COURTS AND JUDICIAL SYSTEM – apprehended bias – where judge hearing a regulatory civil penalty proceeding and a representative proceeding under Pt IVA of the Federal Court Act 1976 (Cth) consecutively – where judge intends to deliver judgment in both proceedings contemporaneously – where there is different and potentially conflicting evidence in the two proceedings – where there is no evidence of prejudgment – whether extraneous information has a subconscious effect on decision-making – whether hypothetical observer considers a judge to have the ability to discard extraneous information – recognition of human frailty by the hypothetical observer
PRACTICE AND PROCEDURE – costs – contradictor appointed by the Court without any order for payment of costs – parties proceeding on assumption that contradictor was appearing pro bono
[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
Getswift Limited v Webb [2021] FCAFC 26
Case
[2021] FCAFC 26
Decision Date
CaseChat Overview and Summary
GetSwift Limited and Joel MacDonald have appealed against the decision of the primary judge to refuse their application to disqualify himself from hearing a proceeding brought by Mr Raffaele Webb against GetSwift. The proceeding alleges breaches of the Corporations Act 2001 (Cth) and other statutes by GetSwift and its Managing Director, Mr MacDonald. The primary judge had previously heard a proceeding brought by the Australian Securities and Investments Commission (ASIC) against GetSwift and Mr MacDonald, and intends to deliver judgment in both proceedings contemporaneously. The primary judge will have heard all evidence and argument in the ASIC proceeding when he hears the Webb proceeding, and vice versa. The appeal raises questions of apprehended bias and costs.
The appeal turns on whether the primary judge's decision to hear and determine the Webb proceeding after having heard the ASIC proceeding gives rise to a reasonable apprehension of bias. The court must consider whether the hypothetical observer would apprehend a risk of subconscious influence on the primary judge's decision-making process in the Webb proceeding due to the evidence and submissions in the ASIC proceeding. The court found that the primary judge's task of ignoring potentially conflicting evidence and submissions in one proceeding while drafting judgment in the other proceeding presents a real difficulty, and the hypothetical observer might apprehend that the judge could be subconsciously influenced by the extraneous information. The court allowed the appeal and set aside the primary judge's refusal to disqualify himself.
The appeal also considers the costs of the contradictor appointed by the court in the Webb proceeding. The contradictor submitted that the appeal be dismissed and the primary judge's proposed approach of deferring judgment in the ASIC proceeding be maintained. The court ordered that the contradictor's costs of $40,000 plus GST be shared equally between the parties to the appeal and ASIC. The court found that the contradictor was appearing without any order for payment of costs, and the parties had proceeded on the assumption that the contradictor was appearing pro bono.
Orders
Orders of the court
1. The appeal be allowed.
2. Order 1 of the primary judge made on 9 September 2020 in proceeding NSD580 of 2018 be set aside and, in lieu thereof, proceeding NSD580 of 2018 be referred to the National Operations Registrar for reallocation to a judge in the Commercial and Corporations National Practice Area.
