Commonwealth Bank of Australia v Jovanovic (No 2) - [2004] SADC 126

DISTRICT COURT OF SOUTH AUSTRALIA
(Civil)
COMMONWEALTH BANK OF AUSTRALIA v JOVANOVIC AND OTHERS (No 2)
Reasons for Decision of His Honour Judge Lowrie
6 September 2004
PROCEDURE - COURTS AND JUDGES GENERALLY - JUDGES - DISQUALIFICATION FOR INTEREST OR BIAS
Trial finding that bank had acted in good faith in manner of sale of mortgaged property.
On appeal, Full Court considered section 420A of Corporations Act 2001 and remitted matter for determination of market value of property.
Defendants, on rehearing, sought:
(a) Disqualification of trial judge, and
(b) Right to reopen and call further evidence.
FINDING: On review of earlier findings including criticisms of male defendant and his partners for fraudulent and deceptive conduct and positive findings on the proper and reasonable conduct of the relevant bank officer and nature of independent inquiries as well as acceptance of bank's independent valuer a fair-minded person would question the hypothetical impartiality of the judge further acting on issues surrounding the right to reopen and final orders.
Accordingly, judge disqualified from further participation.
Corporations Act 2001 s.420A, referred to.
Kola v District Court of South Australia & Anor [2001] SASC 268; Cayman National Bank Ltd v Russell & Russell [2004] SADC 82; IOOF Australia Trustees Ltd v Seas Sapfor Forest Pty Ltd (2000) 78 SASR 151; Smith v The NSW Bar Association (1992) 176 CLR 256; 108 ALR 55; Johnson v Johnson 174 ALR 655; Hines Exports Pty Ltd v Mediterranean Shipping Co (2001) 80 SASR 268; Murray v Figge [1974] 4 ALR 612; The Duke Group (in liquidation) v Pilmer & Ors [1997] SASC 6296; Urban Transport Authority of NSW v Nweiser (1992) NSWLR 471 at 478; Ebner v Official Trustee in Bankruptcy [2000] HCA 63 (7 December 2000); Sanders v Snell [2003] FCAFC 150 (2 July 2003), considered.

COMMONWEALTH BANK OF AUSTRALIA v JOVANOVIC AND OTHERS (No 2)
[2004] SADC 126
HISTORY OF ACTION

On 11 February 1998, the plaintiff bank issued these proceedings against Mr and Mrs Jovanovic and their company, Fortson Pty Ltd (Fortson), claiming the sum of $39,615.09 being monies allegedly owed under a Deed of Guarantee signed by the defendants in support of their company’s obligations. During the years thereafter there was a plethora of interlocutory proceedings amending pleadings, arguments and appeals principally concerned with the defence and counterclaim.
The defendants were initially represented by solicitor, but in early 1999 filed a notice of self-representation. In the numerous interlocutory appellate processes before me Mr Douglas Jovanovic appeared and competently argued the relevant issues. Subsequently, Mr Sallis, as counsel, represented the defendants.
The initial defence was filed on 23 March 1998. What has always been the principal issue in this action was the value of the mortgaged property sold by the bank under its mortgage security.
The initial defence pleaded in paragraph 3(7):
“Reasonable selling price for the said property was $950,000 ….. The defendants have therefore lost the sum of $150,000 as a consequence of the conduct of the plaintiff.”
During the course of the numerous applications, the defence received substantial amendment. The plaintiff bank had sold the mortgage property by private treaty under their mortgage security for the sum of $800,000. The defence pleaded in paragraph 6.25:
“By virtue of the sale the plaintiff sold the property for the purchase price of $800,000 notwithstanding the fact that at the time of the sale the market value of the property was in excess of $2,000,000.”
The history of the action received some attention in my judgment of 13 June 2003 and the Full Court decision.
The substantive defence filed on 25 September 1998 alleged that the defendants had been released from their guarantee on 3 October 1997 or alternatively that the bank on the sale of the mortgaged property had “sacrificed the value”. The amended defences continued to flow and in 1999 in a further amended defence the defendants amplified the “sacrifice” plea by adding:
“The market value of the property was in excess of $1,000,000.”
