Mandie v Memart Nominees Pty Ltd
[2017] VSCA 177
•4 July 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0073
| EDWARD NICHOLAS MANDIE & ORS (according to the attached schedule) | Applicants |
| V | |
| MEMART NOMINEES PTY LTD (as trustee for the DAVID MANDIE FAMILY TRUST) | Respondent |
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| JUDGES: | WHELAN and McLEISH JJA, and CAMERON AJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 24 February 2017 |
| DATE OF JUDGMENT: | 4 July 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 177 |
| JUDGMENT APPEALED FROM: | [2016] VSC 267 (McMillan J) |
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COURTS AND JUDGES — Apprehended bias — Interlocutory finding that claim had no real prospect of success — Finding overturned on appeal — Whether judge ought to have recused herself from finally determining claim — Whether claim now advanced on basis not previously argued — Judge’s criticism of party’s conduct — Whether unreasonable — No reasonable apprehension of bias in circumstances — Judge’s discretion to recuse in any event — Whether refusal to do so reviewable — Appeal dismissed.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr R H Gillies QC with Mr B Jellis | Cornwall Stodart |
| For the Respondent | Mr A C Archibald QC with Mr P D Herzfeld | Allens |
WHELAN JA
McLEISH JA
CAMERON AJA:
Introduction
David Mandie and Minnie Mandie, both now deceased, by a trust deed dated 24 April 1978 (‘the trust deed’), established the David Mandie Family Trust (‘the trust’). The respondent, Memart Nominees Pty Ltd, is the trustee of the trust.
The trust is what is often called a family discretionary trust. Under the trust deed, there are two classes of beneficiaries – specified and general beneficiaries. The specified beneficiaries are the children of David and Minnie Mandie: Ian, Stephen and Evelyn. For ease of reference we will refer to them by their given names. The class of general beneficiaries includes the spouses and children of the specified beneficiaries.
In the mid-1990s, a dispute occurred between Ian and Stephen on one hand, and David and Minnie Mandie on the other. The dispute was settled and a settlement agreement was entered into on 19 December 1995 (‘the settlement agreement’). By the settlement agreement, Ian and Stephen disclaimed their interests in the trust.
On 15 December 2014 Ian and Stephen’s spouses and children issued this proceeding alleging breaches of duty by the respondent and seeking its replacement as trustee.
In May 2015 the plaintiffs applied to amend their statement of claim.
The primary judge heard the application to amend on 12 June 2015. She published her reasons and made orders on 28 August 2015.[1] She gave leave to make certain amendments and she refused leave to make others. In particular, she refused leave to make amendments referred to as the ‘specified beneficiary allegations’. On 13 November 2015 the primary judge made indemnity costs orders against the plaintiffs on the amendment application and published reasons.[2]
[1][2015] VSC 446 (‘the amendment reasons’).
[2][2015] VSC 622 (‘the costs reasons’).
The plaintiffs[3] successfully then appealed the refusal to allow the introduction of the specified beneficiary allegations. This Court heard the appeal on 2 February 2016, and it published reasons and made orders on 5 February 2016.[4]
[3]For ease of reference, we will refer to the applicants for leave to appeal as ‘the plaintiffs’ throughout.
[4][2016] VSCA 4 (‘the appeal reasons’).
This Court made costs orders against the plaintiffs which removed the indemnity component.
The plaintiffs then applied by a summons filed 18 April 2016 for the primary judge to recuse herself. In a judgment delivered on 23 May 2016 she dismissed that summons.[5]
[5][2016] VSC 267 (‘the recusal reasons’).
The plaintiffs now seek leave to appeal the judge’s refusal to recuse herself. For the reasons which follow, we would grant leave but dismiss the appeal.
Before turning to the recusal reasons and the proposed grounds of appeal, it is necessary to review the amendment application, the submissions made on the specified beneficiary allegations to the primary judge, the amendment reasons, the costs reasons, the submissions made to the Court of Appeal, and the decision of the Court of Appeal and the appeal reasons. This is because a clear explanation of what was argued, at what stage, is essential to an understanding of our reasons for upholding the primary judge’s refusal to recuse herself.
The amendment application
By a summons filed 1 May 2015 the plaintiffs sought leave to file and serve an amended statement of claim. The application became what might be described as a ‘rolling’ application whereby the proposed amendments were themselves progressively amended in response to submissions filed in opposition by the defendant trustee.
