion of reasonableness of apprehension. 14    In Dovade Pty Ltd & Ors v Westpac Banking Group & Anor [1999] NSWCA 113 (at para 92) the Court of Appeal approved the following remarks of Tadgell JA in Gascar v Ellicott [1997] 1 VR 332 at 342:

“Although the criterion of apprehension of partiality or prejudice is possibility, not likelihood, a reasonable apprehension is to be established to the court’s satisfaction: it is a reasonable and not a fanciful or fantastic apprehension that is to be established; and the apprehension is to be attributed to an observer who is “fair-minded” — which means “reasonable”. As Mason CJ and McHugh J pointed out in Webb v R at 52 “… it is the court’s view of the public’s view, not the court’s own view, which is determinative”. Even so, the court is to be satisfied that the criterion is met not that it might be. In Builders’ Registration Board of Queensland v Rauber (1983) 57 ALJR 376 at 384, Brennan J observed that:
Each of the indicia which a party proves and relies upon to show a reasonable suspicion [which is to be substantially equated with a reasonable apprehension] of bias must be examined, and the Court is called on to determine whether, upon such indicia, a reasonable suspicion of bias arises.
(The parenthetical clause in the passage cited from Brennan J is added by Tadgell JA.)

15    In Re JRL; Ex parte CJL (supra) Mason J at 352 emphasised that the test from R v Watson ; Ex parte Armstrong (1976) 136 CLR 248 and Livesey (supra) referred to a reasonable apprehension of a lack of impartiality or of the existence of prejudice, not merely an apprehension that the judicial officer would decide the case adversely to a party. Thus previous statements or conduct of the judge which might lead to an expectation that the case will be decided in a particular way were insufficient to constitute a ground for reasonably apprehending bias. What must be shown is a propensity to prejudgment, derived from a prejudiced or partial mind, or conduct giving rise to a reasonable apprehension of such a prejudiced or partial mind. The relevant passage from Mason J’s judgment concludes:

"There may be many 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 a 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’."

16    More recently in a striking case, Barbosa v Di Meglio ([1999] NSWCA 307, 26 February 1999, unreported) the Court of Appeal drew three distinctions. They reflect a disinclination to find a reasonable apprehension of prejudgment merely because a prior finding might suggest one outcome rather than another, or merely by reason of error though persistent, or of unappealing judicial behaviour. At para 9 this is explained by Mason P (of which the first and third distinctions are of particular relevance here).

“9 In the present context it is important to draw three distinctions. First, the litigant’s right is to have a tribunal that is free of prejudgment. The litigant is not entitled to a tribunal that is predisposed to accept or reject any particular proposition. An open mind is not an empty one. …..
10 In the Queen v Commonwealth Conciliation and Arbitration Commission; ex parte Angliss Group (1969) 122 CLR 546 at 553-4 the High Court reminds that:
…. requirements of natural justice are not infringed by a mere lack of nicety but only when it is firmly established that a suspicion may reasonably be engendered in the minds of those who come before the tribunal or in the minds of the public that the tribunal or a member or members of it may not bring to the resolution of the questions arising before the tribunal fair and unprejudiced minds. Such a mind is not necessarily a mind which has not given thought to the subject matter or one which, having thought about it, has not formed any views or inclination of mind upon or with respect to it.
See also Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352.
11 The corollary is that error, even persisting error, in holding a particular legal position is not the criterion of reasonable apprehension of bias. It may be evidence of the same, but capacity for error is universal. Error may be corrigible through argument or by appellate processes. But it does not per se establish a reasonable apprehension of bias.
12 The second distinction is that which lies between unappealing judicial behaviour and appealable judicial behaviour (cf Dovade at 107). Minds and practices will inevitably differ as to how robust a judge may be (or appear) before reasonable apprehension of bias is established in a particular case. Ultimately an appellate judge must form his or her own judgment …. .
13 The third distinction relates to attitudes disclosed by remarks made during argument and attitudes evidenced by the final determination of a trial judge …. . The vigour of the primary judge’s early expressed reaction to the [expert’s] report may not be a model of judicial behaviour, but it did not have the effect of driving his Honour from the judgment seat.”