A more substantive amended defence was filed on 1 March 1999 when the defendants reiterated the market value of the property was “well in excess of $1,500,000” (clause 6.2.4).
The amended defence filed on 1 March 1999 raised the allegations that the mortgaged property was “property within the meaning of section 420A of the Corporations Act” and the provisions of that section applied to the sale of the mortgage property. As one would expect that document continued the thrust of the defendants’ case that the bank had acted without a proper or adequate investigation of the “current market value” of the property.
As I have mentioned, from the institution of these proceedings the principal issue was the market value of the mortgaged property at sale.
These are matters relevant in the rehearing of this matter.
PRE-TRIAL PROCEDURES
I mentioned in my judgment of 13 June 2003 the detailed interlocutory applications and appeals, and how I became involved in these procedures. The appeals were in detail and the pleadings and affidavit material voluminous. I felt seized of the matter and continued to hear the interlocutory applications.
At this time an issue of concern was the fact that Mr and Mrs Jovanovic were unrepresented. I commented in my judgment at page 4:
“I heard the appeals and endeavoured to assist the unrepresented defendants. Mr Douglas Jovanovic (referred to throughout this proceedings as “Doug”) attended on all these applications, and, clearly had a significant grasp of all factual matters not only involving the bank, but his detailed litigation with his former business partners, the Govedaricas.’
The significant issue during these early stages was the experts’ reports. I was sympathetic to the defendants in allowing much time for these valuation and/or reports to be prepared so the trial could proceed.
PRIOR HEARING
The trial commenced on 3 March 2003 and continued to 19 March 2003. The issues for determination were firstly, did the bank follow appropriate and proper procedures in selling the Plaza Hotel under their security, and, secondly, if they had followed such proper procedures, did they sell the same for reasonable value.
There was no dispute about the calculation of the bank’s claim under its security or the nature of the formal default notices.
In my judgment I noted that the bank in their dealings had relied on the valuation obtained from the independent firm of Knight Frank (SA) Pty Ltd (Knight Frank), undertaken by their valuer, a Mr Burton.
The defendants, on the other hand, called a Mr Williamson who prepared a report in May 2002. He did not accept the methodology and Mr Burton did not accept the capitalisation rate. Mr Williamson conceded that his report was not prepared as one would expect on a traditional valuation basis, but rather was asked to examine and comment on the Burton valuation.
The defendants called a valuer, a Mr Taylor, who had valued the Plaza Hotel in 1997. I commented on that evidence at page 39 in my judgment. There was an objection to this evidence, and not without merit. I was conscious of the prior unrepresented state of the defendants and eventually allowed that evidence to be given. Surprisingly, the content of that valuation had not been placed before Mr Burton and his evidence. Eventually Mr Taylor conceded that on the issue of capitalisation the Burton figure was not totally unreasonable and in “the ball park”.
I had little hesitation in accepting the valuation evidence as tendered by Mr Burton. I did not criticise the bank in regard to the action it had taken and had achieved a price above that of the independent valuation. I entered judgment for the bank on its claim. The bank’s dealings as I pointed out were mired and confused by the deceitful conduct of the defendants and their business partners, the Govedaricas. A web of deceit had been spun in and about various financial documents concerning the Plaza Hotel. It would seem that these documents might well have had a basis for defeating creditors. I commented I felt that on what information was before me it was the Govedaricas who may well have been the instigators for this what I called “devious web of misleading documentation”. However, Mr Jovanovic was a pawn in the transaction, but, as I said, a willing partner in the conspiracies. I then commented “his naivety is abundantly clear”. In his evidence he made forthright admissions about his conduct. Litigation is pending between the former partners and I assume is still on foot.
APPEAL
The judgment went on appeal and the Full Court delivered its judgment on 3 March 2004. The appeal was allowed and remitted for further hearing and determination of the market value of the property.
His Honour Justice Gray found that the bank had acted contrary to the advice of its accountants and in breach of section 420A. Justice Besanko found that the bank did not act in breach of duty in relation to the hotel business conducted on the mortgaged premises, but considered that the bank had acted in breach of section 420A. However, the learned judge commented it was encumbent on the bank to appoint an agent and conduct a proper marketing campaign rather than accept a bid from one partner with bank assistance. Justice Mullighan agreed with the decision of Justice Besanko.