3. There be no order as to costs, other than the parties to the appeal (including Mr Webb) and the Australian Securities and Investment Commission are to each pay one quarter of the costs of the contradictor to be fixed at $40,000 plus GST.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The other matter to observe is that no party involved in the regulatory proceeding or the Webb proceeding desires that the primary judge adopt the course of case management he has in fact foreshadowed. Accepting that appropriate case management may have a significance transcending the desires of the parties to litigation, the fact that all the parties to the regulatory proceeding and the Webb proceeding either support or do not oppose the application to disqualify the primary judge does suggest caution should be exercised in not acceding to the application for disqualification. BACKGROUND In the Webb proceeding, the Respondent in this appeal, Mr Raffaele Webb, makes allegations against the First Appellant, GetSwift Limited (‘GetSwift’), of continuous disclosure contraventions under s 674(2) of the Corporations Act 2001 (Cth) (the ‘Corporations Act’), and of false or misleading statements and misleading and deceptive conduct in contravention of ss 1041E and 1041H of the Corporations Act, s 12DA of the Australian Securities and Investments Commission Act 2001 (Cth) (‘ASIC Act’) and s 18 of Sch 2 to the Competition and Consumer Act 2010 (Cth) (‘Australian Consumer Law’). Against the Second Appellant, Mr Joel MacDonald (the Managing Director of GetSwift), Mr Webb alleges contraventions of ss 1041E and 1041H of the Corporations Act, s 12DA of the ASIC Act and s 18 of the Australian Consumer Law, and also alleges contraventions under s 647(2A) of the Corporations Act by reason of knowing involvement in GetSwift’s s 647(2) continuous disclosure contraventions. The allegations arise out of announcements issued by GetSwift to the Australian Securities Exchange (‘ASX’) regarding 16 agreements entered into between GetSwift and various customers. Civil penalty proceedings have also been brought by the Australian Securities and Investments Commission (‘ASIC’) against GetSwift and Mr Macdonald, as well as Mr Bane Hunter (GetSwift’s executive chairman) and Mr Brett Eagle (legal counsel and director of GetSwift) (‘ASIC proceeding’). Against GetSwift, ASIC alleges contraventions of ss 674(2) and 1041H of the Corporations Act and s 12DA of the ASIC Act. Against Mr Macdonald, ASIC alleges contraventions of ss 647(2A) and 1041H of the Corporations Act and s 12DA of the ASIC Act, as well as s 180(1) of the Corporations Act. As the primary judge accepted, the “allegations raised by ASIC and by Mr Webb are largely the same, save that in the class action the allegations relate to GetSwift’s contractual obligations and dealings with a total of 16 customers, comprising 13 customers referred to in the ASIC proceeding plus an additional three customers”: J [5]. Again as the primary judge accepted, he will be dealing with “largely the same course of events in the class action as in the ASIC proceeding”: J [46]. The status of each proceeding is as follows:(a)the ASIC proceeding was heard by the primary judge from 15 June 2020 to 15 July 2020, followed by closing submissions on 14 August 2020 and 30 September 2020. Judgment is reserved;(b)the Webb proceeding was due to commence on 15 September 2020 before the primary judge, but the hearing was vacated in the light of the disqualification application made on 11 August 2020;(c)the primary judge intends that judgment in each proceeding would be based on (and only based on) the evidence adduced in, and argument advanced in, each proceeding (that is, without regard to the evidence adduced in, and argument advanced in, the other proceeding);(d)the primary judge has indicated that he will not deliver judgment in the ASIC proceeding until he has heard the Webb proceeding, and will then deliver judgment contemporaneously in both proceedings;(e)when it comes time to hear and determine the Webb proceeding, the primary judge will have heard all the evidence and argument on liability in the ASIC proceeding. Likewise, when it comes time to deliver judgment on liability in the ASIC proceeding, and to hear and determine any penalty, the primary judge will have heard all the evidence and argument on the common issues in the Webb proceeding.
Evidence
Evidence Before The Court
In addition, the contradictor submits that the appeal be dismissed and the primary judge’s proposed approach of deferring judgment in the ASIC proceeding until after the hearing and determination of the Webb proceeding be maintained. ISSUES AND EVIDENCE IN EACH PROCEEDING The primary judge accepted that in both proceedings he will be “required to make findings on factual matters in contention common to both proceedings” (J [25]), including:(1) the state of affairs of agreements and dealings between GetSwift and its clients;(2) the materiality of certain information;(3)the beliefs that would be held by a reasonable shareholder regarding GetSwift’s statements in relation to the company’s business model;(4)the beliefs that would be held by a reasonable shareholder regarding GetSwift’s statements in relation to the status of its agreements with certain customers;(5)the basis for various statements alleged to have been made the company; and(6)the relevant involvement of GetSwift’s directors in the company’s conduct in releasing certain announcements. The documentary evidence adduced in