In the matter of an application by Bendeich, G.R. of 4 Candlebark Crescent, Chapel Hill, Brisbane in the State of Queensland to be registered as a Trustee under the Bankruptcy Act 1966

[1994] FCA 149

JUDGMENT No. ........ ........ .. ........ .... 14-9, 99-

IN THE FEDERAL COURT OF AUSTRALIA )	No. ART 1 of 1992
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF	1
THE STATE OF OUEENSLAND	)

IN THE MATTER of an application by GRAHAM ROSS BENDEICH of 4 Candlebark Crescent, Chapel Hill, Brisbane in the State of Queensland to be registered as a Trustee under the Bankruptcy Act 1966

MINUTES OF ORDERS

JUDGE MAKING ORDER:	Drummond J
DATE OF ORDER:	25 March, 1994
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:
1. ‘	The application of 22 February, 1994 to review the decision of Deputy District Registrar McQuaid to set down the hearing of the taxation of bills of costs before Taxing Officer Robert Arthur Allen is dismissed.
NOTE :	Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )	No. ART 1 of 1992
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF	1
THE STATE OF OUEENSLAND	)

IN THE MATTER of an application by GRAHAM ROSS BENDEICH of 4 Candlebark Crescent, Chapel Hill, Brisbane in the state of Queensland to be registered as a Trustee under the Bankruptcy Act 1966

Corm:  Drummond J

Place: Brisbane

B: 25 March, 1994

REASONS FOR JUDGMENT

This is an application for an order reviewing a decision of Deputy Registrar McQuaid to set down the taxation of two bills Of costs ordered to be paid to Feez Ruthning pursuant to the orders of 31 August, 1992 and 1 December, 1992

before taxing Officer Robert Arthur Allen.

The ground on which the application is brought is that there is a reasonable apprehension that Mr. Allen may not bring an unbiased mind to the task of taxing these bills of costs. The applicant expressly disclaims any suggestion that Mr. Allen may be infected with actual bias. The principle to be applied is clear. In Livesev v The New South Wales Bar Association (1983) 151 C.L.R. 288 at 293 to 294, it was said:

". . . a judge should not sit to hear a case if in all

the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it."

AS is apparent from what the Court says in the passage immediately following, it is a reasonable apprehension that must be held by the parties or a fair-minded observer. At page 294 the Court added this:

"I£ a judge at first instance considers that there is any real possibility that his participation in a case might lead to a reasonable apprehension of pre- judgment or bias, he should, of course, refrain from sitting. On the other hand, it would be an abdication of judicial function and an encouragement of procedural abuse for a judge to adopt the approach that he should automatically disqualify himself whenever he was requested by one party so to do on the grounds of a possible appearance of pre- judgment or bias, regardless of whether the other party desired that the matter be dealt with by him as the judge to whom the hearing of the case had been entrusted by the ordinary procedures and practice of the particular court."