In that judgment section 420A received attention and comment by the learned judges. I refer particularly to paragraphs 117 and 118 of the learned judgment of Besanko J where His Honour commented:
“The question remains as to the price which would have been obtained for the freehold title of the property had the Bank taken all reasonable care in terms of the section. In the circumstances of this case that involved appointing an agent, conducting a proper marketing campaign and putting the freehold title of the property to the market. The difference between the price which would have been obtained had that been done and the price the Bank in fact obtained, together with appropriate adjustments in relation to the expenses of the sale, is the measure of the loss for the breach of the duty in s 420A. Unfortunately, this Court is not in a position to determine that figure. It involves an assessment of the valuation evidence including an assessment of the extent to which that precise issue has been addressed by the valuers, and a determination as to the valuation evidence which should be preferred. It may be noted that the market value as defined by one or more of the valuers who gave evidence is not necessarily the same as the sale price that would have been achieved had the Bank appointed an agent, conducted a proper marketing campaign and put the freehold title of the property to the market.
The question which I have identified must be determined by the Judge and it will be a matter for him whether, if the parties wish to call further evidence, he allows that to be done. If the conclusion is reached that there is a difference, then Fortson is entitled to have the difference brought to account in the taking of accounts between it and the Bank. Depending on the figure, it may or may not have a counterclaim. The Jovanovics are entitled to bring to account by way of an equitable set off to the claim on the guarantee the difference, if there be a difference. As guarantors they are not entitled to bring a counterclaim, and although they were directors and shareholders of Fortson, they are not entitled to claim for loss sustained by the company (Gould v Vaggelas (1985) 157 CLR 215). For these reasons, I disagree with the conclusion of Gray J that the Jovanovics are entitled to pursue their counterclaim against the Bank.”
REHEARING
When the matter came on for rehearing defendants’ counsel intimated that there were two matters to be considered. Firstly, an order was sought that I disqualify myself from further hearing of this action on the grounds of actual or perceived bias. Secondly, in the alternative, that I grant leave for the defendants to reopen their case to adduce further evidence “as to the sale price that would have been achieved had the plaintiff appointed an agent”.
The defendants’ counsel submitted detailed written submissions. Page 37 of that submission summarised the application that was sought as follows:
“11.32His Honour Judge Lowrie do disqualify himself from further hearing this action on the grounds of actual or perceived bias in that His Honour has already decided or made comments to the effect that he accepts and prefers that valuation evidence of the plaintiff’s witness Mr Burton to the written and oral valuation evidence already adduced by the defendants and the plaintiffs by counterclaim and the written valuation report of the plaintiff’s own senior valuer Mr Tom Cashman.
In that regard, defendants and the plaintiffs by counterclaim refer to the above findings and comments by His Honour Judge Lowrie and the principles of law as enunciated in the above authorities.
11.33In the alternative, His Honour Judge Lowrie do grant leave to the defendants and Fortson Pty Ltd by counterclaim to reopen their case and adduce further written and oral expert evidence as to the sale price that would have been achieved had the plaintiff appointed an agent, conducted a proper marketing campaign and put the freehold title of the property to the market in the manner as described by the Full Court in its Reasons For Judgement delivered on 3 March 2004.
11.34In that regard the defendants and Fortson Pty Ltd by counterclaim seek to adduce such further written and oral expert evidence from the following experts;
11.34.1Mr Rob Williamson, FPD Savills, Currie St, Adelaide;
11.34.2Mr Michael Harrington, McGees Property, Waymouth St, Adelaide;
11.34.3Mr Gary Taplin, Brock Partners, Young St, Adelaide, and
11.34.4Mr Malcolm Steele, Hotel Broker, Carrington St. Adelaide.