When the primary judge managing the matter eventually heard the application to amend on 12 June 2015 the amendments then proposed fell into three groups. They were:
(1)A number of allegations against the trustee were to be deleted. These amendments were not opposed. Subsequently, when dealing with costs, the judge observed that these deleted allegations should never have been made. They included serious unparticularised allegations against the directors of the trustee.
(2)New allegations, referred to as the ‘specified beneficiary allegations,’ were sought to be introduced. The judge refused leave to amend to introduce these allegations. She did so on the basis that the claim made had no real prospect of success. The Court of Appeal overturned that decision and permitted the amendments.
(3)New allegations were sought to be introduced concerning alleged conflict of interest. The judge refused leave to amend to introduce these new allegations and leave to appeal that decision was refused by the Court of Appeal.
The specified beneficiary allegations concern a declaration by the trustee on 27 May 2014 which purportedly excluded Ian and Stephen as beneficiaries. There is a controversy about the proper construction of that declaration, but, for present purposes, the important aspect of these allegations concerns the construction of the provision of the trust deed governing the position on the ‘Vesting Day’ of undisposed assets of the trust. Paragraph 26C of the proposed amended statement of claim alleged that, but for the purported exclusion, the plaintiffs had an interest in the trust under the provisions of cl 5(2) of the trust deed governing the disposition of assets on the ‘Vesting Day’.
Clause 5(2) of the trust deed provides that undisposed of assets as at the ‘Vesting Day’ should be held in trust for the specified beneficiaries absolutely and then continues:
provided always that the children of any Specified Beneficiary who shall have died before the Vesting Day shall take (and if more than one as tenants in common in equal shares) the share which such deceased Specified Beneficiary would have taken had he survived to the Vesting Day and attained a vested interest.
It is important to note the precise terms in which proposed paragraph 26C was pleaded. Relevantly, it read:
but for the purported exclusion (if effective, which is denied) the said plaintiffs had an interest in the trust fund and the income thereof if, upon the vesting of the trust pursuant to sub-clause 5(2):
(a)the trust fund were not wholly disposed of in accordance with sub-clause 5(1); and
(b)his or her father, as a Specified Beneficiary, had died before the Vesting Day.
The primary judge addressed the amendment application generally in the following passage:
The procedural history of this proceeding to date has been, to say the least, unsatisfactory. The proposed amended statement of claim now before the Court represents the plaintiffs’ third attempt to frame their pleadings in such a form that the real issues in dispute can be identified. The most recent version of the document was only provided to the defendant, and to the Court, three days before the hearing. Further, the alterations that were proposed following the plaintiffs’ receipt of Memart’s submissions in defence – which the plaintiffs claim were in response to ‘new issues’ raised in those submissions – refer to material and to matters of which the plaintiffs ought already have been aware, for example, the amendment concerning the contents and effect of the settlement agreement.
Memart asserts that the plaintiffs’ conduct, in repeatedly foreshadowing amendments to the statement of claim, creates the impression that they seek not to identify the real issues in dispute, but rather to cast as wide a net as possible in a fishing exercise conducted through discovery. Whilst I make no finding as to whether such an assertion is justified, it is certainly the case that the plaintiffs’ conduct thus far in regard to the proposed amendments to the statement of claim has not been conducive to the clear identification of the issues in dispute between the parties.
As to the content of the plaintiffs’ present application, Memart submits that it ought to be struck out on the grounds that it has no real prospect of success, in accordance with s 63 of the Civil Procedure Act 2010.
[Reference was then made to, and a passage cited from, Lysaght Building Solutions Pty Ltd v Blanalko Pty Ltd [2014] VSCA 158.]
In this application, one does not have to descend too far into the content of the substantive proceeding to notice that the pleadings in their current form do not identify the issues adequately, giving some force to Memart’s submission that the application is driven in order to justify ‘a broad discovery inquiry’.[6]
[6]Amendment reasons [31]–[35].
Submissions made on the specified beneficiary allegations before the primary judge
The written outline of submissions filed in support of the application to amend had dealt with the specified beneficiary allegations very briefly. Clause 5 of the trust deed was addressed in a footnote.
The defendant trustee in its written outline had submitted that leave to amend should be refused because the claim had no real prospect of success for two reasons.
The first was said to be that, because Ian and Stephen had disclaimed any interest as a beneficiary of the trust, and because the potentiality of the children to take in default on the vesting day was ‘derivative and dependent upon Ian and Stephen being Specified Beneficiaries’, any argument as to the effect of the declaration on 27 May 2014 was ‘entirely moot’. The children could not have any interest under clause 5(2) because their fathers had disclaimed their interest as specified beneficiaries.