It follows from these comments that, where a by the appearance of bias, the court charged with determining	question is raised whether a judicial officer is disqualified
that question is duty-bound to examine the factual bases for the assertion and to hold that the officer is disqualified only if it is satisfied that the facts relied on are sufficient to establish the ground of disqualification said to exist. The mere fact that an assertion of appearance of bias is made cannot create a predisposition by the tribunal, which has to decide the challenge, in favour of upholding it.
The challenge to Mr. Allen's suitability to tax the applicant's bills arises in this way. The two costs orders in question were made in the course of what has become bitter Litigation arising out of an application by an accountant, Mr. Bendeich, for registration as a trustee in bankruptcy. This has been opposed by Braegrove Pty. Ltd. and Mr. Gray, a person associated with that company. This opposition, in turn, arises out of Mr. Bendeich's involvement some time ago with Mr Gray in Braegrove's business affairs. The applicant customarily acts as Mr. Bendeich's solicitor and continues to so act. However, it does not act for him in relation to his application for registration as a trustee, nor in the Supreme Court proceedings to which I will refer.
Braegrove, Mr. Gray and other persons have an action on foot in the Supreme Court against, among others, Mr. Bendeich, the applicant, and the firm of accountants, Knight Ferrier Hodgson, in which Mr. Bendeich was a partner when he was involved, as a director of Braegrove, in that company's
business affairs. Knight Ferrier Hodgson is sued not only in respect of Mr. Bendeich's actions, but also in respect of the
actions of another of its partners, Mr. Clout, who became trustee of the estates of both Mr. and Mrs. Gray, following acceptance of their own petitions in 1989, until their bankruptcies came to an end in 1990.
The issues raised by Braegrove and the other plaintiffs in the Supreme Court action are complex. The allegations made in their statement of claim include the following. The applicant were the solicitors for Mr. Clout in his capacity as trustee in bankruptcy; the applicant also acted as Mr. Bendelchfs private solicitors. From 1989 to 1990 the applicant acted for Braegrove, both in its capacity as trustee of a number of Gray family trusts and in its own right. It is further alleged that in contentious circumstances, orders were made on 22 November, 1989 by the Supreme Court that certain legal costs charged by the applicant in respect of its retainer to act for Braegrove, as trustee of the family trusts, were to be paid to the applicant, but on certain terms. It is also alleged that subsequently M r . Bendeich breached his duty as a director of Braegrove, as did the other directors, firstly, by failing to terminate the applicant's retainer by Braegrove because the applicant was in a position in which it is said it had conflicting duties to Mr. Clout as trustee in Mr. and Mrs. Gray's bankruptcies and to Bank of New South Wales Nominees, Mr. Gray's major creditor, and, secondly, by voting with
Braegrove's other directors to cause that company to enter into a costs agreement with the applicant with respect to the
terms on which the applicant would be remunerated for acting as Braegrove's solicitors. This costs agreement is alleged to provide for the payment of an excessively high level of remuneration to the applicant for its services. It is also alleged that subsequently, Mr. Bendeich breached his duty by also voting with Braegrove's other directors for Braegrove to pay sums to the applicant, pursuant to this costs agreement.

It is also alleged that in the statement of claim that Mr. Bendeich (with the other directors) acted in breach of the terms of the Supreme Court order of 22 November, 1989 by causing Braegrove to pay accounts rendered by the applicant to it.

It is further alleged that the applicant, as solicitors to Mr. Clout and Mr. Bendeich, was involved in various breaches of trust which it is said each of those gentlemen committed, and in which their firm, Knight Ferrier Hodgson, is also implicated. Allegations are also made in the statement of claim that the applicant gave negligent advice to Braegrove with respect to a number of matters in the period 1989 to 1990 and that the applicant was in breach of its fiduciary duty to Braegrove by, among other things, taking a retainer to act for Mr. Bendeich in his personal capacity, which negligence and breach of duty has caUsed loss to Braegrove.

Braegrove claims to recover substantial damages from each of Mr. Bendeich and the applicant which, in the case of the latter, include but are not limited to the legal fees it paid to the applicant pursuant to the costs agreement which, as I have said, is alleged to provide for the payment of excessively high fees to the applicant.

The two orders under which Mr. Allen is to perform his function as taxing officer are in the following terms. That of Neaves J of 31 August, 1992 provides:

"The Court orders that (1) the summons to Feez Ruthning dated 5 June 1992 was so wide in its terms that it should be struck out and the recipient of the summons be not obliged to answer it. (2) the applicant for the summons pay the costs of Messrs Feez Ruthning and Mr D.L. Clout of and incidental to the summons to be taxed including any reserved

costs. "

My order of 1 December, 1992 is relevantly in these

terms :

"The Court orders by consent that (1) the summons to witness proceedings be adjourned to a date to be fixed; (2) the objectors pay Messrs Feez Ruthning's costs of and incidental to the sdcjns to witness to be tax including reserved costs if any."

It appears that the applicant is claiming an entitlement to about $56,000.00 under the order of Neaves J and about $2,000.00 under my order.

It is against the background of these allegations in the Supreme Court action against Mr. Bendeich and the applicant that it was said that the evidence of Mr. Green, a solicitor in the applicant's employ, makes out a sufficient case that Mr. Allen should be disqualified from taxing the costs that Braegrove and Mr. Gray were ordered to pay to the applicant under these two costs orders.