11.35The defendants and Fortson Pty Ltd by counterclaim estimate that it will take the parties about 3 months to obtain and exchange their proposed further written experts’ reports and about 3 to 5 days for the proposed further Court hearing, including the opening, the tendering of the further written experts’ reports and the oral evidence and closing addresses. The nature and parameters of the proposed further written and oral expert evidence are that such proposed evidence shall be confined to the discrete issue of the sale price that would have been achieved had the plaintiff appointed an agent, conducted a proper marketing campaign and put the freehold title of the property to the market in the manner as described by the Full Court in its Reasons For Judgment delivered on 3 March 2004.”
A large bulk of the material is in fact a reproduction of Halsbury’s Laws of Australia concerning the issue of bias and all the well-known and established authorities on this issue. The argument was very much centred around the principle that:
“A judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the questions…. “
The thrust of the submissions was that my prior findings meant that I had prejudged the important issues in this case, in effect, by my comments in accepting the merits of the Burton valuation. The defendants’ counsel set out in those detailed submissions on pages 24, 25, 26, 27 and 28 of that written material remarks that I had made in the course of the trial concerning the nature of the Burton valuation.
I had viewed the Burton valuation as a well-structured document and contained all the essential and necessary factual material that one would come to expect from a valuer involved in the preparation of such a document Mr Williamson’s evidence was viewed as commentary on the Burton valuation.
My comments to counsel were always open-ended like in 11.5 in my discussions with Mr Sallis “anyway, you can answer that later”. At 11.6 “anyway, we will come to this later on”.
A number of subsequent comments were made because of the detailed debate about the nature and valuation of the business as such being carried on from the Plaza Hotel. Mr Sallis overlooked nothing. To say some of his points are repetitive is an understatement. That is the manner of his advocacy and it is not for me to criticise the same. However, in some of my comments there is a sense of frustration and matters can be so viewed.
However, the thrust of Mr Sallis’s application before me was the area of what a party or layperson might possibly perceive as bias. Those authorities are set out in his submissions.
Counsel for the bank commented that the defendants had never raised during the trial and appeal the issue of bias, although he agreed that it had a brief mention in the final stages of the Full Court hearing. He was critical of this issue not being raised after defence counsel had the benefit of the Full Court judgment. Although this point can be made I place the same to one side. Clearly, if my alleged bias was so apparent during the trial that issue should have then been aired. Counsel was also critical of the editing of some of the propositions of bias from Halsbury and the undue emphasis made on the parties’ own perceived application of bias, but pointed out the total rationale of the relevant decisions.
As mentioned in the evolution of case flow management because of the now active participation of judges in pre-trial procedures, judges make comments during periods of dialogue which may well be subject to criticism by one or other party. However, the same have to be seen in that context. When the allegations of my particular comments are examined concerning the same are of debate, particularly when making comparisons, for instance, between the Burton, Williamson and Taylor valuations or reports.
I do not view any of my comments at the time of trial as showing or establishing bias or prejudgment of issues.
Counsel for the bank also referred me to the recent case of Kola v the District Court of South Australia and Anor[1] dated 6 August 2001 where the issue in question was the District Court judge’s conduct during a hearing of a Rule 9 application and as to whether those comments give rise to apprehended bias. The judge’s comments are set out in the learned judgment and can be classified as, indeed, very strong and direct. The learned Chief Justice rejected the bias suggestion although commenting on the use of the language was inappropriate and regrettable and “the judge’s patience was clearly tried” and “there was nothing to suggest that the judge might have closed his mind on the nature of the application and the orders sought”.
[1] [2001] SASC 268
I do not consider any of my comments were “inappropriate” or “regrettable”.
I refer to the decision of Judge Clayton in Cayman National Bank Ltd v Russell & Russell[2] delivered on 28 May 2004. This was an appeal where the appellant thought the Master should disqualify himself in the application before him. The judge found that the Master’s statements did not show any prejudgment of the relevant questions, and commented on the remarks of the Chief Justice in IOOF Australia Trustees Ltd v Seas Sapfor Forests Pty Ltd[3]:
“The observer is taken to understand that there will be occasions when both judge and counsel will, to put it bluntly, express themselves in a manner that is to be regretted. It is important that judges maintain a calm and judicial manner, but as I have already said a fair-minded observer is not to be taken to believe that judges are perfect. The observer will accept that occasional departures from the appropriate standard and nothing more are indications of ordinary frailty.”
