Dimitropoulos AND Australian Securities and Investments Commission
[2019] AATA 1350
•20 June 2019
Dimitropoulos AND Australian Securities and Investments Commission [2019] AATA 1350 (20 June 2019)
Division:TAXATION & COMMERCIAL DIVISION
File Numbers:2017/3749 & 2017/3754
Re:John DIMITROPOULOS
APPLICANT
Australian Securities and Investments CommissionAnd
RESPONDENT
DECISION
Tribunal:Mr P W Taylor SC, Senior Member
Date:20 June 2019
Place:Sydney
Mr Dimitropoulos’ recusal application is refused.
........................................................................
Mr P W Taylor SC, Senior Member
CATCHWORDS
PRACTICE AND PROCEDURE – proceedings – application that a member of the Tribunal recuse themselves from hearing the matter due to an apprehension of bias – where Tribunal member had previously presided over proceedings in relation to a potential witness – whether findings of credit or credibility in relation to that potential witness had been made during the prior proceedings – application refused
LEGISLATION
Corporations Act 2001 (Cth) – ss 761A, 763A, 766A, 911A, 913B, 920A, 920B
National Consumer Credit Protection Act 2009 (Cth) – ss 47, 80, 81
Superannuation Industry (Supervision) Act 1993 (Cth) – s 67
CASES
Antoun v R (2006) 224 ALR 51 at 60; 80 ALJR 497; [2006] HCA 2
Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 65 FCR 215
Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411
Australian Securities and Investments Commission v Rich [2004] NSWSC 970Australian Securities and Investments Commission (ASIC) v Reid [2005] FCA 1274
British American Tobacco Australia Services Ltd v Laurie [2011] HCA 2
Cabcharge Australia Ltd v Australian Competition and Consumer Commission [2010] FCAFC 111
Charara v Federal Commissioner of Taxation [2016] FCA 451
CUR24 v DPP [2012] NSWCA 65
Damjanovic v Sharpe Hume & Co [2001] NSWCA 407
Downey v Acting District Court Judge Boulton (No 5) (2010) 272 ALR 705
Dye v Commonwealth Securities Ltd (No 4) [2010] FCA 910
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337
Ewert v Lonie [1972] VR 308
Fitzgerald v Director of Public Prosecutions (1991) 24 NSWLR 45
Gas & Fuel Corporation Superannuation Fund v Saunders (1994) 52 FCR 48
Hamod v NSW [2011] NSWCA 375
Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 166 ALR 302
Johnson v Johnson (2000) 201 CLR 488 at 501; 174 ALR 655; [2000] HCA 48
Kwan v Kang [2003] NSWCA 336
Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 100; 93 ALR 435; 64 ALJR 412
Livesey v New South Wales Bar Assn (1983) 151 CLR 288; 47 ALR 45
McGovern v Ku-ring-gai Council (2008) 72 NSWLR 504
Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48
Minister for Immigration and Multicultural Affairs v Jia [2001] HCA 17
Nicholls v Michael Wilson & Partners Ltd (2010) 243 FLR 177; [2010] NSWCA 222
R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 116; [1953] ALR 461; (1953) 27 ALJR 35
R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546
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 at 265; 9 ALR 551
Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272
Re Finance Sector Union of Australia; ex parte Illaton Pty Ltd (1992) 107 ALR 581
Re JRL; Ex parte CJL (1986) 161 CLR 342; 66 ALR 239
Re Mellor and Australian Postal Corporation [2010] AATA 288
Sturesteps v Khoury (No 2) [2017] NSWSC 1525
Vakauta v Kelly (1989) 167 CLR 568; 87 ALR 633
Webb v The Queen (1993-1994) 181 CLR 41REASONS FOR DECISION
Mr P W Taylor SC, Senior Member
This is an application by Mr Dimitropoulos that I recuse myself from the hearing of his substantive review applications. Those applications have been fixed for hearing before me for a ten day period starting on 15 July 2019.
The basis of Mr Dimitropoulos’ application is his objection, on the grounds of apprehended bias, to various statements I made in the course of hearing the review application of Mr Michael Wilkins. That hearing took place on 15, 16 and 17 April. I have reserved my decision on Mr Wilkins’ application.
In order to deal with the recusal application it is necessary to provide some background to both the substantive review applications of Mr Dimitropoulos and that of Mr Wilkins.
MR DIMITROPOULOS’ REVIEW APPLICATIONS
Mr Dimitropoulos’ review applications concern two 23 June 2017 ASIC decisions:-
(a)the financial services decision:- an order under ss 920A(1) & 920B(1) & (2) of the Corporations Act 2001 (“CorpAct”) permanently banning Mr Dimitropoulos from providing any financial services
(b)the credit decision:- an order under ss 80(1) & 81(1) & (2) of the National Consumer Credit Protection Act 2009 (“CredAct”) permanently banning Mr Dimitropoulos from engaging in any credit activities.
Both of ASIC’s decisions concerned the character of Mr Dimitropoulos’ conduct, in the period from about mid-2009 to “at least” mid-2013, in relation to various entities including:-
(a)Sunpac Finance Pty Ltd (“Sunpac”):- Mr Dimitropoulos incorporated Sunpac in about 1998. He was at all material times its sole director, secretary and shareholder. Sunpac operated as an intermediary involved in submitting loan applications to financial institutions. Sunpac obtained an Australian credit licence in February 2011. At the end of June 2013, Mr Dimitropoulos resigned as a director, and sold his interest in Sunpac.
(b)Fast Loans Australia Pty Ltd (“Fast Loans”):- Fast Loans provided “top up” loans to at least some of the “SMSF” borrowers / purchasers to which I refer later in these reasons:- see paragraphs 6 & 21 below.
(c)Heritage Financial Solutions Pty Ltd (“HFS”):- HFS operated from office premises it shared with Sunpac, and other entities with which Mr Dimitropoulos had some association. It appears to have had a role in referring people (i.e. property purchasers seeking finance) to “Heritage FSA”.
(d)Heritage Financial Solutions Australia Pty Ltd “Heritage FSA”:- Between February 2010 and August 2011, Heritage FSA referred loan application business to Sunpac. In July 2011 Heritage FSA obtained an Australian credit licence and became a party to arrangements under which Fast Loans provided “top up” loans. ASIC’s credit decision reasons describe it as an entity that, at least until March 2015, “arranged loans on behalf of its clients”.
ASIC’s decision reasons contain findings that the Sunpac / HFS / Heritage FSA businesses involved the following elements:-
(a) unsolicited approaches to prospective clients about using their superannuation funds to buy house and land packages
(b) obtaining details of individual clients’ financial position
(c) assisting clients to enter into contracts for the land purchase and house construction
(d) recommending to purchaser clients that they take steps to
(i) set up a self managed superannuation fund (“SMSF”)
(ii) roll existing superannuation monies into the client’s newly created SMSF
(iii) use the funds placed in the SMSF to assist with the completion / performance of their purchase / construction contracts
(iv) borrow other funds to assist with honouring their contractual purchase and construction obligations.
ASIC’S “CREDIT ACTIVITY” FINDINGS - SUNPAC
ASIC’s credit decision involved three main findings about Mr Dimitropoulos’ conduct. They were to the effect that (i) he had made misrepresentations about Sunpac’s CredAct compliance, (ii) he was involved in Sunpac’s non-compliance with aspects of its general conduct obligations, and (iii) his conduct provided reason to believe in the likelihood of future non-compliance with credit legislation.
The first of ASIC’s findings concerned Sunpac’s 2012 and 2013 annual compliance certificates. It was significantly based on Sunpac’s production of blank (or template) documents in response to production notices ASIC had served in March 2013 and March 2015. One of those documents was a Compliance Manual. Whilst ASIC accepted that the Compliance Manual itself described appropriate policies and practices, it did not accept that Sunpac / Mr Dimitropoulos had demonstrated compliance with them. More specifically, ASIC considered that Sunpac had not demonstrated it had provided clients with appropriate information about either (i) credit alternatives, or (ii) conflicts of interest (having regard to what ASIC considered were the nature of the associations between the various entities with which Mr Dimitropoulos was associated, and their respective apparent involvement in the client transactions).
In its second category of findings, ASIC’s credit decision reasons accepted that Sunpac had complied with its obligations in some respects (including adequate training of its representatives, and having adequate compliance systems). However, ASIC found that Sunpac had not complied with various CredAct s 47 requirements, including:-
(a) s 47(a):- doing all things necessary to ensure that the credit activities authorised by its licence were engaged in efficiently, honestly and fairly
(b) s 47(b):- having adequate arrangements in place to ensure that clients were not disadvantaged by any conflict of interest that might arise in relation to its credit activities engaged.
The particular basis for ASIC’s finding of non-compliance with CredAct s 47(a) & (b) was the absence of evidence that Sunpac clients were appropriately advised about alternative credit products and conflicts of interest. ASIC’s concern about those matters arose from the opacity of the arrangements under which Mr Dimitropoulos received payments from associated entities apparently involved in the client transactions. It was ASIC’s dissatisfaction that Sunpac had adequately addressed those matters that also drove the finding that ASIC had reason to believe Mr Dimitropoulos was likely to contravene credit legislation. ASIC regarded the evidence as revealing the fact, but not the precise nature, of Mr Dimitropoulos’ “significant relationships”, with other entities associated with Sunpac’s business activities. ASIC’s reasons considered that the opacity of those relationships, and their non-disclosure to Sunpac’s employees, demonstrated at least Mr Dimitropoulos’ lack of understanding of credit legislation obligations, and probable disregard of them.
ASIC’S “CREDIT ACTIVITY” FINDINGS - HERITAGE FSA
ASIC considered that Heritage FSA had continued Sunpac’s business. It considered that Mr Dimitropoulos set Heritage FSA’s strategic direction, called and controlled staff meetings, hired, trained and terminated staff, and was an integral part of the company’s business operations. ASIC also found that, from July 2010 to the end of June 2011, Heritage FSA had engaged in credit activity without being registered. ASIC considered that Mr Dimitropoulos’ “integral” role in Heritage FSA’s operations required the conclusion that he had been knowingly involved in that unlicensed credit activity.
In relation to the standard of Heritage FSA’s credit activity, ASIC found that Heritage FSA (like Sunpac) had failed to comply with its general conduct obligations – including the CredAct s 47(a) & (b) obligations. Although Heritage FSA had provided ASIC with a range of manuals, reports and policies, ASIC regarded them as insufficient to demonstrate the required compliance. This was because they did not provide evidence of actual activities in relation to such fundamental matters as (i) the distribution of the various compliance manuals, (ii) the training of Heritage FSA’s representatives, or (iii) representatives compliance with the various manuals and policies. Most particularly, apparently underlying ASIC’s dissatisfaction were concerns that Heritage FSA clients were not appropriately advised about either (i) alternative credit products, or (ii) conflicts of interest.
ASIC’S “FINANCIAL SERVICES” FINDINGS
ASIC’s financial services decision concerned the character of Mr Dimitropoulos’ conduct in relation to the “Heritage” business conducted from about mid-2009, and having the characteristics outlined earlier in these reasons:- see paragraph 6 above. ASIC considered that the business involved providing “financial product advice”, having regard to the relevant statutory definitions of “financial product” and “financial product advice”:- see CorpAct ss 761A, 763A(1), 766A(1). The business was, therefore, a “financial services business” whose lawful conduct required (at least) Heritage FSA to have held either (i) an Australian financial services licence (“AFS licence”), or (ii) an authority from such a licensee:- see CorpAct ss 911A(1), 913B & 1311. Heritage FSA never held such a licence. The only authority Heritage FSA held was from May 2010 to December 2012, limited to providing administrative and clerical services, and did not extend to “financial product advice”.
