LAUREN KAY GEORGE v WILLIAM JOHN FLETCHER AS TRUSTEE FOR THE BANKRUPT ESTATE OF LAUREN KAY GEORGE, DR PETER IRONSIDE PTY LTD (ACN 008 126 387), PETER DOUGLAS IRONSIDE AND NATIONAL AUSTRALIA BANK
File number:
QUD 192 of 2011
Judges:
SIOPIS, JESSUP & KATZMANN JJ
Date of judgment:
25 October 2012
Catchwords:
COURTS AND JUDGES – Procedural fairness – bias – apprehended bias – association – prejudgment – adverse credit finding in earlier judgment – waiver
COURTS AND JUDGES – Procedural fairness – judicial intervention in the conduct of proceeding – whether judicial questioning of witnesses excessive – pejorative and inappropriate comments by federal magistrate – limits on one party’s rights to issue subpoenas and cross-examine witnesses
BANKRUPTCY AND INSOLVENCY – whether federal magistrate erred in finding that certain property was not held by the bankrupt on trust for her son – whether federal magistrate erred in treating certain chattels as having been returned to the bankrupt – failure to undertake necessary inquiry under Bankruptcy Regulations (Cth)
TRUSTS AND TRUSTEES – matters relating to registration and evidence in writing of purported trust – whether notation on reprints of the Trusts Act evidenced purported trust
PRACTICE AND PROCEDURE – Consent orders giving effect to a compromise between parties – whether it was open to federal magistrate to make an order inconsistent with consent orders
[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.
[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.
[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.
Consideration
[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.
[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.
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AGLC
George v Fletcher (Trustee) [2012] FCAFC 148
Case
[2012] FCAFC 148
Decision Date
CaseChat Overview and Summary
In the case of George v Fletcher (Trustee), the parties involved were Ms George, who was in bankruptcy, and Mr Fletcher, the trustee of her bankruptcy. The central dispute concerned the existence of a trust over a property in Moggill, which was allegedly held for Ms George's son, Alexander. The case was heard in the Federal Court of Australia. The legal issues addressed by the court included whether the federal magistrate was biased due to his association with Mr Fletcher, whether there was prejudgment on the part of the federal magistrate, and whether the federal magistrate's conduct during the proceedings was procedurally fair.
The court examined the nature of the association between the federal magistrate and Mr Fletcher, concluding that it was professional rather than personal or financial. The court found no evidence that would lead a fair-minded lay observer to conclude that the federal magistrate might be influenced by this association. Therefore, the claim of apprehended bias was dismissed. Regarding prejudgment, the court found that Ms George, as a critical witness, had a significant issue at stake in the case. The court acknowledged that a previous adverse finding about a witness's credibility by the same judicial officer could lead to a reasonable apprehension of bias. However, the court noted that a party who believes on reasonable grounds that the judge has decided in advance to disbelieve their evidence cannot have confidence in the result of the proceedings.
The court also addressed whether the federal magistrate's conduct during the proceedings was procedurally fair. This included examining whether the federal magistrate's questioning of witnesses and comments were excessive or inappropriate. The court concluded that the federal magistrate's conduct did not amount to procedural unfairness. The court further addressed whether the federal magistrate erred in finding that certain property was not held by the bankrupt on trust for her son and whether there was a failure to undertake necessary inquiries under the Bankruptcy Regulations.
The appeal was partially allowed, and the case was remitted to the Federal Magistrates Court of Australia to determine which, if any, of the chattels removed from Ms George's house were not divisible amongst her creditors. The appeal was otherwise dismissed, and costs were awarded against Ms George to various respondents.
Orders
Orders of the court
1. The appeal be allowed in part.
2. The proceeding be remitted to the Federal Magistrates Court of Australia for the purpose of determining which, if any, of the chattels removed from the appellant’s house by the first respondent was or were not property divisible amongst the creditors of the appellant pursuant to the provisions of s 116(2)(b)(i) of the Bankruptcy Act 1966 (Cth) and reg 6.03 of the Bankruptcy Regulations 1996 (Cth), and of making any consequential orders.
3. The appeal otherwise be dismissed.
4. The appellant pay the costs of the second, third and fourth respondents.
5. The appellant pay 90% of the costs of the first respondent.
6. The operation of the previous order be stayed for 14 days and, if an application be made pursuant to the following order, thereafter until the determination of that application.