I had much of that state of mind in this case.
[2] [2004] SADC 82
[3] (2000) 78 SASR 151

The learned judge then further commented on the remarks of the Chief Justice in Kola v District Court of South Australia & Anor (supra):
“In such a case it is important to remember that the issue is whether it appears that the judge is prepared to hear submissions with an impartial an unprejudiced mind, and not whether it appears that the judge has an inclination or a disposition to decide a point in a particular way. There might be a variety of reasons, including previous decisions made by the same judge, or decisions made by other judges of the court, which make it likely that a judge will decide a point in a particular way. But it does not follow that the judge will not have an impartial and unprejudiced mind, as long as the judge is willing to listen to, and to consider, the argument to be put to the judge.”
I view the test, as commented upon by Judge Clayton when he commented, as most appropriate:
“The test for bias is whether in the minds of reasonable persons there would be a reasonable apprehension that the Judge may not be fairly discharging his or her duty in deciding the case or 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 matter. Actual bias is prejudgment to a conclusion already formed. See Minister for Immigration and Multicultural Affairs v Ghia (2001) 178 ALR 421 and Johnson v Johnson (2000) 174 ALR 655. The apprehension is to be judged objectively by reference to a reasonable observer. See R v Eastman (1994) 76 A Crim R 9.”
An application for disqualification always rests on the particular factual basis of the case in question. This application is entwined with the defendants’ current application to reopen their case and call further evidence.
APPLICATION TO REOPEN
Counsel for the defendants commented at length on the remarks of Besanko J on section 420A. I have set out paragraphs 117 and 118 and submitted that those remarks can only be satisfactorily answered by the admission of new evidence. Counsel viewed these remarks as now being the leading authority on section 420A and the proper determination of “sale price can only be resolved by reopening the case and giving the parties the right to call evidence on this specific designated area”.
Normal circumstances only allow a party to reopen after judgment in exceptional circumstances. A convenient starting point is the High Court decision of Smith v The New South Wales Bar Association[4] where a distinction was drawn in a case where the evidence is complete as compared to a case where the reasons for judgment have been delivered. I refer to the joint judgment at page 267.
[4] (1992) 176 CLR 256; 108 ALR 55
In Johnson v Johnson[5], Kirby J said:
“There is no simple answer to the foregoing questions. As is usually the case when a fiction is adopted, the law endeavours to avoid precision. The nature of the fiction involved in this instance is illustrated by the many ways in which the hypothesised bystander is described. Phrases that have been used include the "lay observer", "fair-minded observer", "fair-minded, informed lay observer", "fair-minded people", "reasonable or fair-minded observer", "reasonable and intelligent man", the "parties or the public", a "reasonable person", or (as has sometimes been favoured in England and Canada) the somewhat quaint and circular phrase, a "right-minded" person. Obviously, all that is involved in these formulae is a reminder to the adjudicator that, in deciding whether there is an apprehension of bias, it is necessary to consider the impression which the same facts might reasonably have upon the parties and the public. It is their confidence that must be won and maintained. The public includes groups of people who are sensitive to the possibility of judicial bias. It must be remembered that, in contemporary Australia, the fictitious bystander is not necessarily a man nor necessarily of European ethnicity or other majority traits.”
[5] 174 ALR 655
I was also referred to the recent decision of Hines Exports Pty Ltd v Mediterranean Shipping Co[6] where Bleby J considered an application to reopen a case where there had been an application to reopen after the judges reasons had been published. The learned judge outlined the factual matters in this case and referred to the case of Murray v Figge[7] where Muirhead J extracted three tests for reopening a party’s case before judgment was delivered, namely:
(a)    fresh evidence is so material to the interests of justice requires it to be admitted.
(b)    the evidence if believed would most probably have affected the results
(c)    if the evidence could not by reasonable diligence have been discovered before.