17    Pre-judgment may be of law or fact. If of law, it is not enough that a judge has determined a legal issue in the past in a particular way. Indeed as Hayne J said in Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 32 ACSR 625 at 630 (para 12):

“The principles about apprehension of bias must be understood in the context of a judicial system founded in precedent and directed to establishing, and maintaining, consistency of judicial decision so that like cases are treated alike and principles of law are applied uniformly. The bare fact that a judicial officer has earlier expressed an opinion on questions of law will therefore seldom, if ever, warrant a conclusion of appearance of bias, no matter how important that opinion may have been to the disposition of the past case or how important it may be to the outcome of the instant case. Fidelity to precedent and consistency may make it very likely that the same opinion about a question of law will be expressed in both cases. But that stops well short of saying that the judicial officer will not listen to and properly consider arguments against the earlier holding.”

18    What is necessary for prejudgment amounting to bias is that the judge concerned has closed his or her mind to argument on the point; see Young J in Challenge Finance Ltd v Forshaw No. 3 (Supreme Court of NSW, 16 February 1995, unreported) and compare Smits v Buckworth (Supreme Court of NSW, 22 September 1997, unreported). 19    Where, in a previous trial, determinations of fact or credit have been made, these prior findings may be sufficient to require the disqualification of the judge at a later trial on the ground of bias evidenced through prejudgment (Australian National Industries Ltd v Spedley Securities Ltd (1992) 26 NSWLR 411), though it is important not to express that proposition in absolute terms. Thus, for example, the same judge may without appearance of bias sit in a series of interlocutory applications relating to interconnected cases, as distinct from the later substantive trial; compare Re JRL; Ex parte CJL (supra) at 352, R v Masters (1992) 26 NSWLR 450, Rozenes & Anor v Judge Kelly [1996] 1 VR 320 and Gascor v Ellicott [1997] 1 VR 332. Further consideration of a particular factual issue by a referee, before his report is adopted by the court, falls into a similar category. The overriding test remains that of the reasonable fair-minded observer in Webb. 20    Indeed in the United Kingdom, though the arguably less stringent “real danger of bias” test is applied, the Court of Appeal in Locobail (UK) Ltd v Bayfield Times Law Reports 9 November 1999 (Lord Bingham, Lord Woolf and Sir Richard Scott in a joint judgment) addressed the issue in terms which differentiate the degree to which prior findings of credit should matter in terms of apprehended bias concluding that it would be found in those more extreme cases:

“…if, in a case where the credibility of any individual were an issue to be decided by the judge, he had in a previous case rejected that person’s evidence in such outspoken terms as to throw doubt on his ability to approach such a person’s evidence with an open mind on any later occasion: or if on any question at issue the judge had expressed views, particularly in the course of the hearing, in such extreme and unbalanced terms as to throw doubt on his ability to try the issue, with an objective judicial mind or if for any other reason there were real ground for doubting the judge’s ability to ignore extraneous considerations, prejudices and predilections and bring an objective judgment to bear on the issues before him.
But then the Court importantly added:

The mere fact that a judge, earlier in the same case or in a previous case, had commented adversely on a party or witness, or found the evidence of a party or witness to be unreliable, would not, without more, found a sustainable objection.”

21    As Hayne J said in Helljay Investments Pty Ltd (supra), “what must be demonstrated to the requisite degree is the appearance of pre-judgment, not simply that a particular outcome of the litigation is likely or unlikely”, citing Mason CJ in Re JRL; Ex parte CJL (supra). 22    There can be a distinction between credit issues in regard to non-expert evidence and observations on reliability or expertise in regard to expert witnesses, such that pre-conceived views in the latter may not constitute bias where based on the judge’s accumulated experience from observing such expert witnesses in prior cases: Vakauta v Kelly (supra) at 571; Bilgin v Minister for Immigration and Multicultural Affairs (1997) 149 ALR 281 per Finkelstein J. 23 And in Galea v Galea (1990) 19 NSWLR 263 at 279 per Kirby A-CJ:

"In judging the suggestion of a supervening apprehension of bias, it is reasonable to assume that the hypothetical lay observer would base the opinion on a fair assessment of the judge’s conduct in the context of the whole of the trial. A judgment of the loss of impartiality and neutrality would not be made from a short and emotional exchange taken out of context and then weighed in isolation."

24    Depending on its forensic context, comment may cross the line into bias, tested by reference to the reasonable apprehension of the hypothetical observer; see for example in Goktas v Government Insurance Office of NSW (supra) and R v Lars (NSW Court of Criminal Appeal, 30 June 1994, unreported). Thus there exists an “ill-defined line beyond which the expression by a trial judge of preconceived views about the reliability of particular [expert] witnesses could threaten the appearance of imported justice”. (Vakauta at 571 per Brennan, Dawson and Gaudron JJ). Here, I would add, we are weighing up whether there is the possibility of future prejudgment in conclusions that are anticipated, following after the opportunity for further evidence and submission and notwithstanding such strictures as are expressed in this judgment to the Referee.