Heritage FSA did have some association with a qualified financial planner (a Mr Pote) who held a relevant authorisation from an AFS licensee, and was at least available to provide advice to Heritage FSA's clients. ASIC’s decision reasons specifically rejected claims that Heritage FSA’s association with Mr Pote (having regard to CorpAct s 911A(2)(k)) had the effect of exempting Heritage from any AFS licence requirement. ASIC also rejected claims that Heritage FSA had conducted its business so as to ensure that (i) the conduct of its representatives was limited to eliciting the interest of potential clients, and (ii) all financial product advice was given by an appropriately authorised third party.
ASIC’s findings about Mr Dimitropoulos’ personal involvement in, and responsibility for, the shortcomings in Heritage FSA’s activities were to the effect that Mr Dimitropoulos:-
(a) held a controlling management position in Heritage FSA - see paragraph 11 above
(b) had investigated whether Heritage FSA required a financial services licence for its activities
(c) had provided training to Heritage FSA about ASIC’s Regulatory Guide 146 “Licensing: Training of financial product advisers” - and was likely to have been well aware of both the relevant licensing requirements, and of the fact that Heritage FSA did not hold such a licence
(d) was relevantly and directly responsible for “a complete disregard for the law in the businesses of Sunpac and Heritage”
(e) was knowingly involved in Heritage FSA’s CorpAct contraventions.
As an apparent alternative to its findings about Mr Dimitropoulos’ personal responsibility for Heritage FSA’s relevant contraventions, ASIC considered that his conduct provided reason to believe that he was likely to contravene a financial services law. This finding was based on ASIC’s scepticism of Mr Dimitropoulos’ claim to have provided various “unpaid” services to Heritage FSA, and its view that Mr Dimitropoulos had displayed a lack of integrity and professionalism in relation to his receipt of regular and substantial payments from other entities apparently involved in aspects of the client transactions. ASIC considered that Mr Dimitropoulos had not disclosed the fact and nature of those payments to the Heritage FSA representatives who dealt with its clients, and that he had at least failed to recognise that his relationship with the other entities gave rise to a potential conflict of interest. It was that absence of disclosure, and apparent lack of appreciation of the significance of the underlying conflict, that resulted in ASIC’s conclusion that it had reason to believe Mr Dimitropoulos was likely to contravene financial services laws.
MR DIMITROPOULOS’ SUBSTANTIVE REVIEW CONTENTIONS
Mr Dimitropoulos challenges the correctness of ASIC’s decisions. In relation to the credit decision his contentions included propositions that:-
(a) in making findings about the nature and extent of his role in the Heritage FSA business, ASIC incorrectly relied on statements from Heritage FSA’s former sales consultants
(b) in making its various findings of non-compliance with other aspects of the general conduct obligations in CredAct s 47, ASIC had proceeded on the impermissible basis that Mr Dimitropoulos had not negatived its concerns about possible non-compliance.
In relation to the financial services decision Mr Dimitropoulos’ contentions include the following propositions:-
(a) contrary to ASIC’s finding, Heritage FSA had not provided “financial services” in contravention of the CorpAct
(b) Mr Dimitropoulos did not hold a controlling management position in Heritage, was not “involved in” Heritage FSA’s CorpAct contraventions, and ASIC had again wrongly relied on evidence from Heritage FSA’s former employees.
THE WILKINS REVIEW APPLICATION
Mr Wilkins’ 26 February 2018 review application related to an ASIC delegate’s decision of 31 January 2018. The substance of that decision was an order, under CredAct ss 80, 81, prohibiting Mr Wilkins from engaging in any credit activities for a period of three years.
Mr Wilkins had been employed by Sunpac from 2001 until the latter part of 2010. His role was as the company’s “finance manager”. In that capacity he provided mortgage broking services to Sunpac’s clients. Thereafter, still in the role of “finance manager”, he provided similar services to the clients of his new employers – respectively HFS (until sometime in late 2010 or early 2011) and Heritage FSA (until January 2015).
During his Sunpac employment, and specifically during the period from February to August 2010, Mr Wilkins had submitted something in excess of 60 “SMSF loan” applications to Westpac. His conduct in relation to five of those loans, relating to a number of NSW resident couples who entered into house and land package contracts relating to properties located about 30 to 40km north east and west of Ipswich in Queensland, that had been the subject of the ASIC delegate’s decision. Each of those purchasers / loan applicants appeared to have been solicited as a result of Sunpac’s pursuit of the business strategy or model outlined earlier in these reasons:- see paragraph 6 above.
The actual sequence of events in which that strategy was pursued with the five Sunpac purchaser / loan applicant clients (after the initial approach to them by Sunpac representatives other than Mr Wilkins) appears to have been to the following effect:-
(a) the purchasers entered into a “subject to finance” contract to purchase an “investment” property, and a contract for the construction of a dwelling on the property
(b) the purchasers submitted to Sunpac a request to establish an SMSF, and to incorporate a trustee for the SMSF lenders
(c) the purchasers submitted a loan application, to finance the purchase price balance – after allowing for their “personal” and “superannuation “roll over” contributions to the property purchase
(d) Sunpac arranged to have the incorporated SMSF trustee enter into a Deed of Trust establishing the SMSF
(e) the purchasers had the incorporated SMSF trustee open an account with the National Australia Bank (“NAB”)
(f) the purchasers arranged to have funds “rolled over” from their existing superannuation fund and deposited into the SMSF trustee’s bank account
(g) the purchasers completed the property purchase (and embarked on the house construction process) – using the SMSF “roll over” amount and the loan proceeds
(h) after completion of the property purchase, the purchasers executed a Declaration of Trust (relating to the property) in favour of the SMSF corporate trustee.
Mr Wilkin’s personal involvement with loan applicants typically involved:-
(a) reviewing the loan application information obtained by a Sunpac “sales” representative
(b) completing the loan application details, typically in the course of a conversation or meeting with the prospective purchasers / borrowers
(c) submitting the completed loan application to Westpac, typically by email, and with a short standard form explanatory note (that Mr Wilkins described as a “Preamble”) to the loan application
(d) following receipt of Westpac’s conditional loan approval, sending Westpac’s “system generated” loan application document to the prospective purchasers, for their approval and execution
(e) occasionally, receipt of the following loan documents from Westpac (although more often than not these documents were sent to the purchasers’ legal advisers, or to the purchasers themselves)
(i) the loan contract
(ii) a property mortgage, together with an authority to complete
(iii) a direct debit form (authorising the loan repayments)
(f) in those instances where he received the loan documents, arranging a meeting with the prospective purchasers, going through the loan documents with them, having the documents signed, and returning them to Westpac.
A common characteristic of all the “SMSF loan” applications Mr Wilkins submitted to Westpac was that the loan applicant was never the SMSF corporate trustee and was always the individuals who had contracted to purchase the property and construct the dwelling. The loan applications typically involved the completion of a standard Westpac Loan Application. Part of the form required the loan applicants to list all their assets. It segregated the required disclosure into the following five groups:-
(a) My real estate property assets – and required details of the property address, description, current use, market value and ownership particulars (in the case of co-ownership)
(b) My cheque, savings, term deposit and other accounts – and required details of the type of account, the institution where it was held, ownership particulars and the account balance
(c) My investments, including superannuation, life insurance, shares, unit trusts, etc – and required details of the investment type, the institution where it was held, ownership details and “current cash balance”
(d) My motor vehicles – and required details of the make, model, build year, ownership and market value
(e) My other assets, including household items and personal effects, cash, boats, tools of trade, etc – and required a brief description of the type of assets, ownership and market value.
Mr Wilkins conduct in relation to the content of five of these loan applications was, in essence, the subject of the ASIC decision, and thus of his review application proceedings. One aspect of the ASIC decision was that the five loan applications had been misleading. Another aspect of the ASIC decision was that Mr Wilkins had disguised the “SMSF loan” character of the applications, because he knew Westpac would not approve loan applications of that kind.
In the review hearing proceedings, ASIC maintained its position that Mr Wilkins knew each of the five relevant loan applications was misleading. This was because they included amounts said to be held in each applicant’s own NAB investment bank account, whereas the true position was that those accounts were only opened when (or after) the loan applications had been approved. Furthermore, they were opened in the name of the corporate trustees of the newly created SMSFs, and the amounts deposited were sometimes less than the “investment” amount asserted in the loan applications.
The essence of Mr Wilkin’s explanation for this treatment of the “bank account” funds in the contentious loan applications was that it followed a conversation with (or a request / instruction from) Mr Holm (the Westpac officer / manager with whom he dealt). There was evidence in the Wilkins proceedings that Westpac had dismissed Mr Holm in September 2010. One of the principal reasons for that decision was his breach of the bank’s practices and procedures in relation to the receipt and processing of “SMSF” loan applications.
In the light of its further consideration of the information explaining Westpac’s actions in relation to Mr Holm, at the start of the Wilkins review hearing ASIC expressly resiled from any contention that Mr Wilkins submitted the loan applications in the names of the individual applicants (rather than in the name of the corporate SMSF trustees) because he knew that the applications would otherwise have been refused. In practical reality this change in ASIC’s position meant that it effectively abandoned the second basis of the delegate’s 31 January 2018 decision:- see further paragraph 94 below. Nevertheless ASIC opposed Mr Wilkins’ review application (on the basis indicated in the previous paragraph) and contended that his explanation about the Holm conversation / request (summarised in the first sentence of the preceding paragraph) should not be believed:- see paragraph 85 below.
PRINCIPLES TO BE APPLIED IN DETERMINING THE RECUSAL APPLICATION
Courts and statutory tribunals such as the AAT, must conduct and determine their proceedings in a way that is, and is seen to be, impartial:- Johnson v Johnson (2000) 201 CLR 488 at 501; 174 ALR 655; [2000] HCA 48. That principle of impartiality precludes judges or tribunal members from adjudicating in proceedings in which they have a material personal interest:- Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337. In that case the plurality judgment in the High Court (Gleeson CJ, McHugh, Gummow and Hayne JJ) described impartial decision making as a basic aspect of procedural fairness, and one that applied generally to all adjudicative tribunals (subject to any modification or qualification required by their particular statutory functions). The judgment expressed the general principle in these terms (footnotes have been omitted):-
[6] Where, in the absence of any suggestion of actual bias, a question arises as to the independence or impartiality of a judge (or other judicial officer or juror), … the governing principle is that, subject to qualifications relating to waiver ... or necessity ... a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide. That principle gives effect to the requirement that justice should both be done and be seen to be done, a requirement which reflects the fundamental importance of the principle that the tribunal be independent and impartial. It is convenient to refer to it as the apprehension of bias principle.
Even in the absence of direct personal interest, the desideratum of impartial determination precludes a decision maker’s participation in proceedings where a fair minded lay observer might reasonably apprehend the decision maker might not bring an impartial mind to the resolution of the proceedings:- R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 265; 9 ALR 551; Livesey v New South Wales Bar Assn (1983) 151 CLR 288; 47 ALR 45; Vakauta v Kelly (1989) 167 CLR 568; 87 ALR 633.