The second reason why it was said that the proposed claim had no real prospect of success concerned the proper construction of the 27 May 2014 declaration. It is unnecessary to address that aspect of the matter because her Honour did not refuse leave on that ground.
In oral submissions, counsel for the plaintiffs sought to meet the argument that the claim concerning the 27 May 2014 declaration was moot by asserting that the children’s entitlement was not ‘a title derivative upon their parents’ title as beneficiaries’. It was contended that Ian and Stephen had disclaimed any interest for themselves, but they had remained within the definition of ‘Specified Beneficiaries’. Beyond that, and the assertion that the children’s interest was not ‘derivative’ (which was repeated three times), no further argument as to the construction of clause 5(2) was advanced before the judge.
The trustee’s counsel in oral submissions repeated the argument that, as it was accepted that Ian and Stephen had disclaimed any interest they could have as beneficiaries, the issue of the effect of the 27 May 2014 declaration was entirely moot. Counsel for the defendant submitted:
if on the vesting day Ian and Stephen would have taken nothing, it must follow on the terms of the clause, that the children of Ian and Stephen also take nothing, because their entitlement is in terms that which the deceased specified beneficiary would have taken. Once it is accepted that Ian and Stephen have disclaimed their interest in right in the trust, it follows that necessarily they would have taken nothing, and it therefore follows that the children of Ian and Stephen can get nothing.
The response in reply was that there was an issue of construction as to clause 5(2) which was not appropriate for summary determination.
Primary judge’s decision on the application for leave to amend to introduce the specified beneficiary allegations
The judge found that, as then pleaded, the specified beneficiary allegations did not advance a claim which had a real prospect of success. The judge’s relevant conclusion was as follows:
The specified beneficiary allegations are couched in terms that fail to take into account, not only the clear statement in the settlement agreement that Ian and Stephen disclaim all rights as beneficiaries under the trust, with the obvious intent and consequence that they cease to be beneficiaries at all, but also the terms of the ‘taking in default’ clause of the deed itself. The latter issue has obvious implications for those general beneficiaries whose status as beneficiary was tied to or derived from that of Ian and Stephen as specified beneficiaries. In my view, leave should not be granted to the plaintiffs to amend the statement of [claim] in relation to the specified beneficiary allegations as pleaded as it has no real prospect of succeeding, in its current form, if it were to proceed to trial.[7]
[7]Ibid [35].
In other words, the judge below accepted the submission put on behalf of the defendant trustee that the proposed claim was ‘moot’, based upon the construction of clause 5(2) advanced on behalf of the defendant. This is unsurprising given that no alternative construction of clause 5(2) had been advanced at that stage, save for the bald assertion that the children’s entitlement was not ‘derivative’.
The costs reasons
After considering written submissions from the parties, the primary judge ordered costs against the plaintiffs on an indemnity basis and ordered that they be taxed immediately. As indicated, she published reasons.
The judge considered that this was an occasion where an indemnity costs order was justified. In relation to the amendments which had been allowed deleting certain allegations, the judge found that those allegations were of fraud, had been made without a proper basis, and should never have been made.[8] The judge found that the procedural history of the proceeding had been unsatisfactory and that the plaintiffs’ applications to amend had been ‘not in line’ with their obligations under the Civil Procedure Act 2010.[9] The judge found that the specified beneficiary allegations concerned matters always known to the plaintiffs and also ought not to have been made.[10]
[8]Costs reasons [18].
[9]Ibid [19]–[20].
[10]Ibid [18], [28].
The judge considered that a departure from r 63.20.1 of the Supreme Court (General Civil Procedure) Rules 2015 was justified and that the costs should be taxed immediately.[11]
[11]Ibid [27]–[32].
Submissions on the specified beneficiary allegations to the Court of Appeal
The plaintiffs applied for leave to appeal from the refusal of the amendment application to introduce the specified beneficiary allegations. The written case filed by the plaintiffs made it clear that the construction of clause 5(2) was critical to these allegations. The written case stated:
the applicants seek to add and pursue claims that they retain their status as general beneficiaries of the Trust and (as to some of them) ‘takers in default’ pursuant to clause 5(2) of the Deed of Settlement despite the disclaimer by Ian Robert Mandie and Stephen Wayne Mandie …
In the written case the plaintiffs submitted that on a ‘proper construction’ of clause 5(2) the children remain ‘takers in default’ notwithstanding the disclaimer by their fathers. It was asserted that there was an issue as to the proper construction of clause 5(2).