Waiver

25    It is the law in Australia that bias can be waived: Vakauta v Kelly. 26    A party should object at the time to the remarks or conduct which go to the reasonable apprehension of bias. But in certain circumstances the view is taken that in the absence of a conscious waiver, the Court should impute waiver only where it would be unjust to both parties to allow the point to be taken at a later stage (Burwood Municipality v Harvey (1995) 86 LGERA 389 Mahoney JA, Kirby P and Handley JA).

In Vakuata v Kelly the comment was made by Dawson J at 577 (finding in obiter that had bias been established it would have been waived because no objection was taken to the continuation of the trial before the judge):

"I do not mean to suggest that an objection will be waived if it is not made in formal or even explicit terms. The circumstances may be such that it is plain, without it being put into words, that a judge is being asked to consider his position having regard to the requirement of impartiality."
Once an objection is taken, the party’s right to complain will not be waived simply because the party continues to participate in the case; Bilgin v The Minister for Immigration and Multi-cultural Affairs per Finkelstein J (supra).

27    I now deal with the relevant circumstances in more detail. They are not themselves in dispute.

RELEVANT CIRCUMSTANCES

28 On 30 October 1997 Young J made consent orders effecting the purchase of the Plaintiffs’ interest in two trusts (“the Trusts”) payment for which would be the subject of a valuation to be determined by Mr Fischl (“the Referee”) pursuant to a formal reference under Pt 72 Supreme Court Rules. 29 There was some delay on the Plaintiffs’ part in the serving and provision of documents required by them for the Referee to prepare his report, which was originally ordered to be handed down by 19 December 1997. 30 Nonetheless, though these delays did ensue, the Referee handed down his report on 12 March 1999, valuing the Plaintiffs’ interest in the Trusts at nil. 31 On 19 March 1998 the matter was re-listed before Young J and the Plaintiffs were granted a further extension to 1 May 1998 to provide the Referee with evidence and contentions. 32 The matter subsequently came before me in April 1999 on a contested application for the adoption of the Referee’s report. The Plaintiffs opposed adoption prompted by the incorporation in the Referee’s report of the following paragraph:

"At the time of the Court’s referral to me (on 30 October 1997) pursuant to Part 72 of the Supreme Court rules, I was a partner of Price Waterhouse. On 1 July 1998, Price Waterhouse and Coopers & Lybrand merged to become PricewaterhouseCoopers. As noted in paragraph 3.3 above, the Receivers and Managers of Mercap and ICM were from Coopers & Lybrand. As such, I have availed myself of the opportunity to review relevant files of the receivership for the purposes of satisfying myself that the conclusions I have reached in relation to the value of the Plumpton Property, the work in progress, the plant and equipment, and the goodwill of the business were not inconsistent with either the available documentation at the time of receivership or my knowledge of the precast concrete industry which commenced in late 1974 when I was involved with the then receivership of Rescrete Industries Pty Limited. That company has for some time now been a highly regarded participant in the industry. My firm has continued to be involved with the Rescrete group of companies since then, as indeed have I other than for a period of some 4 years (1981-1985) when I was with Price Waterhouse in Fiji."

33    The Plaintiffs successfully contended before me that the Referee had denied natural justice by reason of procedural unfairness to the Plaintiffs. Thus I concluded in my judgment of 17 May 1999 (at para 38):

“I am satisfied that there has in the present circumstances been a denial to the Plaintiffs of the proper opportunity of putting before the Referee particulars of the contentions relied upon and an opportunity to comment on the materials reviewed by the Referee in the relevant files of the receivership. I am further satisfied that this procedural unfairness can only be appropriately remedied by orders of the kind that I have earlier made.”

34    The orders to which I refer were earlier made on 21 April 1999 prior to giving reasons for the conclusion I had then announced. I quote the relevant paragraphs of those orders:

“1. a. Pursuant to Part 13 Rule 13(1)(c) of the Supreme Court Rules remit for further consideration by the Referee the whole of the matter referred for a further Report; and


b. Further direct the Referee to take into account in his further Report the evidence and submissions referred to in order 3 herein and my reasons, and

c. Note that the purpose of the further Report is to resolve whether the evidence and submissions referred to in Order 3 herein impact in any way upon the findings contained in the Referee’s Report dated 12 March 1999 and if so, what the impact is.