A finding of apprehended bias can only properly be made where a fair-minded lay observer might reasonably apprehend (as a matter of real, rather than remote possibility) that the decision maker might not bring an impartial mind to the consideration of the issues, evidence and arguments in the proceedings. That apprehension, whilst expressed as a matter of possibility, must nevertheless be “firmly established”: Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352, 360, 371; 66 ALR 239. The plurality judgment in Ebner v Official Trustee in Bankruptcy [2000] HCA 63 at [86]; 205 CLR 337 at 344; 176 ALR 644 went on to describe the evaluative process involved:-
[8] The apprehension of bias principle admits of the possibility of human frailty. Its application is as diverse as human frailty. Its application requires two steps. First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits. The bare assertion that a judge (or juror) has an “interest” in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated. Only then can the reasonableness of the asserted apprehension of bias be assessed.
There is some tension between the propositions that (i) the determinative criterion is one of the real possibility, rather than probability, of the absence of an impartial determination:- see British American Tobacco Australia Services Ltd v Laurie [2011] HCA 2 at [139], [146]–[152]; (2011) 242 CLR 283 at 331, 333–335; (2011) 273 ALR 429 and (ii) the risk of such an apparently partial determination must be “real” and “firmly established”. R v Watson; Ex parte Armstrong (1976) 136 CLR 248 suggested that the answer to the question about the appropriate content of the “real possibility” criterion was provided by the approach taken in R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546. That case arose out of the Commonwealth Conciliation and Arbitration Commission’s 1967 “National Wage Case” decision, and the suggestion in the decision reasons that the concept of “equal pay for equal work” should be applied to not only to wage increases, but also to the total wage. The latter suggestion was noted however, to be a step that would call for thorough investigation and debate.
In the subsequent 1968 award variation proceedings, the employer parties unsuccessfully objected (on the ground of apprehended bias) to the Commission being constituted by members who had presided in the 1967 National Wage Case. In rejecting the employers’ application the High Court described the Commission’s remarks in the 1967 decision as no more than the expression of an attitude on a matter of principle. Such an expression would not justify a reasonable apprehension that those members might not bring fair and unprejudiced minds to the resolution of the question arising before them. In a judgment in which all seven judges participated, the High Court said (at 122 CLR 553–4 – I have added the emphasis to firmly established)
The common law principles of natural justice are well understood though they have been variously expressed. It is sufficient here in relation to that aspect of those principles which is called in aid by the applicant to recall the well known passages from Allinson v General Council of Medical Education and Registration [[1894] 1 QB 750] …
Those 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.
In Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352 Mason J remarked upon the amplitude of the “reasonable apprehension of bias” principle as it had been expressed in Watson and Livesey. In a passage that at least implicitly acknowledges the tension wo which I alluded in paragraph 32 above, His Honour had this to say:-
It seems that the acceptance by this court of the test of reasonable apprehension of bias in such cases as Watson and Livesey has led to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in other proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be 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”: R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group; Watson; Re Lusink; Ex parte Shaw. Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.
As Mason J’s comments show, the criterion of "reasonable apprehension" of bias ought not be reduced to a lesser enquiry as to whether it would be "better" for another decision maker to hear the case. Applying such an impressionistic criterion could encourage a belief that a party can, by making disqualification applications, obtain a hearing before a decision maker more likely to be favourable to the party’s interests: Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352; 66 ALR 239; 10 Fam LR 917. Courts and statutory tribunals have a basic duty to determine proceedings and should not accede too readily to suggestions of apprehended bias: Raybos Australia Pty Ltd v Tectran Corporation Pty Ltd (1986) 6 NSWLR 272. The issue in each case is whether there is a reasonable apprehension that the appointed decision maker might not bring an impartial and unprejudiced mind to the resolution of the proceedings:- Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 65 FCR 215 at 230; 135 ALR 753.
The caution Mason J expressed can lead to competition between the two requirements of both ensuring the reality and appearance of impartial adjudication, and the proper and efficient discharge of adjudicative functions. In Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 the High Court remarked upon that possibility. Speaking primarily in the context of judicial adjudication, but in terms that have a direct application to the Tribunal (in the light of the Tribunal’s statutory objective and obligations: see Administrative Appeals Tribunal Act 1975 ss 2A and 33) the principal reasons in Ebner said:
[19] Judges have a duty to exercise their judicial functions when their jurisdiction is regularly invoked and they are assigned to cases in accordance with the practice which prevails in the court to which they belong. They do not select the cases they will hear, and they are not at liberty to decline to hear cases without good cause. Judges do not choose their cases; and litigants do not choose their judges. If one party to a case objects to a particular judge sitting, or continuing to sit, then that objection should not prevail unless it is based upon a substantial ground for contending that the judge is disqualified from hearing and deciding the case.
[20] This is not to say that it is improper for a judge to decline to sit unless the judge has affirmatively concluded that he or she is disqualified. In a case of real doubt, it will often be prudent for a judge to decide not to sit in order to avoid the inconvenience that could result if an appellate court were to take a different view on the matter of disqualification. However, if the mere making of an insubstantial objection were sufficient to lead a judge to decline to hear or decide a case, the system would soon reach a stage where, for practical purposes, individual parties could influence the composition of the bench. That would be intolerable.
[21] It is not possible to state in a categorical form the circumstances in which a judge, although personally convinced that he or she is not disqualified, may properly decline to sit. Circumstances vary, and may include such factors as the stage at which an objection is raised, the practical possibility of arranging for another judge to hear the case, and the public or constitutional role of the court before which the proceedings are being conducted. These problems usually arise in a context in which a judge has no particular personal desire to hear a case. If a judge were anxious to sit in a particular case, and took pains to arrange that he or she would do so, questions of actual bias may arise.
The limitation of “reasonable apprehension” is particularly important in deciding whether a judge or decision maker’s previous determinations or comments indicate relevant bias. The question of the hypothetical observer's reasonable apprehension about those circumstances requires regard to the standards of ordinary practice in the court or tribunal – a matter of which the hypothetical fair minded observer is taken to be aware and in the light of which the apprehension of bias is to be gauged. The question may arise as a result of (i) decisions made in other proceedings between the same parties, (ii) decisions in similar proceedings involving at least one of the parties, (iii) an interlocutory decision in the proceedings or (iv) observations made in the course of the hearing.
Consistent with the passage set out earlier in (paragraph 33 of) these reasons, an expectation about the way the judge or decision maker is likely to decide the case is not sufficient to generate a reasonable apprehension of partiality: Re JRL; Ex parte CJL (1986) 161 CLR 342 at 352; 66 ALR 239 per Mason CJ. The fact that the court or tribunal may have been provided with (or is otherwise aware of) irrelevant or inadmissible material is similarly insufficient to establish a reasonable apprehension of bias: Gas & Fuel Corporation Superannuation Fund v Saunders (1994) 52 FCR 48; 123 ALR 323; BC9406473. Examples of scenarios of that kind include cases such as Australian Securities and Investments Commission (ASIC) v Reid [2005] FCA 1274; and Sturesteps v Khoury (No 2) [2017] NSWSC 1525. In Reid a judge was aware of contempt orders that had been made by another judge and the issue of an attendance warrant that had been issued for the party’s attendance. That was held not to justify any reasonable apprehension of bias. In Khoury (No 2) a judge had previously acted as counsel in fraud proceedings against a person who was a defendant in the current proceedings. Those circumstances were again held not to provide a basis for a reasonable apprehension of bias. In Re Mellor and Australian Postal Corporation [2010] AATA 288 (speaking in the context of the rehearing of a matter that had been remitted following a successful appeal to the Federal Court) the then President of this Tribunal said:
[28] … just because a member makes an observation relating to credit, a fair-minded lay observer would not apprehend that the member might not bring an impartial and unprejudiced mind to the resolution of the matter. That is not to say that the member may not come to the same conclusion as the member came to the first time, but that is far from not bringing an impartial and unprejudiced mind to the resolution of the question. It is important to note that the fact alone of coming to the same conclusion a second time, or the prospect of that, is not the test. The test relates to the mind of the member and not whether the decision might or might not be the same.
But if the totality of the circumstances gives rise to a reasonable apprehension of bias, neither the decision maker’s own reasons for refusing to disqualify themselves, nor their declared intention to approach the proceedings with an open mind are determinative considerations: British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283; 273 ALR 429; [2011] HCA 2 at [46] [80]-[81] and [132]; Antoun v R (2006) 224 ALR 51 at 60; 80 ALJR 497; [2006] HCA 2 at [35]. In that context a reasonable apprehension of bias may arise where the decision maker has previously determined similar issues between the same parties: Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411; 9 ACSR 309 (a case that involved successive trials involving related issues of fact and credit); Damjanovic v Sharpe Hume & Co [2001] NSWCA 407 at [51], [75] (a case that involved different matters being heard together, where the judge determined one matter on the basis of an adverse credit finding made before the close of evidence in the other matters). However, decisions of that kind typically involve prior determinations involving findings of dishonesty or relevant impropriety, even if temperately expressed. For example, in British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283; 273 ALR 429; [2011] HCA 2, in connection with a controversy about the adequacy of a party’s discovery, a judge had made firm findings about dishonest fraudulent practices relevant to retention of relevant documents. Those findings were held to justify a reasonable apprehension of bias in relation to the judge’s participation in subsequent proceedings involving similar substantive claims.
There is authority to the effect that interlocutory rulings ought not be regarded as giving rise to a reasonable apprehension of bias:- Australian Securities and Investments Commission v Rich[2004] NSWSC 970 (a case that concerned evidentiary rulings involving disallowance of cross-examination). But that generality is subject to the qualification that the nature of the ruling, and the findings on which it was based, do not indicate a significant level of pre-judgment in relation to matters relevant to the final resolution of the proceedings: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 100; 93 ALR 435; 64 ALJR 412; R v Masters (1992) 26 NSWLR 450 at 471; 59 A Crim R 445. The same general approach, and qualification, apply to rulings and expressions of opinion made during the course of the proceedings: Johnson v Johnson (Johnson v Johnson (No 3)) (2000) 201 CLR 488; 174 ALR 655; [2000] HCA 48. In that case the judge had made a statement to the effect that they were unlikely to accept the uncorroborated evidence of either party. That was held not to justify an apprehension of bias in the hypothetical observer.
Despite the generality discussed in the preceding paragraphs, there are instances where the determination of issues at an interlocutory stage of proceedings can give rise to reasonable apprehensions of bias. This may occur, for example, where a judge or tribunal member has made adverse credibility findings in rejecting a claim for client legal privilege: Kwan v Kang[2003] NSWCA 336 at [71]–[75]; Nicholls v Michael Wilson & Partners Ltd (2010) 243 FLR 177; [2010] NSWCA 222. Conversely, the mere fact that the decision maker has made various orders in the absence of a party, and prohibited disclosure to that party of both the applications and the orders, is not sufficient to indicate apparent bias if the matters addressed in the applications do not directly involve the issues in the proceedings or the assessment of the credibility of witnesses: Michael Wilson & Partners Ltd v Nicholls[2011] HCA 48; (2011) 282 ALR 685; 86 ALJR 14; (overruling Nicholls v Michael Wilson & Partners Ltd (2010) 243 FLR 177; [2010] NSWCA 222). If the application is based on the combined effect of rulings on a range of different matters, the reasonableness of any apprehension of bias must be assessed by having regard to the matters impugned both individually and collectively:- Downey v Acting District Court Judge Boulton (No 5)(2010) 272 ALR 705; [2010] NSWCA 240.