[6] (2001) 80 SASR 268
[7] [1974] 4 ALR 612
He also commented on the decision of Mullighan J in The Duke Group (in Liquidation) v Pilmer and Ors[8]. The guiding principle in circumstances of that case was always the obligation to do justice. Clarke JS in Urban Transport Authority of NSW v Nweiser[9] is important when His Honour said:
“In this case it could not be said that the evidence which the appellant sought to lead could not have had any impact upon the result and was peripheral and unimportant. While it is true to say that it did not deal with the incident upon which the claim was based it assumed considerable significance in the light of the defence raised and the issue joined between the parties. The respondent asserted that there was an incident on 13 August 1985 which led to permanent and severe disability. The appellant denied that there had been any such incident and asserted that the respondent was falsely seeking to blame it for a disability from which he suffered. In other words the respondent was asserting that the claim was a fraud. While matters of credit assumed great significance in the light of the primary issue between the parties it should not be overlooked that the real question was whether the respondent had established that the incident occurred and his disability. In these circumstances the assertion by the appellant that the respondent had earlier admitted a serous back disability and had endeavoured to mount a false claim with support from fellow workers was of no little relevance. If, for instance, the witness had given evidence along the lines suggested by counsel in his submissions to his Honour and this evidence had been accepted by the trial judge then the result of the case may well have been difference.”
[8] [1997] SASC 6296
[9] (1992) 28 NSWLR 471 at 478
Plaintiff’s counsel succinctly commented:
“The plaintiff seeks a refusal of the application to re-open. Not only is there the trial judgment, but an appeal judgment as well. At no time during that process was a submission made to re-open to call additional evidence. It is an after-thought based on the appeal judgment in an attempt to ‘ramp up’ the defendant Fortsons’ position when the accounts are determined. In reality nothing has changed about Fortsons’ position since the sale to Roclin by the plaintiff.”
THE PRINCIPAL ISSUE
The issue in this case, as apparent from the initial defence filed in 1998, was the market value of this property, the Plaza Hotel, at the date it was sold by the bank. “Sale price” and “market value” can be one and the same. The defendants alleged in various pleading that the “value of the property was $2,000,000 - $1,500,000 - $1,000,000…”.
Besanko J has commented upon the definition of “sale price” and how the same is arrived at with the aid of valuation evidence.
Section 420A was not a recent, or, issue raised for the first time at trial, but was in fact pleaded by the amended defence settled by defendants’ counsel in excess of three years before the trial.
The “market value” of the property, as distinct from “sale price” had received much attention in the pleadings, pre-trial procedures, evidence and closing addresses.
Over the years, the parties proceeded to trial bearing in mind the central issue was the market value of this property at the relevant time. They each obtained their reports. Lengthy delays were granted to the defendants to obtain such valuations and/or reports for trial. No doubt the parties conducted this trial bearing in mind those valuations and/or reports and the attendant risks of such reports and the provisions of section 420A were uppermost from the outset of this case to the final addresses.
I have commented on the valuation evidence. In my prior judgment I commented upon the valuation material and made findings. An area of debate particularly of Mr Williamson’s evidence was concerned with the capitalisation rate.
The suggestion now by defendants’ counsel is to recall Mr Williamson and seek evidence from three other people who I assume are real estate valuers in an attempt to establish the market value or sale price of the Plaza Hotel. Those reports have not been obtained and I accept to do this would be an expensive exercise. However, this was evidence which could and should have been and no doubt was available to be called at the trial.
The finding must be that this evidence now sought to be adduced was in fact at all times available on this particular area, but for reasons best known to the defendants and their advisers they relied on Mr Williamson and Mr Taylor.
The learned appellate judge drew the distinction between what I view as the net selling price of the property after marketing and commission expenses compared with a market value or appraisal. They are not necessarily the same. In this, in effect, “private” sale by the bank after their investigations the normal selling expenses were averted.
As I have mentioned before, and reiterated, over the years the valuation evidence was central to this case and the defendants were for a long period unrepresented. That did involve delays in order to ensure the defendants relevant reports were available at trial. In that early period, the bank may well have had some cause for complaint of my conduct and, indeed, even during the trial in allowing matters to be tendered in the absence of proper discovery.