What Mr. Green says in this regard is limited to the contents of paragraph 11 of his affidavit of 23 February, 1994, which reads:

"I am informed by Graham Ross Bendeich and do verlly

believe : (a) on 4 September 1992 he commenced proceedings against Deputy Registrar Allen in the Supreme Court of Queensland action number 1309 of 1992 claiming damages for defamation; (b) the defamatory matters of which M r Bendeich complains comprise statements alleged by him to have been made by Deputy Registrar Allen concerning the administration of the bankrupt estates of the Grays, the actions of Braegrove Pty. Ltd. and associated matters which are the subject of Supreme Court action number 380 of 1992."

The correspondence annexed to Mr. Green's affidavit to which I was referred does not take this aspect of the matter any further. This afternoon, immediately before I gave judgment, an application was made to file and read an affidavit by Mr. Green designed to provide some further information from Mr. Bendeich, so it was said, on matters about which I expressed concern yesterday. I declined to grant leave because it seems to me that an application of the	present kind is very much subject to the ordinary rule that	the parties are bound by the way they conduct their case; they
elected to run it on very limited material when it was pretty clear that other information from Mr. Bendeich was readily available to them, if they wanted to seek it out, and they should not be accorded the advantage of being able to make good deficiencies in their evidence on which I commented in the course of argument.
Although the applicant continues to act for Mr. Bendeich in an unidentified range of matters, and so are able to obtain information from Mr. Bendeich about his defamation action additional to that which Mr. Green mentions in the communication he had with Mr. Bendeich to which he refers in paragraph 11 of his affidavit, no other evidence is before me that serves to identify with any further clarity what Mr. Allen is alleged to have said which provoked Mr. Bendeich to sue him. I was eventually told from the Bar table that this was because Mr. Bendeich did not wish to re-publish Mr. Allen's alleged comments while his application for registration as a trustee is before this Court. There are procedures available, pursuant to S. 50 the Federal Court of Australia Act 1976, that would have enabled what Mr. Bendeich claims Mr. Allen said, insofar as that is relevant to the question for my determination, to be put in evidence before me while recognising any concern Mr. Bendeich may have about re- publication. Moreover, I know nothing from what the applicant has put before me of the history of this action which Mr.
Bendeich has brought against Mr. Allen. Yet this is, it seems to me, relevant to assessing whether or not a fair-minded
person would perceive Mr. Allen's position to be that of a suitable person to tax the applicant's costs. For example, a fair-minded observer might well consider that Mr. Allen's position would be different, if Mr. Bendeich was pushing the action along with a view to bringing it to an early trial, from his position if all that Mr. Bendeich has done is to issue a writ a long while ago. Disclosure in this application of such matters, which are matters of public record, would not seem to be such as could occasion any concern to Mr. Bendeich. After some discussion in the course of argument, I was also told from the Bar table that Mr. Bendeich issued the writ against Mr. Allen on 4 September, 1992 and that, so far as the applicant was aware, it had not been served.
An affidavit read by the solicitor for Braegrove and Mr. Gray, who was served with the present application, but whose clients are content to abide the order of the Court on this occasion, confirms that public records show that the action has not progressed beyond the filing of the writ.
It is an extraordinary thing for a judicial officer who has to tax costs payable to a person to himself be a defendant in defamation proceedings, especially proceedings brought against him by another who is associated with that person. This is the more so when the allegedly defamatory statements made about one relate to activities in which both ...
persons were together involved. However, I am not satisfied that a sufficient case has been made out to warrant the review
sought and the consequent disqualification of Mr. Allen from the job of taxing the applicant's costs, for the following reasons. Firstly, even though . Green says Mr. Bendeich alleges that Mr. Allen made certain defamatory statements of him concerning the Supreme Court action by Braegrove, there is no suggestion that Mr. Allen is alleged to have said anything at all concerning the applicant or its involvement in the matters the subject of that action let alone anything derogatory of the applicant. It is unlikely, if Mr. Allen were alleged by Mr. Bendeich to have said anything about the applicant itself that might concern the applicant, that the applicant would not be aware of that and would not have put evidence of such matters before me, given its ongoing association with Mr. Bendeich. The mere fact that Mr. Allen is alleged by Mr. Bendeich to have made a defamatory statement about Mr. Bendeich in relation to very broadly identified aspects of the Braegrove litigation would not, in my opinion, cause a fair-minded observer to suspect Mr. Allen's
impartiality as the officer of the court responsible for taxing the applicant's costs here in question, even though there are allegations made by Braegrove in its statement of claim in the Supreme Court that the applicant's charges to Braegrove were excessive. That the applicant continues to have an association with Mr. Bendeich that is on the evidence a professional one only, does not add anything to the case that the applicant seeks to make out in support of the review
now sought.
Secondly, the way Mr. Bendeich is pursuing his defamation action, or rather failing to pursue that action, diminishes any concern that a fair-minded observer might have that there might be something in Mr. Bendeich's allegations against Mr. Allen about his unfitness to have any official involvement with any of the parties, including the applicant, on the defendant's side of the record in the Braegrove litigation in the Supreme Court.
Thirdly, Mr. Bendeich, the only person who alleges he was defamed by Mr. Allen, has on the evidence before me a rather different attitude towards . Allen's impartiality than does the applicant. Mr. Allen has taxed costs as between Mr. Bendeich and Braegrove and Mr. Gray under no less than four orders made in the litigation in this Court on Mr. Bendeich's application for registration since he commenced his defamation action agalnst Mr. Allen. Mr. Gray, in his affidavit, says of this:

"To my knowledge, no complaint or objection has been taken by Mr Bendeich or his legal representatives to

Mr Allen taxing any of the above bills, and no

application was made by Mr Bendeich for the disqualification of Mr Allen by reason of the existence of the Supreme Court writ issued by Mr Bendeich against Mr Allen. None of the rulings made by Mr Allen on any of the above taxations have been reviewed by Mr Bendeich."

The attitude of Mr. Bendeich is, I think, of direct relevance to the question whether a fair-minded member of the public would entertain a reasonable apprehension that Mr. Allen might not bring an unprejudiced mind to bear on the issues for his determination in this taxation. This limb of the test is in my view an objective one. That the person who is alone complaining of being defamed by Mr. Allen has sufficient confidence in his professional impartiality in making decisions that directly affect Mr. Bendeich's own

pecuniary interests, which are decisions of exactly the same kind as those with respect to which the applicant has raised concerns about m. Allen's perceived impartiality, could not fail to be a matter which a reasonable person would regard as showing that there is no real reason for concern. Not only as

I say does the evidence before me indicate that Mr. Bendeich

has made no objection to any of the taxations, but he has not sought to challenge at any stage any of the rulings made by Mr. Allen. The way Mr. Bendeich has conducted the defamation action to date reinforces me in the assessment that I have just mentioned.

By way of conclusion, I observe that the entitlement the applicant is asserting with respect to the costs due to it by Braegrove and Mr. Gray, particularly under the order of Neaves J, is unusual, so far as the quantum of that entitlement is concerned. The applicant is saying that a sum as large as $56,000.00 is payable to it by persons in the litigation in this Court, who also happen to be alleging

misconduct by the applicant in separate proceedings in the	Supreme Court, in respect of what the applicant did in
relation to the subpoena to produce documents issued by those people. The applicant is saying this because it did a lot of work that it would only have been necessary for it to do if it had to answer the subpoena even though it never answered it because it successfully had the subpoena set aside on the ground, as Neaves J's order recites, that it was too wide. Whether the applicant, when faced with a subpoena that was on its face bad, is entitled to recover what appears to be the very extensive costs of doing work necessary to respond to the subpoena, only if it was effective to require a response, can recover any of those costs under Neaves J's order is a question which Mr. Allen will have to decide. But litigation can often develop a momentum of its own. The applicant's claim is for a sum so large that, having regard to the basis on which it is made, it would in my view be desirable for the appropriateness of pursuing it, at least for the entirety of the amount currently claimed, to be reviewed at the senior level in the applicant's firm.
I certify that this and the preceding 12 pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Drummond.
Associate:  by#<' &<~sd

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Date:  25 March, 1994