Substantiation of an apprehended bias complaint requires more than reliance on views or "inclinations of mind" that decision makers may have formed about particular subject matters: R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 116; [1953] ALR 461; (1953) 27 ALJR 35; R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 553–554; [1969] ALR 504; BC6900660; R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 261–262; 9 ALR 551; 1 Fam LR 11,297. Views or inclinations of that kind do not provide a basis for any real apprehension that the decision maker might not bring an impartial mind to the consideration of the evidence and arguments in the particular proceedings: CUR24 v DPP [2012] NSWCA 65; BC201202033 at [59]. On the contrary, it is generally reasonable to assume that a decision maker’s approach to the proper discharge of their functions will result in them discarding views that are merely preliminary irrelevant, immaterial or prejudicial: Johnson v Johnson (Johnson v Johnson (No 3)) (2000) [2000] HCA 48 at [12]; (2000) 201 CLR 488; 174 ALR 655; British American Tobacco Australia Services Ltd v Laurie [2011] HCA 2 at [46]–[47], [80]–[81] and [132]; (2011) 242 CLR 283; 273 ALR 429.
The kind of reasonable apprehension that must be established is the possibility that the judicial officer will not alter a preliminary inclination “irrespective of the evidence or arguments presented":- Minister for Immigration and Multicultural Affairs v Jia [2001] HCA 17 at [72]; (2001) 205 CLR 507; 178 ALR 421. That was a case in which the Full Court of the Federal Court of Australia set aside a Ministerial decision on the ground of actual bias. In the subsequent High Court appeal decision Gleeson CJ and Gummow J said the following (footnote references have been omitted):
[71] ... Decision-makers, including judicial decision-makers, sometimes approach their task with a tendency of mind, or predisposition, sometimes one that has been publicly expressed, without being accused or suspected of bias. The question is not whether a decision-maker’s mind is blank; it is whether it is open to persuasion. The fact that, in the case of judges, it may be easier to persuade one judge of a proposition than it is to persuade another does not mean that either of them is affected by bias.
[72]The test which was applied both by French J and by the Full Court was orthodox. It accords with the decisions of this court in Laws v Australian Broadcasting Tribunal and Johnson v Johnson. The state of mind described as bias in the form of prejudgment is one so committed to a conclusion already formed as to be incapable of alteration, whatever evidence or arguments may be presented. Natural justice does not require the absence of any predisposition or inclination for or against an argument or conclusion…
Although the decision in Minister for Immigration and Multicultural Affairs v Jia [2001] HCA 17 at [72]; (2001) 205 CLR 507; 178 ALR 421 involved an allegation of actual bias, the approach it endorsed applies equally to complaints of apprehended bias (contrary to a submission made on behalf of Mr Dimitroplous in the present application). In rejecting the suggestion that there was any difference between the two situations, Spigelman CJ pointed out in McGovern v Ku-ring-gai Council (2008) 72 NSWLR 504 that in Jia the members of the Court had addressed the alternative argument of apprehended bias. Hayne J, with whom Gleeson CJ and Gummow J agreed on this point, applied the apprehended bias principle on the basis that it involved an enquiry as to whether the hypothetical observer might reasonably suspect that the decision maker might not be “open to persuasion”: see 72 NSWLR 504 at [19]-[23]. In his own reasons for judgment Spigelman CJ summarised the applicable principles in the following way:-
[15] The test for pre-judgment in Australian law is, in my opinion, to the same effect as that identified by the Supreme Court of Canada in Old St Boniface Residents Association v Winnipeg (City) [1990] 3 SCR 1170 where, in the terminology of the majority judgment: the decision-maker must be “capable of being persuaded” (at 1197c); pre-judgment is of such an “extent” that contrary representations “would be futile” (at 1197d-e); statements said to constitute pre-judgment must be an “expression of final opinion ... which cannot be dislodged” (at 1197f); the position of the person must be “incapable of change” (at 1197g). The “incapable of persuasion” test was applied again in Save Richmond Farmland Society v Richmond (Township) [1990] 3 SCR 1213 at 1224g.
[16] A similar approach has been adopted in Australia on pre-judgment issues in Minister for Immigration and Multicultural Affairs v Jia Legeng (at 531 [71], 540 [105]) where, in the joint judgment of Gleeson CJ and Gummow J, their Honours referred to a test of whether the decision-maker “is open to persuasion”, or whether the “conclusion already formed [is] incapable of alteration, whatever evidence or arguments may be presented” (at 531 [72]).
[17] To similar effect are the observations of Hayne J (at 564 [183]), namely, that a decision-maker will apply his or her opinion “without giving the matter fresh consideration in the light of whatever may be the facts and arguments relevant to the particular case” (at [185]). His Honour went on (at 564 [186]) to refer to the test terms of whether “the evidence will be disregarded”.
[18] Also to similar effect are the observations of Gaudron and McHugh JJ in Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 100 that the decision-maker “will not alter that conclusion irrespective of the evidence or arguments presented”. In that case, members of the Tribunal had filed a defence which encompassed a pleading asserting the fact into which the Tribunal was to inquire. Their Honours concluded (at 101) that that act was based on the evidence known to them at the time of the pleading. It was not appropriate to conclude that “the members of the Tribunal will not decide the case impartially when they hear the evidence and arguments ... at the ... inquiry”.
THE KNOWLEDGE OF THE FAIR MINDED OBSERVER
The proposition that the circumstances must “firmly establish” a reasonable apprehension of bias, in the sense that a fair minded observer “might” reasonably conclude that the decision maker “might not” bring to bear a mind that was “open to persuasion” in the resolution of the contentious matter, highlights the importance of determining what degree of knowledge and objectivity is to be attributed to the hypothetical observer.
The assessment of reasonable apprehension is to be conducted on the basis of an assumption that the fair minded observer knows all the relevant circumstances: Vakauta v Kelly (1988) 13 NSWLR 502 at 528, 535-6. This includes knowledge of any circumstances that occurred after the contentious conduct, and permits regard to be had to the cumulative effect of the totality of the circumstances: Hamod v NSW [2011] NSWCA 375 at [259] per Beazley JA; Johnson v Johnson (Johnson v Johnson (No 3)) (2000) 201 CLR 488; 174 ALR 655; [2000] HCA 48 at [11]-[14].
In Webb v The Queen (1993-1994) 181 CLR 41 at 51-52 Mason CJ and McHugh J in explaining the rationale for the “dual contingency” involved in the accepted statement of the apprehended bias principle, said this:-
... the premise on which the decisions in this Court are based is that public confidence in the administration of justice is more likely to be maintained if the Court adopts a test that reflects the reaction of the ordinary reasonable member of the public to the irregularity in question. References to the reasonable apprehension of the “lay observer” [Vakauta (1989) 167 CLR at 573, 574], the “fair-minded observer”[Livesey (1983) 151 CLR at 300; Laws (1990) 170 CLR at 87], the “fair-minded, informed lay observer” [Laws (1990) 170 CLR at 92], “fair-minded people” [Watson (1976) 136 CLR at 263], the “reasonable or fair-minded observer” [Vakauta (1989) 167 CLR at 585], the “parties or the public” [Ex parte Hoyts Corporation Pty Ltd (1994) 68 ALJR at 182; 119 ALJR 210] and the “reasonable person” [Vakauta (1989) 167 CLR at 576] abound in the decisions of this Court and other courts in this country. They indicate that it is the court’s view of the public’s view, not the court’s own view, which is determinative. If public confidence in the administration of justice is to be maintained, the approach that is taken by fair-minded and informed members of the public cannot be ignored. Indeed, as Toohey J pointed out in Vakauta [(1989) 167 CLR at 585] in considering whether an allegation of bias on the part of a judge has been made out, the public perception of the judiciary is not advanced by attributing to a fair-minded member of the public a knowledge of the law and the judicial process which ordinary experience suggests is not the case. That does not mean that the trial judge’s opinions and findings are irrelevant. The fair-minded and informed observer would place great weight on the judge’s view of the facts. Indeed, in many cases the fair-minded observer would be bound to evaluate the incident in terms of the judge’s findings.
In the same case, Deane J expressed his view (at 73-74) that the knowledge to be attributed to the hypothetical “fair-minded observer” was:
a broad knowledge of the material objective facts ... as distinct from a detailed knowledge of the law or knowledge of the character or ability of the members of the relevant court. The material objective facts include, of course, any published statement, whether prior, contemporaneous or subsequent, of the person concerned. If, in the particular case the proper conclusion is that a fair-minded lay observer with a broad knowledge of those facts would not entertain a regional apprehension of bias, that is the end of the issue of disqualification by reason of an appearance of bias.
In Johnson v Johnson (2000) 201 CLR 488 at 508-9 Kirby J also referred to the attributes of the fictitious bystander. His Honour said (at [53], footnotes omitted):
… Such a person is not a lawyer. Yet neither is he or she a person wholly uninformed and uninstructed about the law in general or the issue to be decided. Being reasonable and fair-minded, the bystander, before making a decision important to the parties and the community, would ordinarily be taken to have sought to be informed on at least the most basic considerations relevant to arriving at a conclusion founded on a fair understanding of all the relevant circumstances. The bystander would be taken to know commonplace things, such as the fact that adjudicators sometimes say, or do, things that they might later wish they had not, without necessarily disqualifying themselves from continuing to exercise their powers. The bystander must also now be taken to have, at least in a very general way, some knowledge of the fact that an adjudicator may properly adopt reasonable efforts to confine proceedings within appropriate limits and to ensure that time is not wasted. The fictitious bystander will also be aware of the strong professional pressures on adjudicators (reinforced by the facilities of appeal and review) to uphold traditions of integrity and impartiality. Acting reasonably, the fictitious bystander would not reach a hasty conclusion based on the appearance evoked by an isolated episode of temper or remarks to the parties or their representatives, which was taken out of context. Finally, a reasonable member of the public is neither complacent nor unduly sensitive or suspicious.
A more specific statement about the hypothetical observer’s knowledge can be made where the complaint of prejudgment involves findings made in a previous decision or judgment. Referring to such a situation, Katzmann J said the following in Dye v Commonwealth Securities Ltd (No 4) [2010] FCA 910 at [94]:
The hypothetical observer would be expected, at least, to have read the whole of the judgment. A reasonable fair-minded observer would not cherry-pick statements and consider them in isolation; rather, s/he would have regard to the context in which they were made and the issues to which they related, for to do otherwise would be neither fair nor reasonable. As the majority observed in Johnson at [14], “the hypothetical observer is no more entitled to make snap judgments than the person under observation”.
PARTICULAR EXAMPLES RELATING TO APPREHENSIONS OF PRE-JUDGMENT ARISING FROM PRELIMINARY VIEWS
The circumstances in R v Watson; Ex parte Armstrong involved remarks made by a Family Court of Australia judge in the course of his interlocutory management of a property dispute. The true assets and means of the parties, and the accuracy of their respective disclosures, were likely to be highly contentious. The judge’s remarks were to the effect that he was would not be likely to accept the evidence of either spouse, except to the extent that it was objectively corroborated. The wife then made an application for the judge to disqualify himself from the proceedings. His refusal to do so resulted in the wife’s successful application for an order prohibiting the judge from hearing the proceedings.
In granting the wife the order she had sought, the High Court stated the relevant question as being “whether it has been established that it might reasonably be suspected by fair-minded persons that the learned judge might not resolve the questions before him with a fair and unprejudiced mind”: at 136 CLR 264. The High Court then went on to say this:
As the cases show, there are some matters on which a judge may have preconceived opinions, and yet be qualified to sit, but speaking generally the credit of an essential witness, where the case may turn on credibility, is not one of them. It is apparent from the facts that have been recited that it is possible, if not probable, that an assessment of the credit of the witnesses may play an important part in the resolution of the proceedings between the husband and the wife.