The pre-trial procedures were on foot prior to trial for almost five years and the issue was the value of this property at the date of sale. Every opportunity was extended to the defendants to obtain such evidence. There must be finality in legal proceedings. Both parties structured their respective cases around this issue. This matter should not be re-litigated.
If I were to decide this issue I would consider on the factual basis of this case in light of the authorities that there is no right to reopen. However, I would hear the parties on the material presented at trial on what further orders I should make following the Full Court decision.
However, this conclusion does cause me concern.
In my judgment I made credit findings and was particularly critical of Mr Douglas Jovanovic and his former partners for their deceptive and fraudulent conduct. On the other hand, I viewed the conduct of the senior bank officer, Ms Barker, as very fair and at all times considerate of the defendants and their interests notwithstanding the evolving legal confusion of the persons entitled to operate the site. The bank was concerned about the confusion of the day-to-day operations of the site and sought advice on this area from the accountants, Ernst & Young. Their report was inconclusive because of the lack of written material and outlined the options open to the bank, which were threefold including the private tender process, or option 3, sale on the open market.
I viewed the actions of the bank on the conduct of Ms Barker as reasonable in light of the independent reports received from the accountants, Ernst & Young, and the real estate valuer, Mr Burton of Knight Frank, and I outlined my views on why I had little hesitation in accepting such a well-structured report.
However, the Full Court has found that option 3 of the accountant’s report was the appropriate course bearing in mind the provisions of section 420A of the Corporations Act 2001.
I refer to the recent Full Court decision of the Federal Court of Australia in Sanders v Snell[10]. This matter concerned the issue of the nature of the termination of office of the former Executive Officer of Norfolk Island. The action initially succeeded and then went to appeal. The Full Court increased the damages under the various heads. The matter went on appeal to the High Court and the appeal was allowed on the basis that the Full Court was not justified in making certain findings of fact on the tort of misfeasance in public office and set aside the Full Court decision and ordered a new trial. On the retrial the learned Judge rejected a contention that he should disqualify himself and eventually made a finding of a cause of action in misfeasance in public office. That decision then went on appeal. The Full Court considered the issue of disqualification (paragraph 82) and commented:
“This leaves the question whether his Honour should have disqualified himself from undertaking the new trial. It follows from the conclusion already reached that there could be no issue of bias or apprehended bias. The new trial was in substance a rehearing of the proceedings with a view to deciding upon the as yet unresolved cause of action of misfeasance in public office. The trial judge was able to receive the evidence led at the first trial and to make findings many of which were, not surprisingly, congruent with the findings he had made at that trial but with a view to determining the question which he had not examined. He did that and found that the tort had been committed. The correctness or otherwise of his finding is no basis for asserting that the judge should have disqualified himself. Such a complaint would be analogous to a complaint that a judge who had determined a preliminary issue of fact adversely to a particular party should be precluded from hearing and determining remaining issues in the proceedings.”
[10] [2003] FCAFC 150 (2 July 2003)
The learned Judge had in no way concerned himself with the separate cause of action of misfeasance in public office and consequently there was no basis for disqualification.
I do not accept a contention of actual bias on my part in this matter. The issue is a perception of bias in light of my credit findings of the parties as well as my clear views on the merits of the valuation evidence.
I can understand the defendants concern with my further deliberations in this matter and, indeed, concerns of the hypothetic fair-minded lay observer. Such a person would raise concern of a judge now deciding further issues after rejecting the defendant as a credible witness, but also did not accept the reports of his experts and further viewed the conduct of the relevant bank officer as patient, exemplary and reasonable in light of the past deceitful and fraudulent conduct of the defendant and his associates.
The fair-minded person would conclude “how can even a fair-minded judge be impartial in light of those past findings in now considering issues of reopening and valuation evidence?”.
The integrity of our judicial system must be maintained. As the High Court recently commented in Ebner v Official Trustee in Bankruptcy[11] the hypothetical issue of impartiality is question of possibility not probability.
[11] [2000] HCA 63 (7 December 2000)
The overriding principle in all of these matters is the need for our tribunals to be completely impartial for justice to be delivered fairly.
My evident concern in this matter raises sufficient doubt for me to disqualify myself from the current process.
I reserve the question of costs to the trial judge.