the ASIC proceeding, and proposed to be adduced in the Webb proceeding, is substantially the same (J [8]), with the result that there will be a “core body of documentary material” common to each proceeding: J [28]. However, there are differences (whether substantial or not needs not be determined, but the differences are not minimal) as to the lay and expert evidence in each proceeding. In the ASIC proceeding, ASIC relied upon a total of 37 lay witnesses, including 19 witnesses from customers of GetSwift; four witnesses who are former associates of GetSwift; 10 witnesses from ASIC, the ASX and Chi-X Australia (a securities and derivatives exchange); and four witnesses from organisations who were large investors in GetSwift. Twenty-four of those witnesses were cross-examined. ASIC also relied upon expert opinion evidence from Mr Andrew Molony as a “professional investor” who was also cross-examined. The Defendants did not give evidence or call any witnesses. In the Webb proceeding, Mr Webb intends to give evidence and to call seven out of the 19 customer witnesses called in the ASIC proceeding. All of those witnesses were cross-examined and are intended to be required for cross-examination in the Webb proceeding. Three of the witnesses will only be called if Mr Webb’s efforts to secure their attendance remotely from overseas are successful. Mr Webb intends to rely on two experts (Dr Ramsay Zein and Mr Robert Turner) as does GetSwift (Dr Sanjay Unni and Mr Martin Duncan). As the primary judge accepted, when he comes to hear the Webb proceeding the Court “will be in possession of information extraneous to the evidence adduced in the class action when making findings in the class action” (J [26]): namely the written and oral evidence of 30 lay witnesses from the ASIC proceeding (or perhaps 33 lay witnesses, if the attendance of the three overseas witnesses cannot be secured); the opinion evidence of Mr Molony; and written and oral submissions.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
It follows that there is a need to recognise “human frailty” such that, even where a decision-maker has expressly disavowed consideration of certain material, it may be that the particular nature and relevance of that material can still give rise to the risk of a subconscious influence. CONSIDERATION In our view, the hypothetical observer would recognise that judges are human, not a “passionless thinking machine” (CNY17 at [28] (Kiefel CJ and Gageler J) quoting Re J P Linahan Inc (1943) 138 F 2d 650 at 653) or robot just assessing information. In the circumstances before the primary judge, there is a real difficulty of disregarding the extraneous information. The primary judge is not being asked to disregard the evidence of one witness, on a discrete topic, heard at a remote point in time. This case is removed from the “everyday duty of a judge at first instance to sift inadmissible from admissible material”: R v Judge Leckie; ex parte Felman (1977) 18 ALR 93 (‘R v Judge Leckie’) at 99 (Gibbs J). In contrast to the present case, when a judge rules evidence inadmissible, he or she is generally not required to return to it again. For the purposes of determining the Webb proceeding, the primary judge is required to ignore the evidence of 30 to 33 lay witnesses, an expert, and the submissions made by the parties in the ASIC proceeding, while at the same time reviewing that material in the ASIC proceeding. Likewise, for the purposes of determining the ASIC proceeding, the primary judge is required to ignore the evidence of four experts, and the submissions made by the parties in the Webb proceeding, while at the same time reviewing that material in drafting judgment in the Webb proceeding. The test does not focus on the particular characteristics of the judge. The hypothetical observer looking at the reality of the process might apprehend that it might be difficult for any person, even a professional judge, confronted with different and potentially conflicting evidence and submissions in different proceedings (albeit proceedings directed to the same underlying transactions and issues) to decide the Webb proceeding without the contamination of the extraneous information. As a result the hypothetical observer might reasonably apprehend that the judge might be influenced subconsciously by the extraneous information in deciding the issues in the Webb proceeding. The primary judge accepted that the evidence of the 30 to 33 lay witnesses and of Mr Molony could not be dismissed “as being marginal or insignificant”: J [28]. The primary judge has proceeded on the basis that, notwithstanding the significance of the witness evidence, the fair-minded lay observer would recognise that the documentary evidence was “the most important evidentiary material”: J [33]. We would not assume that the hypothetical observer would expect that evidence to be necessarily preferred insofar as there was a conflict between the documentary and witness evidence. In some instances at least, the witness evidence might be preferred. The choice between documentary and witness evidence is not always clear cut. Documentary evidence, such as email correspondence for instance, can be ambiguous or confusing and witness evidence can be necessary to understand it and can influence the meanings attributed to it. Further, witness evidence can address matters that are not addressed by documentary evidence, as the primary judge recognised was the case with ASIC’s expert evidence on materiality: see J [33].