The circumstances involved in R v Watson; Ex parte Armstrong have some similarity to those involved in Vakauta v Kelly (1986) 167 CLR 568; 87 AR 239. In that case the appellant was a defendant in personal injuries proceedings involving an assessment of damages. Before hearing the evidence of the appellant's doctors, the trial judge referred to them as an “unholy trinity”, and said that he was not usually very impressed with their views. He repeated comments to a similar effect during the course of the hearing, and also in his reasons for judgment. In the High Court proceedings the justices were unanimous in upholding the bias complaint, principally because of the comments contained in the trial judge’s reasons for judgment. In relation to the earlier comments during the course of the proceedings, Dawson J regarded them as insufficient to warrant a conclusion of bias. Justices Brennan, Deane and Gaudron thought that if the judge’s earlier comments were indicative of bias, that complaint could not be maintained when no objection had been made during the proceedings. Their Honours went on to describe an “ill-defined line” between the expression of some pre-conceived views, and the reasonable appearance of bias. In the context of situations where judges frequently encountered the same witnesses in proceedings having similar subject matters, the three judges said this (87 ALR 633 at 634-5):-
The requirement of the reality and the appearance of impartial justice in the administration of the law by the courts is one which must be observed in the real world of actual litigation. That requirement will not be infringed merely because a judge carries .. the knowledge that some medical witnesses, who are regularly called to give evidence on behalf of particular classes of plaintiffs … are likely to be less sceptical of a plaintiff's claims than are other medical witnesses who are regularly called to give evidence on behalf of particular classes of defendants … If it were so infringed, the administration of justice in personal injuries cases would be all but impossible. In that regard, both necessity and common sense require that a distinction be drawn between the case where a judge has some preconceived views about the expertise or reliability of the professional opinions of an expert medical witness and the case where a judge has preconceived views about the credit or trustworthiness of a non-expert witness “whose evidence is of significance on … a question of fact” which “constitutes a live and significant issue” in the case (see Livesey v New South Wales Bar Association (1983) 151 CLR 288 at 300 ; 47 ALR 45 ).
Nor will that requirement of the reality and appearance of impartial justice be infringed if a judge with preconceived views about the general reliability of the evidence of a particular medical witness discloses the existence of such views in the course of the dialogue between Bench and Bar … a trial judge who made necessary rulings but otherwise sat completely silent throughout a non-jury trial with the result that his or her views about the issues, problems and technical difficulties involved in the case remained unknown until they emerged as final conclusions in his or her judgment would not represent a model to be emulated.
The decision in R v Lusink; Ex parte Shaw (1980) 32 ALR 47; (1980) 55 ALJR 12 illustrates acceptance of the “dialogue” proposition endorsed by the plurality judgment in Vakauta v Kelly, and contrasts with the position taken in cases such as R v Watson; ex parte Armstrong. The bias complaint in R v Lusink arose in family court proceedings in which a husband had made an open settlement offer before the wife called any evidence. When the wife ended her case in chief, and before the husband called any evidence, the judge made what she described as “preliminary comments” and proceeded to indicate that, on the evidence adduced to that point, but without “prejudging the case”, she regarded the husband’s offer as inadequate. Then, after some further discussion, the judge said there was “no way” the wife and children were going to be left in their current situation, and that money would have to be found” at least “to pay a substantial deposit on some house for the family”. The judge then added that she wanted to make it “quite clear” that “on the evidence so far” she regarded the husband’s offer as “totally unacceptable”. The judge’s comments were the basis of the husband’s unsuccessful apprehended bias complaint.
In rejecting the complaint the various judgments in the High Court adhered to the approach taken in R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 (see paragraph 33 above). The following passage from the reasons of Gibbs ACJ in Lusink (at 32 ALR 51) typifies the approach taken by four of the five other justices that constituted the High Court in that case:-
It may be thought that, in the present case, the learned judge expressed herself more absolutely than was altogether prudent. However, it would be exaggerating the importance of the mode of expression which the learned judge adopted to conclude that she had decided that she would make an order of a particular kind, irrespective of the state of the evidence at the end of the case, and irrespective of the arguments finally presented. An examination of the statements made by her Honour, which are set out above, shows that she expressed no firm view as to the precise form of the order which she suggested might be made. She described her own remarks merely as “comments … on the facts as they have appeared before the court to this moment …” and repeatedly emphasized that she was not to be taken as prejudging the case… In part the judge's remarks were no doubt intended to express forcibly the view which she had formed at that stage of the evidence that the offer was quite inadequate … No doubt also the learned judge hoped to spur the husband, and perhaps his relatives, to greater efforts to provide a home for the wife and children. The evidence does not, however, justify a conclusion that the views which the learned judge expressed, although strong, were other than provisional, or that it could reasonably be suspected that at the end of the case she would not decide with a fair and unprejudiced mind.
In Charara v Federal Commissioner of Taxation [2016] FCA 451; (2016) 160 ALD 57, an applicant for review unsuccessfully sought the recusal of the presiding Tribunal member, principally on the basis of various comments and observations that had been made in the course of the hearing, and also on the basis of excessive intervention in the course of the party’s evidence. One of the matters complained about was that, at one stage the Tribunal member had expressed the view that part of the witness’ evidence was “non-sense”. In rejecting the appeal against the refusal of the recusal application Wigney J said this:-
[115] In considering whether apprehended bias based on the conduct of a decision-maker in the course of a hearing has been made out, each case must be considered having regard to its own particular facts and circumstances. Observations and findings made in previous cases may be of some assistance. Care must be taken, however, not to transpose general statements or findings made in other cases to what may be quite different facts or circumstances in the matter under consideration.
…
[117] In the judicial context, it has been said that judges are no longer expected to sit mute “as inscrutable as the Sphinx” while evidence is advanced and arguments are presented: Johnson v Johnson at 493[13] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). It is expected that judges can and perhaps should, in some circumstances, express tentative views: Antoun v R [2006] HCA 2; (2006) 224 ALR 51 at 60[32]. Statements that amount to provisional views put forward to test the evidence and invite further persuasion do not suggest a closed mind.
[118] Where a complaint is made of excessive questioning or inappropriate comment, the central question is whether “the judge has closed his or her mind to further persuasion, moved into counsel’s shoes and ‘into the perils of self-persuasion’”: Galea v Galea(1990) 19 NSWLR 263 at 281C (Kirby ACJ). That question must be answered having regard to the context of the whole trial and the number, length, terms and circumstances of the interventions. Questioning designed to clear-up evidence that may have been overlooked, or left in an uncertain or equivocal state, is unlikely to be problematic: R v Esposito (1998) 45 NSWLR 442 at 472C (Wood CJ at CL). Questioning that amounts to cross-examination designed to discredit or undermine a witness is in a different category.
[119] Momentary or occasional outbursts or displays of impatience, irritation or ill-temper will not alone give rise to an apprehension of bias: Galea at 279F–280A (Kirby ACJ), 283C (Priestly JA): R v Minister for Immigration and Multicultural Affairs; Ex parte AB(2000) 177 ALR 225 at 230[20]; VFAB v Minister for Immigration and Multicultural and Indigenous Affairs(2003) 131 FCR 102 at [81]. Nor will strong language or harsh tones alone be sufficient: Penhall-Jones v NSW [2007] FCA 925 at [92]–[97]; SZNVM v Minister for Immigration and Citizenship [2010] FCA 261 at [31]. Those sorts of matters all have to be considered in the context of the entire hearing. Apprehended bias will not be established by cherry-picking statements made during a hearing and considering them in isolation: Dye v Commonwealth Securities Ltd (No 4) [2010] FCA 910 at [94].
EXAMPLES OF THE APPREHENDED BIAS PRINCIPLE IN CASES DEALING WITH SIMILAR ISSUES
The High Court decision in Livesey v New South Wales Bar Assn (1983) 151 CLR 288; 47 ALR 45 was the relevant culmination of three sets of proceedings. In the first proceedings Livesey had been briefed to appear for a defendant who had been charged with conspiracy to effect the escape of prisoners from lawful custody. Ms B arranged for bail funds to be provided, but the accused absconded after being released on bail. In the second proceedings, two years later, Ms B unsuccessfully sought admission as a barrister. That application failed, principally because there was evidence that the bail money belonged to the accused, and the Court described as “incredible” Ms B’s evidence that she had personally borrowed the bail money from a friend, without enquiring as to its source. Instead, and even though he had not been a witness in the admission proceedings, the Court made a positive finding that both Livesey and Ms B knew the actual source of the bail funds and had been party to “a corrupt agreement”. In the third set of proceedings Livesey faced professional misconduct charges relating to the bail matter, and a court constituted by two of the three judges who had rejected Ms B’s admission application. In setting aside the Court’s misconduct determination against Livesey in the third proceedings the High Court said the following (at 151 CLR 300):
… a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment 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. The consideration that the relevant question of fact may be conceded or that the relevant person may not be called as a witness if the particular judge sits would not, of course, avoid the appearance of bias. To the contrary, it would underline the need for the judge to refrain from sitting.
Despite the disjunctive references in Livesey to significant questions of fact and the credit of a witness or party, the proposition that a mere similarity of factual issues, even between the same parties, is not sufficient to give rise to a relevant and reasonable apprehension of bias, was affirmed by the High Court in Re Finance Sector Union of Australia; ex parte Illaton Pty Ltd (1992) 107 ALR 581. That was a case in which a Deputy President of the Australian Industrial Relations Commission, in dismissing an application to certify an industrial agreement, and after 45 days of hearing, expressed strongly worded conclusions on various factual matters. Those matters were germane to issues that arose in subsequent industrial dispute proceedings between the same parties. The circumstances gave rise to an unsuccessful application for the Deputy President to be disqualified from hearing the second proceedings. Deane, Toohey and Gaudron JJ had this to say about the application of the prejudgment bias principle (at 583, footnotes omitted):
In these circumstances, the need for caution which this court has consistently identified in relation to applications for an order preventing a member of a statutory tribunal from participating in the discharge of the functions of that tribunal by reason of apprehended bias is particularly apposite when such an application is directed against a member of the Commission. It is that care must be taken to bear in mind that the basis for disqualification by reason of apprehended bias is that there are grounds upon which a party or the public might entertain a reasonable apprehension that the particular member of the Commission will not decide the case impartially or without prejudice. The basis for disqualification is not merely that the member’s past decisions, on questions of fact or law, might lead to a reasonable expectation that she or he will decide the case adversely to one of the parties. Nor is it that she or he has had previous contact or experience, as a member of the Commission, with the facts involved in the particular matter, with the context in which the particular matter arises, or with one or more of the parties involved in the particular matter.
In Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 166 ALR 302. Hayne J cited the passage from the judgment of Mason J in Re JRL; Ex parte CJL (set out in paragraph 34 above) – to the effect that the Watson/Livesey principle only applied where “a reasonable apprehension of bias by reason of prejudgment” had been “firmly established”. His Honour then opined that a judge or tribunal’s prior determination on a question of law will:
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.
Hayne J then referred to a Victorian Supreme Court decision in Ewert v Lonie [1972] VR 308 at 311–12, where an allegation of apprehended bias arose in the context of an planning approval dispute. In an earlier set of proceedings, constituted by two of the same members of a statutory planning tribunal, the approval had been set aside on technical grounds, but the tribunal had also ruled on, and rejected, some of the other grounds of objection to the approval. Those grounds of objection were again pursued in the second set of proceedings, in which the apprehension of bias complaint was unsuccessfully made. In a passage that Hayne J later set out with approval in Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 166 ALR 302, Lush J said:
Every reasonable man knows that consistency in decision is one of the aims of judicial or quasi-judicial institutions, but if he is exercising his quality of reasonableness he does not suppose that a tribunal will refuse to entertain or will fail to give proper attention to a submission opposed to its former decision merely because it is so opposed. In this case, the reasonable onlooker might have thought that the appellants would not have much chance of succeeding, but this is not the same thing as feeling or believing that they would not get a proper hearing. It is not a characteristic of the law’s reasonable man either to be irrationally suspicious of every institution or authority or to think that every cynical appraisal represents an absolute truth.