In the written case of the trustee it was said that no question of construction arose. The terms of the provision were plain. It was submitted that clause 5(2) ‘provides for a substitutional gift, in which the entitlement of the children can be no greater than that of their parent’. Thus, the argument below was repeated. The proposed claim was moot.
In the course of oral submissions before the Court of Appeal an argument as to the construction of clause 5(2) which, if accepted, might enable a conclusion to be drawn that the declaration of 27 May 2014 had, or could have, affected the interests of the children emerged for the first time. It was founded on the last words of clause 5(2), being ‘and attained a vested interest’. These words were notably absent from the portion of the proposed amended pleading (para 26C) where what was alleged to be the relevant provisions of clause 5(2) were set out.
The first time any reference was made to the potential significance of the words ‘and attained a vested interest’ was during the course of the plaintiffs’ oral argument. But the argument clearly emerged only in response to questions from the bench. The matter came to a head in the following interchange:
[COUNSEL]:… I think the contention now advanced is this, that in some way the interests of the children under clause 5(2) is derivative upon and dependent upon their parents or their parent having attained a vested interest or being entitled to a vested interest, but that is not correct, as the words of the provision make perfectly clear.
McLEISH JA: So it depends on there being two assumptions, as you put it earlier, does it, that you assume both that the parents survive to the vesting day and that the parent attained a vested interest?
[COUNSEL]:Yes, that is what it says.
McLEISH JA: In other words, you disregard the fact that the parent did not survive to the vesting day and you disregard anything that might have stood in the way of the parent attaining a vested interest?
[COUNSEL]: Correct. …[12]
[12]Transcript of Proceedings (Court of Appeal, 2 February 2016) 17–18.
Decision of the Court of Appeal
The Court of Appeal granted leave to appeal in relation to the specified beneficiary allegations, allowed the appeal, and relevantly amended the orders made by the judge below.
The Court of Appeal’s analysis of the relevant issue revolved around the proper construction of clause 5(2). The Court began its consideration of that issue with the following observation:
The proper construction of cl 5(2) of the Trust Deed was not clearly identified by the applicants either before the judge or in their written case in support of their application for leave to appeal. It was articulated for the first time on the hearing of that application.[13]
[13]Appeal Reasons [50].
The Court summarised the argument put for the first time on the hearing of the application for leave to appeal as follows:
The applicants contended that the words ‘the share which such deceased Specified Beneficiary would have taken’ coupled with the words ‘and attained a vested interest’ in cl 5(2) of the Trust Deed merely describe what the children of a Specified Beneficiary would be entitled to take if the two conditions described … are met. The latter words were said to refer to the attaining of a vested interest by virtue of satisfying the two conditions rather than to anything that was external to the provisions of the deed. According to the applicants, if Ian and Stephen satisfied the conditions of surviving to the vesting day and having the status of Specified Beneficiaries on that day, they would have attained a vested interest in a share of the undisposed of Trust Fund and, in the event that they did not survive to that day, their children would be entitled to take the share that Ian or Stephen would have taken had they survived. On the applicants’ construction of cl 5(2), the disclaimer by Ian and Stephen of their interests under the Trust pursuant to cl 9.2 of the Settlement Agreement would be effective in preventing them from taking any share of the Trust Fund under the clause if they survived to the vesting day but such disclaimer had no bearing on the entitlements of their children under cl 5(2).[14]
[14]Ibid [52].
The Court found that this construction of clause 5(2) was ‘not fanciful’.[15] In reaching that conclusion, this Court made the following relevant observations:
·Given the drafting of the specified beneficiary allegations and the ‘limited and confined’ submissions made by the plaintiffs to the judge below, it was ‘understandable’ that the judge had reached the conclusion which she did.[16]
·It was ‘unfortunate’ that the case the plaintiffs sought to make in relation to the specified beneficiary allegations was ‘not fully exposed’ until the hearing of the application for leave to appeal.[17]
[15]Ibid [63].
[16]Ibid [61].
[17]Ibid [62].
The proposed pleading had not exposed the issue upon which the plaintiffs succeeded on appeal, and, to the contrary, had suggested (by their omission) that the words said to be critical, being ‘and attained a vested interest’, had no relevant operation because when proposed para 26C set out the relevant part of clause 5(2) the words now said to be critical did not appear. This Court held that that deficiency in the proposed pleading should not preclude reliance on the argument articulated for the first time on the appeal.[18]
[18]Ibid [64].