2. Direct the Referee to provide to the Parties’ solicitors by 12 noon on Tuesday 27 April 1999 copies of the documents inspected by him from the files of the Receivership of Mercap and ICM referred to in Appendix A page 27 of his Report.

3. Direct the parties to submit any evidence and submissions to the Referee by 10 May 1999 in respect of the documents provided pursuant Order 2 herein, or such further date, subject to there being no delay in relation to the time provided in Order 4, as the Referee may direct provided that such evidence and submissions must be directly relevant to the Referee’s determination of the matter before him.

4. Direct the Referee to provide his further Report referred to in Order 1(a) herein on or before 28 May 1999 by delivering the same to the Registrar of the Equity Division of this Court and to the parties.”

35    In my judgment (para 28) I made clear that there was nothing improper in the Referee consulting the relevant files of the receivership and that “one may trust the independence of the Referee in the present circumstances, notwithstanding that the merger latterly brought him into partnership with the receivers”. 36    There then follows the basis for my making the orders that I did:

“… Nonetheless information in the present case which the Receiver’s files would have revealed would necessarily include what is highly relevant, namely the efforts made by the Receiver to find purchasers and the responses to those efforts. Though the Referee has stated elsewhere in his report that the only offer received was from Mr Wong that of itself should not deprive the Plaintiffs of the opportunity of testing to the extent reasonable the information which would have been thus made available from the Receiver’s files in the way I have indicated. It may be that at the end of that process nothing would have emerged which would lead to any different conclusion than the Referee reached, but equally that cannot be assumed.
What needs to be emphasised is that significance and its consequences is not diminished by the fact that the Referee reviewed these files only after having reached his conclusions. The very fact he saw fit to refer to the files means they had a potential significance, though in the end he said they simply confirmed conclusions already reached. That can be tested by assuming that instead of being confirmatory they negated a conclusion earlier reached. “

37    Thus it is clear from my earlier quoted orders, the matter had been referred back to the Referee to provide the parties an opportunity now to furnish evidence and make submissions to the Referee in respect of the document inspected by the Referee. This followed the Referee’s inspection earlier of the relevant files of the receivership of the two companies whose value in turn bore on the value of the relevant units in the unit trusts. The process which followed started on 27 April 1999 when the Referee wrote the following letter to both parties’ solicitors:

“As you are aware, Order 2 of the Short Minutes of Order has directed me, as referee, “to provide to the Parties’ solicitors by 12 Noon on Tuesday 27 April 1999 copies of the documents inspected by (me) from the files of the Receivership of Mercap and ICM referred to in Appendix A page 27 of (my) Report.”
In the context of the relevant wording on Appendix A page 27 of my report, I have interpreted that Order to mean that I have been directed to provide a copy of those documents into which I have looked closely. Accordingly, I have not considered it necessary to provide copies of documents that I have not looked into in any detail.
Documents that I have not looked into in any detail are those where it was readily apparent to me from the face of the document(s) that the document(s) was not relevant to the valuation of either the goodwill of the business, the work in progress, the plant and equipment or the Plumpton Property or those that were copies of or drafts of documents that I had either looked at in detail or not. Examples of such documents include those relating to insurance matters, correspondence relating to the receiver and manager’s dispute with Mr Wong in relation to an assignation fee of $30,000, litigation relating to collection of debts, sundry correspondence between the liquidator and the receivers and managers of ICM, follow up letters to prospective purchasers seeking to progress efforts in achieving a sale of the business and setting a final date for offers to be submitted as well as confidentiality agreements, and day to day matters of the receivership.
Also, I have not provided any copies (drafts or otherwise) of the contracts for the sale of the Plumpton Property and the plant and equipment by Mercap to ICM 2000 Pty Limited (including related correspondence). I understand the former was executed by Messrs. Ceccattini and de Michelis and the latter by the receiver and manager. Should you require a copy, please advise me.
Subject to the above, I am providing you herewith a copy “of the documents inspected by (me) from the files of the Receivership of Mercap and ICM referred to in Appendix A page 27 of (my) Report.”
In the event that you consider I have incorrectly interpreted the direction tome, please let me know.”