An example of a situation where the predictability of the outcome of contested issues was insufficient to give rise to a relevant apprehension of bias is provided by the decision in Fitzgerald v Director of Public Prosecutions (1991) 24 NSWLR 45. Mr Fitzgerald had been charged with two counts of false pretences involving two unrelated incidents. On the day the charges were listed for trial there was a successful application to have them separately tried. The basis of this application was the judge’s ruling that some flawed identification evidence would not be admissible on one of the charges. The judge then heard the first count and ultimately directed an acquittal, apparently on the alternative grounds that the identification evidence was inadequate and that the circumstantial evidence (of the accused’s possession of both the goods and the cheque book from which the dishonoured payment cheque had been drawn) was insufficient to discharge the onus of proof. When the hearing moved to the trial of the second charge, the Crown sought to have the judge disqualify himself, on the ground of apprehended prejudgment arising from the determination of the first charge. The Crown had agreed not to adduce the contentious identification evidence on the second charge. This had the practical result that the second charge depended principally on the circumstantial evidence. Although this evidence was uncontradicted, the judge had not regarded it as sufficient to discharge the onus of proof on the first charge, and was highly likely to come to the same result on the second charge.
The NSW Court of Appeal rejected the contention that the circumstances revealed relevant prejudgment bias. Samuels JA, with whom Meagher JA agreed said:
The fact that a judge has decided an issue in a particular way, and is likely to decide it in the same way when it arises again, does not, in my view, indicate pre-judgment of the kind which was perceived in R v Watson; Ex parte Armstrong or in Livesey v New South Wales Bar Association (1983) 151 CLR 288. In R v Watson; Ex parte Armstrong, the apprehension was that the judge had already made up his mind about the credit of a witness before he had heard the whole of the relevant material; and in Livesey it was that members of the court in other proceedings and on different evidence had determined adversely to the appellant an issue vital to the current proceedings in which he was involved. The essence of the principles which regulate disqualification for apprehension of bias are based upon the reasonable perception that justice will not be done because a party will be unfairly tried. I cannot see that in this case the Crown could argue with any cogency that there was any fear of that kind.
MR DIMITROPOLOUS BIAS CONTENTIONS
The submissions in support of the present application pointed to Mr Wilkins’ status as a witness in Mr Dimitropoulos’ review application proceedings and in particular to specific parts of his 26 April 2018 affidavit. The asserted significance of his evidence was to the following effect:-
(a)He provided corroborating evidence about the compliance processes at both Sunpac and Hertiage FSA
(b)That evidence would be relevant
(i)in assessing the factual evidence relating to the reasoning contained in paragraphs [34]-[35] of the ASIC credit decision
(ii)in determining the accuracy of Sunpac’s 2012 and 2013 Annual Compliance Certificates
(iii)in assessing whether Mr Dimitropoulos knowingly or recklessly made statements (in the Annual Compliance Certificates) about Sunpac’s compliance processes
(iv)in determining whether Sunpac and/or Heritage FSA had complied with their general conduct obligations as credit licensees as required by CredAct s 47(1).
The submission made was that
It is immediately obvious that there is a logical connection between the comments made by Senior Member Taylor in the Wilkins hearing on the credit of Mr Wilkins, and the importance of the credit of Mr Wilkins in the Main Proceedings.
The submission involves, at its heart, a proposition that I had made various relevant adverse comments about Mr Wilkins’ “credit”. That submission, and the recusal application that relies upon it, requires careful examination. That examination has to be informed by an understanding not only of the principles I have outlined earlier, but also (i) the subject matter and scope of both the Dimitropoulos and the Wilkins review applications, and (ii) by reference to the content, and the overall context, of the transcript passages on which the recusal application submissions were advanced.
THE POSITION IN RELATION TO “CREDIT” AND “CREDIBILITY” OBSERVATIONS / DETERMINATIONS
The reference to “credit” in the Livesey judgment (to which I have referred in paragraph 57 above) although it only refers to “credit” is probably to be taken to include both “credit” and “credibility”. An earlier passage in the High Court’s judgment recorded the fact that in the Court of Appeal proceedings two members of that Court had expressed adverse views in their judgments “both as to the credibility and credit of [Ms B] as a witness and on the circumstances surrounding the lodging of the [bail] surety”. The deliberate use of the disjunctive expression, understood against the background of the reasons and findings made in Re B [1981] 2 NSWLR 372, suggests that the Court was intending to refer not only to findings about the apparent general honesty of the person concerned, but also about the objective unreliability of their evidence.
Nevertheless the distinction between “credit” and “credibility” is of some importance. If an adverse finding, although identified as one of “credit” generally, really involves no more than an assessment of the objective unreliability of the person’s evidence, it may have little significance in suggesting a reasonable apprehension of prejudgment in a subsequent case involving different factual circumstances. But where the “credit” finding relates to the witness’s apparent honesty and truthfulness, a finding of that kind may contribute to a reasonable apprehension of prejudgment bias. Whether or not it does so will depend on the particularity of the finding and the nature and significance of the issues in contention.
Given the circumstances involved in Livesey it can readily be seen that the evidence of Ms B was of central significance in determining both Ms B’s and Livesey’s knowledge of the source of the contentious funds, and the character of Ms B’s personal proprietary interest in them. A similarly significant “credit” finding, that provided a basis for a reasonable apprehension of bias, was evident in Australian National Industries Ltd (in liq) v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411. That was a case where there were between 10 and 16 sets of related proceedings in which the solvency of Spedley Securities was likely to be a critical matter for determination. In interlocutory proceedings a judge had made findings that were critical of the “recollection, credit and commercial conduct” of two of the three directors of the company. Those findings were (i) directly relevant to one of the substantial points in issue in the principal proceedings, (ii) patently critical of the honesty of a principal witness, and (iii) included a finding that the witness had given “false” evidence.
It is apparent from the various judgments in Spedley Securities that there were differences of opinion as to how the requirement that an apprehension of bias must be “firmly established” applied to findings involving the credit of a witness. Mahoney JA referred to the statement in Livesey to which we have already referred. His Honour also referred to the following passage in Watson at 264:
As the cases show, there are some matters on which a judge may have preconceived opinions, and yet be qualified to sit, but speaking generally the credit of an essential witness, where the case may turn on credibility, is not one of them. It is apparent from the facts that have been recited that it is possible, if not probable, that an assessment of the credit of the witnesses may play an important part in the resolution of the proceedings between the husband and the wife.
That submission was then developed, in the context of what appropriate sanction might be applied to Mr Wilkins, by contrasting the claim in Mr Wilkins’ affidavit (at paragraph 60, that the loan applications had been accurately completed) with a concession he had made in the course of cross examination by ASIC’s senior counsel. That concession was contained in the following passage:-
Newlinds SC:- In paragraph 60, once again at the risk of hurting the horse, are you really saying that sitting here today you completed the Westpac loan application forms accurately?---Yes.
But that’s just not right, Mr Wilkins, can’t you see that?---Yes.
You can see that what you’re saying is not right, can’t you?---Yes, now that - yes.
Right. So you’re not saying that you believe now that you completed the Westpac loan applications accurately, are you?---No.
You are saying now that you believe that you completed the Westpac loan forms inaccurately, aren’t you?---Yes.
And you accept that you completed them falsely?---Yes.
Later in the transcript ASIC’s senior counsel returned to the proposition that, in effect, Mr Wilkins was a person who had either knowingly or recklessly passed on false information. That submission was then developed by referring to the potentially adverse consequences that conduct might have on a lender (such as Westpac). Mr Newlinds went to parts of Westpac’s internal report on Mr Holm’s conduct. The context of the report revealed that Mr Holm’s formal status was a “mobile home finance manager” and suggested that Mr Holm had never had the requisite loan approval authority. This suggestion was contrary to the understanding Mr Wilkins had given earlier in his oral evidence. Westpac’s internal description of Mr Holm’s status prompted curiosity about the actual evidence relating to Mr Holm’s status, and Mr Wilkins knowledge of it.
Against that background, the particular wording about which Mr Dimitropoulos complains is underlined in the following extract from the transcript:-
SENIOR MEMBER: Just before you do that, where’s the reference to mobile lending?
Newlinds SC: It was up in the - where’s the mobile. The very first line of the first main paragraph, the paragraph that starts, “Request before the bank relates to a client who is referred to a mobile HFM, Graeme Holm”.
SENIOR MEMBER: Do we know that Mr Wilkins understood that was Mr Holm’s status?
Newlinds SC: No.
Cheshire SC: I think we do. I think he gives that evidence.
Newlinds SC: All right.
Cheshire SC: I think it’s in his affidavit.
Newlinds SC: I’ll stand to be corrected for that.
SENIOR MEMBER: Because if Mr Wilkins knew that, it seems to me to strain credibility to accept his evidence he thought Mr Wilkins was the person approving the loans.
Newlinds SC: Yes, Mr Holm.
SENIOR MEMBER: Mr Holm.
Newlinds SC: Yes, I agree, and I put to him squarely that he must have known there were people up the hierarchy, but he denied that.
SENIOR MEMBER: Mr Cheshire, you might take on board whatever scraps of evidence there are in relation to Mr Holm’s status.
The fair minded reasonable observer would appreciate both the contingency with which the impugned passage began, and the invitation issued to Cheshire SC to identify the relevant evidence that might be used to determine whether or not the contingency could be satisfied from the available evidence. Such an understanding would have led the hypothetical observer to conclude that I had in no way reached any firm view at all on the accuracy of Mr Wilkins’ previous evidence (on the topic of his understanding of the scope of Mr Holm’s loan approval authority).
The question of the extent of the evidence about Mr Holm’s status, and Mr Wilkins’ contemporaneous knowledge was returned to later, although in a different context. The context was that of the final submissions made by Mr Wilkins’ senior counsel on the question of the materiality of the “falsity” Mr Wilkins had conceded in the NAB a/c balance details in the loan applications:- see paragraph 86 above. The particular proposition being advanced was that the error in the loan application was not material, and amounted to no more than putting the details “in a different box”. The underlying reality was said to be that Westpac had processed these applications in exactly the same way as other loan applications where the corresponding amount had in fact been characterised as a superannuation balance. It was the nuances of that particular proposition that led to the following exchange:-
Cheshire SC: That was the way I was intending to put it, not that they were processed in a different way and it’s in a different box, but I say that materially in substance they’ve been processed in the same way in the sense that wherever the assets are, and that’s the point; wherever the assets are, whichever box they’re in, Westpac is still going ahead with the loan in the same way. That’s what I’m seeking to say there.
SENIOR MEMBER: Which may beg the question a little bit about who was approving it; are we clear on who was issuing the approvals?
Cheshire SC: We’re still not clear. One of the –
The submissions then returned to emphasise the submission that Mr Wilkins’ conduct amounted, in substance, to putting information in the “wrong box” on the loan application form, rather than providing materially false information. Those submissions were developed without any further attempt to identify the evidence, if there was any, that bore on either the question of the actual extent of Mr Holm’s loan approval authority, or Mr Wilkins’ contemporaneous understanding of that matter.