The recusal application
The plaintiffs sought the recusal of the primary judge on the basis of both actual and apprehended bias.
The bias was said to be evident in the finding that the specified beneficiary allegations had no prospect of success, which was said to be a prejudgment of an issue to be determined at trial, and in what were said to be ‘highly pejorative’ conclusions as to the plaintiffs’ conduct and motivations when dealing with the procedural history in the amendment reasons and generally in the costs reasons.
The plaintiffs argued that if actual or apprehended bias was not established, the primary judge should nevertheless recuse herself in the exercise of what was characterised as a ‘residual discretion’ to do so.
The recusal reasons
The primary judge rejected the plaintiffs’ arguments concerning actual bias. As actual bias was not relied upon before us, it is unnecessary to address the reasons.
The primary judge concluded that the applicants’ application on the basis of apprehended bias should be dismissed. Her conclusion was as follows:
I am not satisfied that based on comments, conclusions and orders in the [amendment reasons] and [costs reasons], considered individually or collectively, a fair-minded lay observer might reasonably apprehend that I might not bring an impartial mind to the resolution of specified beneficiaries allegations.[19]
[19]Recusal reasons [87].
In reaching her conclusion in relation to apprehended bias, the primary judge reasoned as follows:
·The fair-minded lay observer will have read all decisions in the matter to date.[20]
·If the fair-minded lay observer might in fact apprehend bias, it must be determined whether the apprehension of bias is reasonable.[21]
·The reasonableness of the apprehension is to be determined against the backdrop of ordinary judicial practice and case management principles – where judges are now expected to express views on issues in dispute. Such views might not necessarily be prejudgment on the issues. [22]
·Even if the fair-minded lay observer might apprehend that the Court might find against the plaintiffs on the specified beneficiary allegations at trial, the judge did not accept that such an observer might apprehend that the Court might not approach those allegations impartially.[23]
·This Court had overturned the primary judge’s decision to refuse leave on the basis of an argument which had not been put to the judge.[24]
·No findings had been made against the plaintiffs in relation to ulterior motive or misconduct, nor were there any personal criticisms or findings of dishonesty or fraud made against the plaintiffs or their advisors.[25] No logical connection can be made between the two interlocutory decisions and an apprehension that the judge might not consider the specified beneficiary allegations on their merits at trial.[26]
·The relevant decisions were of an interlocutory nature concerning a question of law on proposed pleadings as they then stood. The judge had used the following expressions: ‘the pleadings in their current form’, ‘[t]he specified beneficiary allegations are couched in terms…’, ‘the specified beneficiary allegations as pleaded’ and ‘has no real prospect of succeeding, in its current form’.[27]
·The plaintiffs did not argue that ‘a mere conclusion that the specified beneficiaries allegations had no real prospect of success resulted in a reasonable apprehension of bias’. To support the recusal application, the plaintiffs had rather relied on the conclusion that the allegations had no real prospect of success together with additional comments and the orders that followed. Those were consequences of a failed application and not a reasonable basis to show that the judge’s impartial consideration of the merits of the case might be compromised.[28]
[20]Ibid [74].
[21]Ibid [75].
[22]Ibid [75]–[76], [85].
[23]Ibid [78].
[24]Ibid [78], [81].
[25]Ibid [79]-[80].
[26]Ibid [82].
[27]Ibid [84] (emphasis in original).
[28]Ibid [85].
In relation to what was referred to as the residual discretion to recuse, the judge accepted that there are circumstances in which discretionary recusal will be warranted in the absence of any actual or apprehended bias. The judge stated that the circumstances would have to be exceptional.[29] She decided that the circumstances in this case did not justify such recusal.[30]
[29]Ibid [88]–[91].
[30]Ibid [93]–[98].
Proposed grounds of appeal
The plaintiffs’ proposed grounds of appeal are the following:
Ground 1:The primary judge erred by not holding that she must recuse herself on the ground of apprehended bias.
Ground 2:The primary judge erred by not finding that a fair minded lay observer might reasonably apprehend that her Honour might not bring an impartial and unprejudiced mind to the resolution of the issues of relevance (that her Honour had determined in refusing the application for leave to plead the specified beneficiary allegations) that she would be required to decide again at trial.
Ground 3:Alternatively to proposed grounds one and two, the primary judge’s refusal to exercise a residual discretion to recuse herself miscarried.
Proposed ground 3 sets out a list of factors which it is contended had led to a miscarriage of the exercise of what the plaintiffs characterise as the ‘residual discretion’ to recuse.