7. The appellant and the first respondent have leave to apply for a variation of Order 5 above by filing and serving, within 14 days, submissions, not exceeding five pages in length (including any attachments and any documents incorporated by reference) setting out the terms of the variation sought and a statement of the reasons why it should be made. In the event that any such submissions are made by either such party, the other party may, within a further 14 days, file and serve submissions, also not exceeding five pages in length (including any attachments and any documents incorporated by reference), in response. In the event that any such submissions in response are made, the first party may, within a further seven days, file and serve submissions, not exceeding two pages in length (including any attachments and any documents incorporated by reference), in reply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
In order to understand the issues and the reasons for some of the federal magistrate’s conduct, it is necessary to provide some background. We will return to some of these matters in our discussion of the grounds of appeal. Having regard to the way those grounds are formulated, a certain amount of repetition is unavoidable.FACTUAL BACKGROUND Ms George gave birth to her son, Alexander, on 27 November 1997. At the time of his birth Ms George and her then husband, Matthew George, lived on a property in Pullenvale, Queensland. The marriage later broke down. The Pullenvale property was sold and Ms George used the proceeds of the sale to purchase a block of land at Moggill upon which she later had a house built. The contract for the sale of the Moggill land names Ms George (as Cordes) as the purchaser. There is no mention of a trust.On 22 September 2003 Mr George placed a caveat over the Moggill land, claiming to have an equitable interest (in the nature of a constructive, resulting or implied trust). The registered owner listed on the caveat is “Lauren Kay George”. The certificate of title issued on 3 December 2003 records the name of the registered owner as “Lauren Kay Cordes”. In proceedings in the Family Court of Australia resulting from the breakdown of the marriage Ms George filed three financial statements. Each statement purported to set out her income, assets, expenditure and liabilities and included an affidavit from her stating that she was aware of her obligations to make full and frank disclosure of her financial situation. In the September 2002 and October 2004 statements she listed herself as the sole owner of her home. The January 2004 statement listed the Moggill property by address and again did not name any other owners. There was no reference to any trust. On 14 July 2004 the fourth respondent, National Australia Bank (NAB) registered a mortgage over the Moggill property. Ms George is named as mortgagor. Once again, there was no mention of a trust. In January 2005 Ms George applied to NAB for finance to build a house on the property and for a first home mortgage stamp duty concession. The application made no reference to any trust. In March and April 2005 the Family Court heard a dispute between Ms George and her former husband over the questions of property settlement and spousal maintenance. On 29 April 2005 Barry J made final orders. The judgment, which was an annexure to Mr Fletcher’s affidavit in the court below, made no mention of the existence of any trust in favour of Alexander and before the federal magistrate Ms George conceded that no evidence was called in that proceeding of the existence of such a trust. Ms George appealed from the Family Court judgment. When the appeal came on for hearing on 31 October 2005, consent orders were made, allowing the appeal and discharging the orders for spousal maintenance. On 18 June 2005 Ms George entered into a contract in standard REIQ form to sell the Moggill property to the second respondent, Dr Peter Ironside Pty Ltd (DPIPL) (a company associated with the third respondent, her brother-in-law, Dr Peter Ironside) for $400,000. The contract was not subject to any encumbrances but included provision for a 30 year tenancy agreement in Ms George’s favour at a set rental. There was no reference in the contract to the existence of any trust. Ms George contended that the parties entered into a collateral agreement the same day to transfer the property back to her at some indeterminate time. NAB agreed to a sale at the contract price, leaving a debt of $20,000 to be repaid at $200 a month, but a private loan of $80,000 was given to assist with the property settlement. Mr Fletcher contended that the sale was for less than the market value and that the transfer was therefore void against the trustee in Ms George’s bankruptcy (see s 120(1) of the Bankruptcy Act).
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Where apprehended bias is alleged based on the relationship between a decision-maker and a party, there must be “something in the nature or the extent of the association which leads that bystander to conclude, whether for friendship, love, money, fear, favour or otherwise, that the [decision-maker] might be influenced by it”: Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 65 FCR 215 at 222 per Merkel J. Here, the only material before the Court indicates that the association between the federal magistrate and Mr Fletcher was a professional, not a personal or financial one. There is nothing in the nature of this association which might lead a fair-minded lay observer to conclude that his Honour might be influenced by the association to decide the issues in dispute in a particular way. It follows that the submission that he was biased because of his association with Mr Fletcher must be rejected.The federal magistrate’s decision of 3 November 2008 This complaint relates to the federal magistrate’s decision to gaol Ms George and to the reasons his Honour gave at the time. It involves two issues: whether there was a reasonable apprehension of bias and (no question of necessity, consent or special circumstances having been raised) whether Ms George should be taken to have waived her right to object to the conduct now complained of. Waiver aside, the principle is best encapsulated in the following passage from Livesey (at 300), a case in which two of the three members of the bench of the NSW Court of Appeal constituted to hear the Bar Association’s summons to have Mr Livesey struck from the roll of barristers had (in a previous case) made adverse credit findings about one of his witnesses: In a case such as the present where it is not suggested that there is any overriding consideration of necessity, special circumstances or consent of the parties, 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. Here, Ms George was a critical witness whose evidence was of significance on a question of fact which constituted a live and significant issue in the case. That issue was whether before her bankruptcy she had created a trust in favour of her son. The resolution of that issue depended on whether or not the federal magistrate accepted her as a witness of truth. The necessary apprehension, of course, is that the judicial officer might not decide the case impartially, not that he might decide it adversely to one party. A previous decision of the judicial officer might generate such an expectation. This does not mean, however, that the judicial officer will not approach the issues in the case with the requisite degree of objectivity: Re JRL; Ex parte CJL (1986) 161 CLR 342 (JRL) at 352. The mere fact that a judge has made interlocutory decisions that adversely affected a party does not mean that he or she is precluded from hearing the principal proceeding, although judges are usually circumspect in the way they express themselves so as to avoid any appearance of bias: Southern Equities Corporation Ltd (in liq) v Bond (2000) 78 SASR 339 (Southern Equities) at [129] per Bleby J, Olsson J agreeing. A judge has a duty to sit; judicial officers should not accede too readily to suggestions of appearances of bias and so encourage parties to forum-shop: JRL at 352. But a party who believes on reasonable grounds that the judge has decided in advance to disbelieve his or her evidence cannot have confidence in the result of the proceedings: R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 265. In Australian National Industries Ltd v Spedley Securities Ltd (in liq) (1992) 26 NSWLR 411 Mahoney JA (at 442E), with whom Meagher JA agreed (at 447G), observed that a previous decision on the same fact or on the credibility of a relevant witness will “normally, if not inevitably” give rise to a reasonable apprehension of bias.