38    On 29 April 1999 the Plaintiffs’ solicitors informed the Referee that he had misconstrued the Court’s order and that they sought inspection of all documents to which he had referred. 39    On 4 May 1999 the Referee responded to the solicitors for both sides in a letter as follows:

“You will note that in section 6 of the documents forwarded to you on 27 April 1999 that there is correspondence from both Kevin Curran of Corotec Pty Limited and John Burke of Rescrete Industries Pty Limited in respect of the business that was advertised for sale by the receiver and manager.
To the extent that it may be relevant to you in so far as submitting any evidence and submissions to me, I am advising you that as I knew both John Burke and Kevin Curran, I called them. Notwithstanding that the above correspondence indicated that neither of them was going to proceed with an offer, I nevertheless made the calls on the basis that information not known to me at the time may have come to light which may have given me cause to consider reassessing upwards, the value I was intending to, and ultimately did, adopt for each of the goodwill, plant and equipment, work in progress and the Plumpton Property. No such information came to light. I did not prepare a file note on my calls.
My recollection of what John Burke said was that he advised me of the environmental problems with the site and that the business suffered from quality control problems, some of which still existed.
It is my recollection that Kevin Curran may not have returned my telephone call until after I had issued my report of 12 March 1999. When I did speak to him, he advised me that he had been looking to invest in a business and that what was offered for sale did not meet his criteria.
This letter also serves to confirm my invitation to you both, which Mr Pomare has to date accepted, to inspect the files that I had reviewed and to provide you wish a copy of any documents that you so request. This is in lieu of providing to you from the outset, a copy of the entire contents of 12 files.”

40 It should be appreciated that the Referee did not prepare file notes of his calls on Messrs Curran and Burke, though I do not attach any particular significance to that. The Referee is not a judge taking evidence by transcript in accordance with the formal rules. Rather, Pt 72, r 8(2) Supreme Court Rules, in its application to referees who are frequently experts, contemplates a degree of informality, consistent with an expeditious, cost-saving approach, though requiring minimum procedural fairness. Thus it simply states that, subject to any direction by the Court:

“(a) the Referee may conduct the proceedings under the reference in such manner as the Referee thinks fit;
(b) the Referee, in conducting proceedings under the reference, is not bound by rules of evidence that may inform himself or herself in relation to any matter in such manner as the Referee thinks fit.”

41 Furthermore, Pt 72 r 8(3) permits evidence to be given orally or in writing, again pointing to varying levels of formality. 42 In relation to the earlier quoted correspondence, I am satisfied that there is no suggestion of concealment by the Referee; indeed quite the contrary. Though in the first instance he was offering to provide simply those documents into which he had looked closely, he made quite clear that there were other documents. When he was asked for them he readily provided them. This was perfectly reasonable given that there were twelve files to be inspected. 43 Nor is his conduct in writing the letter of 4 May 1999 fairly to be considered other than forthcoming. The Plaintiffs’ complaint however is that the Referee should have referred to these oral exchanges between the Referee and Messrs Curran and Burke much earlier; that is, at the time of his original report if not when made. This is particularly as they bore upon a matter of central importance to the valuation of the units, namely the potential availability of offers other than from Mr Wong. But for the initial challenge to the adoption of the Referee’s report and the orders that I made, these further, and in the Plaintiffs’ submission, important, conversations would never have come to light. 44 That much can be accepted. However, I do not consider that this reflects on the Referee’s frankness or willingness to be forthcoming once the orders made brought home to him that the substance of those conversations was required to be made known to the parties. He did this thereafter unprompted. There would have been no way of knowing whether or not those conversations had occurred unless the Referee had volunteered them, as he did. Nor for reasons I develop below, do I consider that this sequence of events makes it reasonable to apprehend that the Referee would now close his mind to any further evidence or submissions that might bear on those oral exchanges and their significance in terms of the valuation. 45 It is necessary to put these exchanges in context. The Receivers when appointed on 18 April 1995 had themselves set about commissioning a valuation of the plant and equipment together with the vehicles which were included in the underlying assets and undertakings of the units in the relevant unit trust. The Receivers subsequently prepared an information memorandum concerning the sale of the business, plant and equipment and the land, to be accepted initially no later than 4 pm Wednesday 3 May 1995. 46 Responses to the Information Memorandum were received from:

(i) L Crema of Crema Group on 3 May 1995 as to the then cut-off date for offers for the business. Mr Crema’s letter (p14 Mr Pomare’s affidavit) says in part

“Both Mirvac and Crema Group have only recently become aware that this business is for sale and accordingly we are unable, as at 4 pm 3 May 1995, to provide you with our office price and terms to purchase.”

(ii) Mr H Pollock of Mirvac Pty Ltd.