Submissions on proposed grounds 1 and 2
The plaintiffs submitted that the judge had prejudged the merits of the specified beneficiary allegations. They argued that apprehension of bias was demonstrated by the judge refusing leave to plead the relevant allegations on the basis that they had no real prospect of success.
It was also submitted that the judge had been highly critical of the plaintiffs in relation to the application for leave to amend their statement of claim more generally.
It was submitted that this was a very clear case of apprehended bias.
The plaintiffs submitted that the apprehension of bias of the judge is further amplified by the costs decision. It was submitted that the judge’s decision ‘demonstrates that her Honour regarded the applicants as being guilty of such unmeritorious or deliberate misconduct such as to justify the Court showing its disapproval’.
The plaintiffs submitted that the judge, in the amendment reasons, suggested twice that the plaintiffs had the ulterior motive of broadening discovery in raising the specified beneficiary allegations.
The plaintiffs argued that the facts of this case fell squarely within the decision of the High Court in British American Tobacco Australia Services Ltd v Laurie (‘BATAS v Laurie’).[31]
[31](2011) 242 CLR 283.
The plaintiffs submitted that the judge had been wrong to emphasise that there had been a new argument in support of the specified beneficiary allegations before this Court. They argued that the judge had failed to give sufficient weight to the fact that the issues determined by the judge in the amendment reasons overlap with those to be determined at trial.
It was submitted the amendment decision had been a ‘final’ decision in the sense that the judge had concluded that the proposed claim could not be introduced because it had no real prospect of success. The judge had been wrong to characterise it as interlocutory and tentative or preliminary.
The trustee submitted that no error by the judge in the recusal decision had been demonstrated. No fair-minded lay observer could reasonably think that the judge might have prejudged an issue which, on analysis, had never been put before her.
Relevant legal principles
The High Court in Ebner v Official Trustee in Bankruptcy (‘Ebner’)[32] stated the relevant test as follows:
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.[33]
[32](2000) 205 CLR 337.
[33]Ibid 344-5 [6] (Gleeson CJ, McHugh, Gummow and Hayne JJ) (citations omitted).
The test does not require an enquiry into ‘how the judge … will in fact approach the matter’[34] but a question of ‘possibility (real and not remote), not probability’.[35]
[34]Ibid 345 [7].
[35]Ibid.
The application of the test involves 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.[36]
[36]Ibid 345 [8].
The High Court emphasised that judges have a duty to perform their judicial functions and to hear the cases allocated to them:
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.[37]
[37]Ibid 348 [19].
In BATAS v Laurie, the authority said by the plaintiffs to be directly applicable here, the majority of the High Court held that the trial judge should have disqualified himself from hearing a matter further. The trial judge there, in an unrelated proceeding, had found that BATAS had adopted a document retention policy for the purpose of a fraud. This finding had been based upon the testimony of a witness who was a former employee of BATAS. In the relevant proceeding allegations in relation to the document retention policy would be made and it was likely that the same witness would be called to give evidence.[38] BATAS applied to have the trial judge recuse himself.
[38]BATAS v Laurie (2011) 242 CLR 283, 332-3 [106]-[107] (Heydon, Kiefel and Bell JJ).
Heydon, Kiefel and Bell JJ observed that the trial judge in the earlier proceeding had expressed ‘extreme scepticism’ about the failure to rebut the evidence of fraud and had expressed strong doubt about the availability of evidence which might bring about a different result.[39] Their Honours applied the requisite test and concluded that:
a reasonable observer might possibly apprehend that at the trial the court might not move its mind from the position reached on one set of materials even if different materials were presented at the trial — that is, bring an impartial mind to the issues relating to the fraud finding.[40]
[39]Ibid 333 [145].
[40]Ibid.
In BATAS v Laurie, the High Court observed that even though the trial judge had expressly acknowledged the possibility that new evidence may be led at trial, an impression had been created that his finding of fraud by BATAS was ‘based on actual persuasion of the correctness of that conclusion’.[41] It was that impression that might lead a reasonable observer to reasonably apprehend that the earlier views expressed by the judge might influence his determination on the same issues in the later proceeding.[42]
[41]Ibid.
[42]Ibid.
One further High Court authority should be referred to.
The High Court in Johnson v Johnson[43] explained the rationale for the use of the ‘hypothetical reasonable observer’, and described the qualities such an observer is taken to possess and the context in which the hypothetical assessment is to be made. The Court said:
The hypothetical reasonable observer of the judge's conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues. At the same time, two things need to be remembered: the observer is taken to be reasonable; and the person being observed is ‘a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial’.
Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx.
…
No doubt some statements, or some behaviour, may produce an ineradicable apprehension of prejudgment. On other occasions, however, a preliminary impression created by what is said or done may be altered by a later statement. It depends upon the circumstances of the particular case. The hypothetical observer is no more entitled to make snap judgments than the person under observation.[44]
[43](2000) 201 CLR 488.
[44]Ibid 493–4 [12]–[14] (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ) (citations omitted).
Finally, as to the observations relied upon other than those concerning the specified beneficiary allegations, the authorities reveal that judges are at liberty to express ‘measured displeasure’[45] at the manner in which proceedings are conducted. When issues of this kind arise they have to be assessed within their full context, and criticisms of the conduct of a party’s case will not indicate apprehended bias unless they are unreasonable and indicative of an inability to bring an impartial mind to bear on the issues in dispute.[46]
[45]Galea v Galea (1990) 19 NSWLR 263, 283 (Meagher JA), quoted in Michael v State of Western Australia [2007] WASCA 100 [64].
[46]Barakat v Goritsas (No 2) [2012] NSWCA 36 [13].
Analysis of proposed grounds 1 and 2
The plaintiffs’ contentions in relation to proposed grounds 1 and 2 are arguable and leave to appeal should be granted.
We have concluded, however, that the appeal should be dismissed for the following reasons.
The most substantive basis upon which it is contended that the primary judge should have recused herself is because, if she is the judge at the trial, she will have to finally determine the claim made in the specified beneficiary allegations, a claim which she has held had no real prospect of success. Ordinarily, recusal would be expected in such a circumstance. But there are a number of factors which lead to a different conclusion here.
The relevant issue here is an issue of construction. It is a question of law. It is not an issue at all similar to the issue in BATAS v Laurie. Here, there is no issue of fact as to which the judge has previously expressed a concluded view.
The construction which the Court of Appeal found to be ‘not fanciful’ is not a construction which was ever put to the primary judge. It is a contention of law upon which she heard no submissions and upon which she has never ruled.
A fair-minded lay observer, understanding the nature of the relevant issue and the judge’s training and duties, and understanding that the argument the Court of Appeal found to be ‘not fanciful’ had never been put to the primary judge, would not apprehend bias in the relevant sense.[47] In terms of the Ebner test, the answer to the question whether the fair-minded lay observer might apprehend that the judge might not be impartial in deciding this issue of construction, is, in our view, ‘no’.
[47]In that respect the case is similar to others where judges have continued to sit after having had a prior determination in the proceeding overturned on appeal: see, eg Edwards v Santos Ltd [No 3] [2011] FCA 886 [54] (Logan J); Cavar v Greengate Management Services Pty Ltd [2016] FCA 961 (Bromwich J).
We have set out in some detail how the amendment application proceeded and was argued. It emerges from that review that the argument the plaintiffs propose to advance at trial has not been prejudged by the primary judge because she has never ruled upon it.
Once the issue concerning the primary judge’s finding as to whether the specified beneficiary allegations had a reasonable prospect of success is put to one side, the judge’s other comments and conclusions did not require her to recuse herself. Whilst the Court of Appeal altered the primary judge’s costs order, a review of the material does not reveal that the observations she made in relation to the plaintiffs, or the way in which they had conducted the case, were unreasonable, or so unreasonable as to give rise to a legitimate apprehension of bias.
The judge’s observations in the amendment reasons (quoted earlier) and the conclusions she reached in the costs reasons have to be seen in the context of the manner in which the amendment application had been conducted (the ‘rolling’ character we referred to earlier); the removal of the allegations alleging misconduct by the trustees’ directors which the judge said were allegations of fraud which should never have been made (statements not challenged before us); and the attempt to introduce a new conflict of interest claim, as to which the judge refused leave to amend and as to which this Court refused leave to appeal. When those matters are combined with the judge’s rejection of the specified beneficiary allegations in the way that claim had been put to her, her conclusions on costs and her observations more generally do not, in our view, give rise to apprehended bias in the relevant sense.
Contrary to the submission made by the plaintiffs, the primary judge never made a finding that the amendment application had been brought with the ulterior motive of broadening discovery. She expressly refrained from making that finding.
In the end, the only matter of real substance on the recusal application was the judge’s conclusion that the specified beneficiary allegations had no real prospect of success. In the circumstances of this case, as we have described them, we do not consider that the judge has been shown to have been in error when she refused to recuse herself on that ground.