In those circumstances, the hypothetical informed and fair minded observer would have understood that I had made no finding, firm or otherwise, about the reliability of Mr Wilkins evidence that he had believed or understood that Mr Holm had the operative loan approval authority. On the contrary, the hypothesised observer would have understood that I was refraining from expressing any concluded adverse view, because of the absence of evidence about the contingency to which I had referred.
THE “CREDIT” COMPLAINT RELATING TO TRANSCRIPT PAGE 161
This was another interchange that occurred in the course of Newlinds SC’s oral closing submissions on behalf of ASIC. Those oral submissions were substantially an elaboration upon, or explanation of, a 53 page written “Outline”. In part of the written Outline ASIC submitted (in paragraph 17(b)(iii)) that each of the five loan applications under consideration in the Wilkins proceedings “would have been rejected if Westpac’s policies in relation to SMSF lending had been applied”. That submission prompted a question from me. In response to it Newlinds SC disavowed, indeed described as “impossible”, any contention that Mr Wilkins knew that Westpac would not approve the five contentious loan applications if they had patently been presented as “SMSF loans”. He described it as an “impossible submission, because there has been 60 loans to date where Westpac has been told clearly that there is superannuation funds involved”.
The nuances of Westpac’s attitude thus turned on reconciling the proposition that the loan applications would not have been approved “if Westpac’s policies in relation to SMSF lending had been followed”, with the reality that 60 “SMSF loans” (to use an admittedly imprecise characterisation) had been approved. The attempt to reconcile the proposition with the reality is evident in the passage about which Mr Dimitropoulos complains. In that passage, and referring to the specific proposition in paragraph 17(b)(iii) of the Outline submissions, the following exchange occurred:-
SENIOR MEMBER:- … Now it’s a fact, we know that. I just see some dissonance between that proposition and what you said to me a moment ago, that we know that 60 loans were approved. See, it seems to me that you look at the written loan application form, it’s clearly a standard form that is authorised by Westpac and it requires the information to be presented in a particular format. I just don’t understand how anyone in Mr Wilkin’s position could have thought that Mr Holm, depending upon what his status was, but it seems to me inconceivable that Mr Wilkins genuinely thought that Mr Holm either had the authority to depart from the standard form, or was approving the loans, and in those circumstances the proposition that Mr Wilkins didn’t think there was anything wrong with these applications seems to me at the moment to be on the fringes of incredulity. That’s what’s troubling me about it, and you say the 60 other transactions were approved, but if they all had that sort of covering letter, I’m not sure that they reveal anything in relation to the SMSF nature of the loans.
Newlinds SC: Do you want my theory of what might’ve happened? Firstly, Mr Holm bins the covering - - -
SENIOR MEMBER: Bins what?
Newlinds SC: Bins the covering letter because that’s not a requirement of Westpac, so that doesn’t have to be kept on their file. Somehow a conditional approval happens off the handwritten document. Mr Holm may have authority to do that. That then produces the typed written document. That comes in and that gets approved by someone up the line, who in the earlier versions when it does disclose money in a self-managed superannuation fund, or alternatively, Mr Holm was within the limits of his authority and he’s just brazenly breaking the rules. I don’t know which.
SENIOR MEMBER: To be clear, you’re not positively contending that Mr Wilkins knew that SMSF loans, whatever that expression genuinely means; let’s put it another way. You’re not contending that if Mr Wilkins - you’re not contending that Mr Wilkins knew that if the application had been submitted in the trustee’s namely and frankly disclosed it was to fund the purchase by the corporate trustee, you’re not contending that he knew the loan would’ve been refused if that had been disclosed.
Newlinds SC: No, we’re not, because that would be a case about all hundred transactions, and it’s not, but what I will contend is in relation to the five that we are talking about, that if you believe Mr Wilkins when he says he had the conversation with Mr Holm and he said, “Can you change the system?”, and if it is true that he just didn’t think about why he was being asked to do that, that at the very least a reasonable man would’ve been on notice at that point that something’s up. It’s not an equitable fraud case, but that is your classic turning a blind eye to very, very suspicious circumstances. But of course our primary position is you don’t believe that explanation at all, it’s made up, and he’s proffered no explanation.
Seen in its overall context, this exchange was an attempt to explore what degree of personal shortcoming, if any, was properly to be attributed to Mr Wilkins in relation to his conduct in providing the contentious loan applications to Mr Holm. One proposition was that Mr Wilkins knew that “SMSF” loan applications would be rejected if their characterisation as such was candidly disclosed. But that proposition ASIC expressly, and repeatedly disavowed, and was a proposition whose disavowal I accepted as appropriate in the context of Mr Wilkins review proceedings. The other proposition was the assertion Mr Wilkins had made in his affidavit – that he had understood and believed the loan applications to have been accurately completed. Earlier in these reasons I have referred to that assertion, and to the fact that Mr Wilkins expressly resiled from it, and conceded the falsity of the applications (in relation to their treatment of the NAB a/c details):- see paragraph 86 above. I have also referred to the substance of ASIC’s submissions about the degree of culpability associated with that conduct, in the context of Mr Wilkin’s explanation that he had submitted the contentious loan applications in that way because of a request / instruction from Mr Holm:- see paragraph 85 above.
Against a proper and complete understanding of the way the interchange recorded at page 161 of the transcript had occurred, a fair minded reasonable observer would not have concluded that I had reached any firm adverse view about Mr Wilkins’ credit. The informed observer would have understood that the exchange was an attempt to explore what inferences were open about the extent of Mr Wilkins’ culpability. On the one hand, he had expressly resiled from his affidavit assertion that he believed the loan applications had been accurately completed. On the other hand, ASIC had disavowed any contention that Mr Wilkins knew the loan applications were likely to be rejected (because of their “SMSF” association and purpose. Further underscoring the difficulty of the situation was the absence of any specific evidence and clarity about the extent of Mr Wilkins’ knowledge of Mr Holm’s true status and authority within Westpac.
THE LIMITS OF CLOSE CONTEXTUAL ANALYSIS
It is readily apparent from what I have written about the “credit” complaints that in assessing them I have undertaken a detailed assessment of the actual wording of the contentious statements. In so doing I have been, and remain, mindful of the limitations on the degree of knowledge and understating that can and ought to be attributed to the hypothetical observer:- see paragraph 48 above. I have also been conscious of the need to consider the totality of the matters about which complaint is made.
In dealing with Mr Dimitropoulos’s recusal application I have undertaken the detailed analysis essentially as a way of testing the proposition (which was essentially the basis of ASIC’s opposition to the recusal application) that, taken as a whole, the impugned passages constituted no more than concerns, impressions and doubts that would, in no sense lead a fair minded observer to any apprehension of bias. For the reasons I have set out, I accept ASIC’s submission.
THE “LOGICAL CONNECTION” REQUIREMENT
The second step required to substantiate a complaint of apprehended bias is the demonstration of a “logical connection” between the matter complained of and the “feared deviation” from impartiality:- see Ebner and paragraph 31 above.
I have remarked earlier on the assertion, in Mr Dimitropoulos’ recusal request, that it was “immediately obvious” that Mr Wilkins’ credit was logically connected to the facts and issues likely to fall for determination in the substantive review proceedings and my apprehended lack of impartiality in determining them:- see paragraph 64 above. That bare assertion was never really developed, beyond pointing to my comments about the “structure” of the SMSF client transactions. Clearly Mr Wilkins’ evidence, confined as it was to the narrow basis of the erroneous treatment of the NAB bank account in the five 2010 loan applications, could not reasonably have any material relevance to the Sunpac and Heritage FSA’s wider activities in 2012 and 2013 (the years that appear to have been the principal focus of ASICs concerns relating to Mr Dimitropoulos:- see paragraph 8 above). And the same is true even in relation to Heritage FSA’s unlicensed activity after July 2010 (see paragraph 11 above). Even though perhaps some of the five loan applications involved in the Wilkins proceedings were made in July or August 2010, Mr Wilkins apparently had a very limited role in the totality of the activities of Sunpac and Heritage FSA.
The specific proposition advanced in Mr Dimitropoulos’ recusal submissions was that Mr Wilkins’ evidence provided corroborative evidence that would, if accepted, significantly support his application to review ASIC’s 23 June 2017 decisions. That submission pointed to the contents of paragraphs [47]-[61] Mr Wilkins’ April 2018 affidavit. In the first half of these paragraphs Mr Wilkins described first Sunpac, and then Heritage FSA’s processes and systems. In the case of Sunpac, Mr Wilkins’ evidence gives the impression that it had little “process” documentation, other than the records detailing each client’s transaction. In the case of Heritage FSA he described its business as “small” as at July 2011, and impliedly concedes that it did not have a compliance manual at that time. In the later section of these paragraphs of his affidavit Mr Wilkins briefly describes his own professional development activities – without clearly identifying when any specific activity occurred. He also outlined the internal reporting regime within Heritage FSA. That description can only relate to the period after his Sunpac employment ended (in late 2010).
Three points may be made about the Dimitropoulos submissions. The first is that little in the Wilkins affidavit (at least in the paragraphs identified in the submissions) address the extent of Mr Dimitropoulos’ involvement with the Heritage FSA business. The second point is that the submissions emphasised Mr Wilkins’ role in putting in place “systems” and “processes” to ensure compliance with credit licence conditions. By their very nature and purpose, those ‘systems” and “processes” would have to be evidenced by documentary records, and those records either existed (in an appropriate form and content), and were thus available to be produced to ASIC, or they did not exist. Mr Wilkins’ credit, whether put in terms of his honesty or his objective reliability is not likely to be an influential consideration in determining that question.
The third point is that ASIC’s decision reasons do not seem to dispute the existence of at least some of the compliance related procedural documents and policies. As I have outlined above, ASIC’s concerns related to (i) the formulaic nature of the content of some of those documents and, (ii) dissatisfaction that the documented processes and policies were actually complied with. Nothing that was put on Mr Dimitropoulos behalf articulated a logical basis for apprehension that Mr Wilkins’ “credit’ would likely be influential in evaluating the evidence about either of those aspects of ASIC’s concerns about Mr Dimitropoulos’ conduct.
THE “PRE-JUDGMENT” COMPLAINT BASED ON TRANSCRIPT PAGES 122 TO 123
I have referred earlier in these reasons to the questions I asked of Mr Wilkins (at the end of ASIC’s cross examination) about the content of the legal advice Sunpac had obtained, and to Cheshire SC’s objection to pursuit of further questioning along the same lines:- see paragraph 81 above. I also referred to the concern I then expressed about the narrow scope of the complaints ASIC was pursuing against Mr Wilkins in relation to the particular errors in the five contentious loan applications:- see paragraph 82 above.
Those matters provide background information that is necessary to take into account in assessing Mr Dimitropoulos’ complaint about the concern I expressed about the narrow scope of the complaints ASIC was pursuing about Mr Wilkin’s conduct. The section of the hearing transcript was in the following terms (again I have underlined the words about which Mr Dimitropoulos principally complained).
SENIOR MEMBER: I don’t want to start a hare running, but it seems to me that there is something fundamentally wrong with the entirety of this structure.