(iii) Kevin Curran of Corotec Pty Ltd dated 4 May 1995 who said in his letter (p16, Mr Pomare’s affidavit)

“given more time to come to terms with all of the issues involved with this business, we would be interested in pursuing it further. However, there is no way we can satisfy the schedule as set out in your fax of 26/4/95, particularly as we would need to carry out a lot of investigations in relation to the Council and EPA requirements for the site.”

(iv) John Burke of Rescrete Pty Ltd dated 16 May 1995 (p17 Mr Pomare’s affidavit).

On 12 May 1995 the receiver and manager extended the time for offers to 5 pm Tuesday 16 May 1995 and wrote to those who had written to him (pp18-21, affidavit Franco Pomare 21 June 1999).

Given that 12 May was a Friday the receiver’s actions in extending time in fact allowed only two further business days.

47    The Plaintiffs contend that the circumstances of the advertisements and the time given to prospective purchasers to put forward a bid are relevant. This was because the Referee had concluded, at para 7.6 of his report, that “in my opinion there can be no better indication of value of the plant and equipment than that ($450,000) which was realised by the Receiver and Manager after having advertised the business for sale and not having received any offer other than from Mr Wong”. 48    The Plaintiffs contend that therefore the reasons why Mr Curran and Mr Burke did not pursue the bid are of significance. The valuation (by Gray Edsel Timms) put the auction value of the plant and equipment at between $471,386 to $556,386 and as a going concern at the much higher figure of $1,136,410. 49    The valuer had earlier commented at page 12 of the valuation in respect of the “Cato Truck Crane” (which had been valued at $350,000-$400,000) that “truck crane of this capacity are well sought after in the secondary market. If the vehicle is in very good mechanical condition, in excess of $400,000 may be offered by an end user”. 50    As is clear from the report, the figure offered by Mr Wong and subsequently accepted by the Receivers and Managers was less than the valuation amounts. 51    Thus the Plaintiffs, correctly in my judgment, assert the potential importance of the evidence of Mr Curran and Mr Burke as to why they did not proceed with the further enquiries and what steps they did take. Also of potential importance would be evidence as to the reasons why they chose not to make an offer. That however is not to discount the Referee’s capacity to give proper weight to such further evidence, if so ordered. 52    The Referee in his letter of 4 May 1999 quotes his recollection of what Mr Burke and Mr Curran had said. I should add that the Referee makes clear that the informants were not mere strangers, though that fact does not make consulting them suggestive of bias. Apposite to a referee with that sort of industry experience is what Rogers CJ Comm D said in Telecomputing PLC v Bridges Wholesale Acceptance (1991) 24 NSWLR 513 at 522-3:

“… Again, the test in Livesey cannot be pressed too far when the qualifications for membership of the tribunal are such that the members are likely to have some prior knowledge of the circumstances which give rise to the issues for determination or to have formed an attitude about the way in which such issues should be determined, or the tribunal’s powers exercised. … The prior involvement of a Deputy President with associations or with governments who are frequently parties to proceedings before the Commission cannot be sufficient by itself to amount to a disqualification from sitting in a particular case; nor can the prior acquisition of ‘skills and experience’ amount to such a disqualification. Deputy Presidents who are appointed on account of their industrial background are not disqualified merely because persons with that background have a measure of knowledge or are likely to have a particular attitude to the exercise of the Commission’s powers. To adopt the words of the Privy Council in Labour Relations Board of Saskatchewan v John East Ironworks Ltd [1949] AC 134 at 151, their background will not necessarily lead them ‘to act otherwise than judicially, so far as that word connotes a standard of conduct’ even though the background which it carries experience and knowledge acquired extra-judicially ‘assuredly means that the subject-matter is such as profoundly to distinguish such a tribunal from the courts …’.”

53    The Plaintiffs’ complaint is that, as with the Referee’s consultation of the Receivers’ files, had the Referee advised the Plaintiffs that these conversations had occurred with Messrs Curran and Burke prior to finalising their report, they would have been in a position then to make submissions to the Referee. Those submissions could then conceivably have influenced the Referee’s mind before he finalised his report. The Plaintiffs further contend that, based on Mr Curran’s letter of 4 May 1995, the real reason why no further offer was forthcoming was that there was an insufficient extension of time to enable Mr Curran to put in an offer, given as he says in his letter of 4 May 1995 that he “would need to carry out a lot of investigations in relation to the Council and the EPA requirements for the site”. I agree that the Plaintiffs should have had the opportunity to put these submissions at the time. 54    However, accepting those contentions is not to accept the inevitable consequence said by the Plaintiffs to follow. That consequence is that the fair-minded observer would reasonably apprehend that the Referee, having already reached his conclusions, might not bring to bear an impartial mind in revisiting those conclusions in light of such further evidence and submissions. That is to say, having once expressed his view, he would close his mind to further evidence or submissions. Such a consequence would be surprising, for it is not, for example, the assumption that is made when a case is remitted back to the trial judge by an appellate court finding error, as for example where evidence was wrongly included. Nor is it in conformity with the proposition that in the interlocutory stage of a case at least, a prior finding on credit does not lead to a reasonable apprehension of bias, at least where the finding is not expressed in such outspoken terms as to throw doubt on the ability to approach the case with an open mind; see Locobail (UK) Ltd v Bayfield (supra). Thus I do not accept such a consequence automatically follows; it needs to be tested by the particular circumstances and their likely impact on the hypothetical observer. It is to that I now turn.