We will grant leave to appeal on proposed grounds 1 and 2. However, the appeal will be dismissed.
Proposed ground 3: the ‘residual discretion’
Proposed ground 3 is founded upon the following passage from the majority judgment of the High Court in Ebner:
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.[48]
[48](2000) 205 CLR 337, 348 [20] (emphasis added).
After the passage relied upon as the foundation for the applicants’ contention as to the existence of a ‘residual discretion’, the joint judgment continued:
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.[49]
[49]Ibid 348 [21].
The ‘prudent’ approach described by the High Court is, as the passage above demonstrates, not bounded by any fixed rules or criteria. We were not taken to any case in which an appellate court had reviewed a judge’s decision of this kind. In our view it is potentially misleading to describe the judge as having a ‘discretion’ in these circumstances. In truth, it is a capacity to ‘decide not to sit’, in the exercise of a judge’s view of what is ‘prudent’. It assumes that it has not been established that there is a legal impediment to the judge hearing the case. So understood, a judge’s decision whether or not to sit, there being no legal impediment to doing so, is not readily susceptible to appellate review in the ordinary way. The matter is to be decided according to the judge’s view of what prudence requires, unrestrained by prescriptive legal rules. Therefore, at least ordinarily, it will not fall to an appellate court to substitute its own view as to what prudence requires.
This is not to deny that a judge’s assessment of what prudence requires will be influenced by the kinds of considerations to which the judgment in Ebner referred. The passages from the authorities which we have cited earlier emphasise the importance of the judicial duty to sit on an allocated case and that a judge must not accede too readily to suggestions of an appearance of bias.[50] As the primary judge observed, a judge’s decision not to sit, after rejecting a recusal application, would involve an exceptional departure from the ordinary duty of a judge to sit on a case to which the judge had been assigned.
[50]See also Re JRL; Ex parte CJL (1986) 161 CLR 342, 352 (Mason J); R v Nicholas (Unreported, Victorian Court of Appeal, Chernov JA, 25 October 1999) [18]–[20], quoted in R v Nicholas (2000) 111 A Crim R 490, 550 (Annexure 1).
If, contrary to the above, there is a basis for seeking review of a judge’s refusal to exercise the ‘discretion’, it would be necessary to establish House v The King[51] error. It would in turn be necessary to identify some governing principle by reference to which the trial judge was required to act, and by reference to which error might therefore be shown. That principle would have to be sourced in the requirement that circumstances be exceptional in order to displace the judge’s ordinary duty to sit.
[51](1936) 55 CLR 499, 504–5.
The plaintiffs submitted that the residual discretion should be exercised whenever the judge has ‘real doubt’ about whether he or she should recuse themselves. This must be rejected. As already observed, the High Court in using the language of ‘real doubt’ did not propound a legal duty, only a counsel of prudence. To turn this into a test by reference to which House v The King review of a judge’s decision not to disqualify themselves should be conducted would amount to a modification of the Ebner test itself, which applies on its own terms and without regard to any such additional criteria. In particular, the test is not whether there is real doubt about whether or not a fair-minded lay observer might apprehend that the judge might not bring an impartial mind to the case, but simply whether a fair-minded lay observer might so apprehend.
In the present case, while it would have been open to the judge, if she considered that this was one of the exceptional cases where prudence warranted it, to decline to hear the matter notwithstanding that she had found that the Ebner test was not satisfied, nothing required her to take that course. In particular, the prospect of further delay to the trial by virtue of an application to appeal against her decision did not require her not to sit. To take that course would have been at odds with the warning in Ebner against enabling individual parties to influence the composition of the bench.
Leave to appeal on proposed ground 3 will be refused.
- - -
SCHEDULE OF PARTIES
| S APCI 2016 0073 | |
| BETWEEN: | |
| EDWARD NICHOLAS MANDIE | First Applicant |
| JANE ELISABETH MANDIE | Second Applicant |
| ISABELLA MANDIE | Third Applicant |
| AMANDA MANDIE | Fourth Applicant |
| NICHOLAS ELLIOTT MANDIE | Fifth Applicant |
| DANIELLA MANDIE (a person under a disability being a minor by her litigation guardian AMANDA MANDIE) | Sixth Applicant |
| - and - | |
| MEMART NOMINEES PTY LTD ACN 005 024 617 (as trustee for the DAVID MANDIE FAMILY TRUST) | Respondent |
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