Newlinds SC: Can I say this; I would love to run the case that you are exploring. I’ve raised that; we’re not running it; apart from anything else I’m told there are other documents which if we were running it would need to be put before the tribunal, so I’m not running that case. If the matter was to – we could regroup it and cast such a case, but at the moment I’m not running it.Now, that doesn’t mean the tribunal in its inquisitorial function couldn’t raise it and require - - -
SENIOR MEMBER: Look, I’m deeply troubled by this, I really am, because it seems to me the focus of ASIC’s case is upon the minutiae of a couple of loan transactions, which on one view - I mean, what is this man supposed to do if he’s told that the dollars are X, Y and Z, and if I accept that Mr Holm told him to put the money from one box into another? It seems to me we’re looking at the - on the tar baby and neither the fox nor the baby. There is a structure in here that seems to me to be fundamentally wrong. It looks to be a set of transactions in which people who are employees, and I think that’s right, isn’t it?
Newlinds SC: Yes.
SENIOR MEMBER: They’re all being shoe-horned into creating a self managed super fund of which the only asset is a real estate transaction which is largely wholly financed. They’re setting up a fund that they can’t contribute to themselves because they’re employees, and there’s got to be a background to this that is just a scenario that at the moment it should never have flown.
Newlinds SC: All I can say is, I get it. I’m not running it at the moment. We all need to be fair to Mr Wilkins, not just ASIC, but the tribunal, but there is a level of inquisitorial that goes on here, and if you direct us to explore that we will, but we haven’t - - -
SENIOR MEMBER: Mr Newlinds, I’m not on top of all the material.
Newlinds SC: And neither am I.
SENIOR MEMBER: But it will be perfectly clear to both of you that I think something about this investigation and treatment has misfired. If, having raised that, and I think it’s pretty clear, I hope, what I’m apprehensive about, is that these transactions - I mean, take it a little bit further. You have these people signed up to set up a superannuation fund and it’s all against the scenarios that have a real property investment. Where is the financial analysis to justify the overall transaction? You’re setting up a fund. It’s got to be audited. They are going to have ongoing costs. There is the financial modelling for the investment? They’re not going to be able to contribute themselves. Why are they getting into this?
Newlinds SC: And could I raise another question? Where us the valuation of the real property? It doesn’t appear to ever happen, but maybe by the bank.
SENIOR MEMBER: Look, that’s what concerns me.
Newlinds SC: I don’t know how much investigation has been carried out. You can rest assured that in the short time I’ve had the brief I obviously, I asked similar questions, and I’m here to run the case that I’m running. That doesn’t mean I ought not now take instructions.
SENIOR MEMBER: Gentlemen, what I think I’ll do, and Mr Cheshire, I share Mr Newlinds’ concern about whether I should be getting into this area, but it seems to me it’s just the elephant in the room. What I propose to do, subject to what either of you have to say, is I won’t take your other submissions at the moment, but no doubt you can share them with Mr Cheshire.
Newlinds SC: I’ll give them to Mr Cheshire.
SENIOR MEMBER: I’ll break for the rest of the day and you can take on board what I’ve had to say and both of you can take it on board. My inclination is that, if, having raised it, ASIC comes back and says they don’t want to touch anything other than what they’ve raised, I want that put in writing and tendered as an exhibit and I want there to be a specific acknowledgement that that’s a considered decision that’s been made, notwithstanding the points that I’ve raised. If that’s the position that’s taken - - -
Newlinds SC: I think that’s unlikely.
SENIOR MEMBER: If that’s the position that’s taken, you can anticipate that I’ll regard it as appropriate to proceed.
Newlinds SC: Proceed. I understand.
SENIOR MEMBER: If that’s not the position, then you’ll both have to say something about it.
The submissions advanced on Mr Dimitropoulos behalf emphasised that the “structure” of the SMSF transactions, and perhaps more specifically the conduct of the Sunpac employees and agents in relation to it, are directly relevant to the basis on which ASIC made both the financial services decision and the credit act decision:- see paragraph 4 above. That emphasis was correct, as is readily apparent from my earlier summary of the reasons for those two decisions:- see paragraphs 7 to 16 above. But that similarity is neither determinative of, nor even informative about, the reality of the apprehended bias of which Mr Dimitropoulos complains.
In its submissions opposing the recusal application ASIC pointed to the qualified and contingent expressions that appear in the contentious passage. (I have “double underlined” them in the passage set out above.) Conversely, Mr Dimitropoulos’ submissions emphasised the fact that in expressing my concern I twice used the expression “fundamentally wrong”. The submission was that the expression conveyed a form view, and one that was relevantly indicative of the reality of the risk determinative of the apprehended bias complaint.
Having regard to the necessity to look at the overall context and the combination of the matters complained of:- see paragraphs 39, 41 & 46 above. It would not be appropriate to resolve the current bias complaint by close evaluation of individual words – whether they be sought to be characterised as evidencing mere diffident inclinations or firmly held views. The more important consideration is the overall context. That overall context would be understood by the hypothesised fair minded observer as one in which the whole reason for the concern about the narrowness of the complaints being pursued against Mr Wilkins was the likely absence of a sufficient evidentiary foundation to reach any properly informed view. That proposition, apart from being implicit in the concern I expressed, is readily apparent from the references I made to the need for information about financial analysis and financial modelling, the costs involved in the transaction structure, and about the reasons why the clients participated in the transactions. The fact that I indicated (both in the passage set out above, and in a subsequent exchange with Newlinds SC the following day) that I would not embark upon considering any wider grounds of complaint, if ASIC indicated it did not propose to pursue them, would alert to the fair minded observer to the force of what Gleeson CJ and Gummow J had said in Minister for Immigration and Multicultural Affairs v Jia [2001] HCA 17 at [72]; (2001) 205 CLR 507; 178 ALR 421 (see paragraph 43 above). Conscious of that proposition, the fair minded observer would take the remarks I had made to be inconsistent with the proposition that I held firm views likely to give rise to a real risk of not being relevantly impartial in the determination of the wider grounds of complaint raised in the credit decision and the financial services decision. (And in this respect it also pertinent to repeat the passage I set out earlier from the High Court decision in R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 (at 553-4)
The common law principles of natural justice are well understood though they have been variously expressed. ….
Those 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.
THE PAGE 179 TRANSCRIPT PASSAGE
I have referred earlier in these reasons to Newlinds SC’s oral closing submissions and the 53 page written “Outline” which those oral submissions complemented. In part of the written Outline ASIC submitted (in paragraph 17(b)(ii)) that “certain transactions” were prohibited by the Superannuation Industry (Supervision) Act 1993, and that Westpac’s policy was not to lend for such transactions. That submission was immediately followed in the written Outline by an apparently complementary proposition that the five contentious loan applications would have been rejected “if Westpac’s policies in relation to SMSF lending had been applied”. (I have addressed that particular aspect of ASIC’s submissions earlier in these reasons:- see paragraph 94 above.) In the course of Newlinds SC’s oral submissions I took up with him the imprecision of the expression “certain transactions” and the consequential ambiguity of the reference to Westpac’s lending policies. The relevant transcript passage is set out below. (I have corrected the transcript references so that the references to the “Outline” document correspond with the actual paragraph numbering it contained.)
SENIOR MEMBER: Back on page 10, certain transactions were prohibited by the SIS Act, and Westpac’s policy was not to lend for such transactions. What are the certain transactions?
Newlinds SC: I have no idea. That comes from the Westpac internal memo.
SENIOR MEMBER: See, on one view of section 67, I think that’s 4, only authorises borrowing in relation to the acquisition and trading in of instalment warrants. On one view, this transaction or these transactions weren’t within a bull’s roar of an instalment warrant. If the certain transactions being addressed there are just left to hang in the air - - -
Newlinds SC: It is, because it’s a summary of what Mr Skujins at Westpac has said. It is really Mr Skujins’ understanding, it is him explaining why they had a policy.
SENIOR MEMBER: And 17(b)(iii), each of the subject loan applications would have been rejected.
Newlinds SC: Yes.
SENIOR MEMBER: Why? Because?
Newlinds SC: I think because there properly should have been loans to superannuation, self-managed superannuation funds, and Westpac’s policy was not to do that. But we will give you a summary of Skujin’s evidence.
SENIOR MEMBER: I really want the proposition - - -
Newlinds SC: But if you want the legal proposition, it’s hard.
SENIOR MEMBER: No, I understand that. I want the proposition that underlies 17(b)(iii). Paragraph 21, were the loans limited recourse? You see, in a sense - - -
Newlinds SC: Well, they had to be.
SENIOR MEMBER: Say that again?
Newlinds SC: Yes, in the sense that they become a loan to the self- managed superannuation fund itself, so recourse will be limited to the money in the fund.
SENIOR MEMBER: No, but it has to be limited to the - - -
Newlinds SC: The legal property.
SENIOR MEMBER: Under the legislation, the rights have to be limited to the property that’s acquired.
Newlinds SC: I don’t know - - -
SENIOR MEMBER: So the answer to that question is you don’t know?
Newlinds SC: I don’t know, but - - -
Cheshire SC: I understood the position, as was said earlier, that anything beyond that would be void. So in a sense, once they are into the superannuation analysis - - -
SENIOR MEMBER: But it’s more significant than that. There is a prohibition on the borrowing unless the rights are limited to the property or rights in relation to the property.
Cheshire SC: Yes, but my point is that we know the borrowing took place, so whatever the terms of the contract were, anything beyond what would have been lawful would have been void.
SENIOR MEMBER: That might be true, but you have a broker who is participating in a transaction which is prohibited by the legislation.
Cheshire SC: That is not the case. That is - - -
SENIOR MEMBER: You mean that is not the allegation that has been made?
Cheshire SC: That is not the allegation that has ever been made. It is not the case that has been run. It has not been put to Mr Wilkins. It can’t come in through the back door.
It was submitted on Mr Dimitropoulos’ behalf that the underlined words in this passage complement the concerns I had earlier expressed about the “structure” of the SMSF loan transactions, and tend to confirm the view that I had formed a firm opinion about the structure being “fundamentally wrong”, to the point of holding the view that the transactions were actually illegal and prohibited by section 67(4) of the Superannuation Industry (Supervision) Act 1993.
The submission misconceives the context of the interchange that occurred. The interchange started because of my concern about the ambiguity of paragraphs 17(b)(ii) and 17(b)(iii) of ASIC’s “Outline” submissions. In particular, as is readily apparent from the passage set out above, I complained that the expression “certain transactions” could not be left to “hang in the air”. That complaint provoked the enquiry whether the loans were “limited recourse” (as Sunpac’s legal advice has said was required:- see paragraph 81 above). ASIC’s response to that enquiry was agnosticism. The substance of the response volunteered by Cheshire SC on behalf of Mr Wilkins was that any illegality did not matter, because it would simply result in the unenforceability of that part of the loan obligations. That response to my enquiry about the nature of the loan obligations led to the underlined words in the passage set out above. That context and understanding would be readily apparent to the hypothetical fair minded observer, and would be taken to indicate that concerns about the legality of the loan obligations could not simply be dismissed, when assessing the propriety of the conduct of those involved in arranging the loan transaction. In the light of the background to the impugned statement, and Cheshire SC’s response (that, no question of illegality having been raised in relation to Mr Wilkins, the propriety of that conduct could not be addressed in the proceedings) the fair minded observer would not regard the underlined statement as indicative of any real risk of an absence of impartiality in the determination of the issues likely to be raised in Mr Dimitropoulos’ substantive review proceedings.
CONCLUSION
Mr Dimitropoulos’ recusal application is refused.
I certify that the preceding 112 (one hundred and twelve) paragraphs are a true copy of the reasons for the decision herein of Mr P W Taylor SC, Senior Member
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Associate
Dated: 20 June 2019
Date of hearing: 27 May 2019 Counsel for the Applicant: Ms A Munro Solicitors for the Applicant: Mills Oakley Counsel for the Respondent: Mr S Cleary
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