Resolving the Central Issue

55    I start with the procedure contemplated by the Defendants — and by my original orders in relation to the Receiver’s files. Messrs Curran and Burke would be asked to give evidence, if necessary by subpoena, as to why they did not proceed with an offer. Then any submissions would be heard from the Plaintiffs and the Defendants. The Referee, like the jury in Webb v the Queen, would be warned that he must retain an open mind to any such new evidence. The question is whether a fair-minded and informed observer would nonetheless entertain a reasonable apprehension of a lack of impartiality on the part of the Referee, by reason of pre-judgment, notwithstanding that the procedures contemplate the taking of further evidence, the opportunity for further submissions and in a context where the Referee would be under no misapprehension as to his duty of impartiality. It is significant that the High Court in Webb by majority concluded, in the case of a juror who gave a bunch of flowers to the deceased’s mother via a court officer during the trial, that in the circumstances a fair-minded observer would not have had an apprehension of lack of impartiality on the part of the juror. This conclusion emphasised that the judge had impressed on the jury the need to have regard only to the evidence, which they were to consider in a dispassionate manner putting aside all feelings of sympathy and emotion. It can be taken that a similar stricture is made by this Court to the Referee; to put aside any earlier conclusion and take into account any new facts emerging from that procedure as well as the submissions of the parties. 56    Furthermore the Referee is not operating in a strict Livesey situation in that, while the task before him is the determination of the same matter of fact — the valuation of the units — ex hypothesi he will have additional facts before him. No-one suggests that a trial judge cannot deal with a case remitted back by an appeal court taking into account the appeal court’s directions, by reason of pre-judgment. The Referee’s position is no different. The Referee, if he changes his mind, is not necessarily admitting error but accommodating further evidence and submissions. 57    While a referee is not to be treated as in the same position as a juror, nonetheless the supervisory role of the court in relation to the performance by a referee of his or her quasi-judicial function is such that it could be expected that such a stricture would be taken seriously. 58    The Plaintiffs’ case amounts to this. The Referee both in consulting the Receiver’s files and now in the two further conversations when in the process of confirming his conclusions, the Referee denied procedural fairness to the Plaintiffs. That coupled with the prior determination of the factual issue of what the units were worth suffices to give rise to a reasonable apprehension of bias, based on pre-judgment. 59    It cannot be the case that every denial of procedural fairness gives rise to a reasonable apprehension of bias though in a more serious case it may well do so, by bespeaking a closed mind or prejudice. To suppose otherwise would contradict the assumption underlying the well established Hardiman principle. That assumption is that a referee, like a tribunal, should not take any active role in proceedings which may bear upon a failure to provide procedural fairness. This is because the matter may return to the Tribunal after an adverse finding on procedural fairness for a re-hearing and the assumption is that the Tribunal can still hear the matter. Obviously in some cases the circumstances of unfairness may be so serious that another body should deal with it, but by no means is this inevitably so. 60    The question is therefore whether the circumstances that gave rise to the procedural unfairness are such as to rise to the level where a reasonable and informed observer has a “reasonable apprehension” of bias. First, I am satisfied that there is not sufficient in the two stage production of documents from the Receiver’s files to justify a reasonable apprehension of bias. In particular, I do not consider the two conversations tip the balance; that is to say, taking all the circumstances in their context and considering their cumulative effect on a fair-minded observer, I do not consider there would be an apprehension of bias. The volunteering of the details of the two conversations reinforces rather an impression of candour. It is true, as I have said, the evidence of the two oral conversations bears upon the potential availability of higher offers, if for example more time had been allowed. But that matter can readily be tested against what Messrs Burke and Curran now say would have influenced them in deciding to proceed or not with an offer and against other relevant facts. 61    The second issue is whether the Referee’s prior finding in those circumstances, coupled as it was by procedural unfairness though unwitting, would lead a fair-minded observer to conclude that the Referee was parti pris, and thus might not bring a genuinely impartial mind to bear on any new evidence or submissions so generated, however hard he tried. While we all know that psychologically, admitting error is not easy, here the Referee is simply required to take account of new evidence and further submissions. If it be the case that, with all the other circumstances, a different conclusion by the Referee were warranted, there can be no embarrassment such as to disincline the Referee from that course. That is reinforced by the strictures expressed in this judgment of the importance of giving fair and proper weight to all relevant facts and submissions, retaining an open mind free of prejudgment. In saying that, I do not of course express any view one way or the other on the subject matter of the Referee’s determination or whether the further facts and submissions will require a different conclusion to the Referee’s previous one. The Referee must simply do his job in an impartial, open-minded way.

Conclusion

62    I am satisfied that there should be no reasonable apprehension by a fair-minded observer that the question of value now to be revisited will not be objectively and impartially determined by the Referee. The earlier procedural unfairness was not a model of (quasi) judicial behaviour and in that sense, was unappealing (to use Mason P’s words in Barbosa v Di Meglio (supra)). But it was not “appealable” in the sense of requiring the Referee’s disqualification. Apprehension of bias must be “firmly established” as reasonable. I am satisfied that it has not been in the present case.

Waiver

63    Turning to the question of waiver, I do not consider that the case for that has been made out. The assumption in Vakauta v Kelly at 572 (per Brennan, Deane and Gaudron JJ) is that waiver is constituted when the party who might have complained waits first to see the result and only after that attacks the decision-maker for actual or apparent bias. It is true that if during a hearing a party apprehends bias, he or she may make clear objection thereby giving the decision-maker the opportunity if possible to correct that impression of bias. But this cannot mean that the party complaining of bias has first to participate in a further hearing to put that claim to the decision-maker for a response, as the Defendants suggest, if a reasonable apprehension of bias has already been formed. It would be absurd to suppose that the impugned decision-maker must first be given the opportunity to dispel any apprehension of bias before a well-founded application can be made. Such a proposition wrongly pre-supposes some reciprocal obligation of bestowing natural justice upon the decision-maker to defend itself. Whereas, the decision-maker is not there to defend itself, but to perform the task entrusted, whether judicial or quasi judicial. It would rather be by adventitious circumstance that the issue of apparent bias emerges at a time when the parties affected could protest. That was not what occurred here. The circumstances giving rise to the claim of potential bias arose progressively, culminating in the Referee’s report of his contact with the claimed potential buyers. Thereafter the Plaintiffs acted with reasonable promptness. That the Plaintiffs made submissions to the Referee, as they did, in accordance with my earlier orders, was not equivalent to waiting the result and only then seeking disqualification.

overall Conclusions

64    I am satisfied that in the events that happened, the Plaintiffs flagged early enough that they reserved any rights they might have in relation to seeking a disqualification of the Referee. This was on 10 June 1999 when the matter was then before me. The ensuing time was spent on reviewing the twelve files produced by the Referee (being the Receiver’s files consulted) before disqualification was pressed. Thus waiver is not made out. 65    I am satisfied that the conduct of the Referee is not such as to give rise to a reasonable apprehension of bias, based on pre-judgment or otherwise. It is to be expected that the Referee will co-operate fully in hearing submissions from the parties and in considering evidence from Messrs Burke and Curran when subpoenaed and will be conscious of the requirement to bring an unbiased mind to bear on the further material before him.

ORDERS AND COSTS

66    While costs would ordinarily follow the event either party may address me on costs if desired. 67    The orders I contemplate are now to comprehend subpoenas if necessary, addressed to Messrs Burke and Curran (unless willing to attend without that necessity) and a hearing by the Referee before the parties and their legal representatives of any matters pertaining to the likelihood that Messrs Burke and Curran would have made offers for the relevant business and the level of such offers if they would have been made and for the parties to have the opportunity to question Messrs Burke and Curran through their legal advisers. The opportunity should then be afforded to both parties to make submissions based upon that material and for the Referee to provide his further report by a designated date after the foregoing steps have taken place, taking into account all of the evidence including, but not limited to, the further evidence and submissions. 68    I invite the parties to agree orders or otherwise submit draft orders in the alternative giving effect to the terms of this judgment. This should be done within seven days.

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Last Modified: 12/08/1999