Melbourne City Investments Pty Ltd v UGL Ltd
[2017] VSCA 128
•2 June 2017
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2016 0144
| MELBOURNE CITY INVESTMENTS PTY LTD (ACN 161 046 304) | Applicant |
| v | |
| UGL LIMITED (ACN 009 180 287) | Respondent |
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| JUDGES: | WARREN CJ, TATE and WHELAN JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 8 February 2017 |
| DATE OF JUDGMENT: | 2 June 2017 |
| MEDIUM NEUTRAL CITATION: | [2017] VSCA 128 |
| JUDGMENT APPEALED FROM: | [2016] VSC 554 (Robson J) |
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COURTS AND JUDGES – Recusal application claiming apprehended bias – Judge refused to recuse himself – Whether judge correctly applied test in Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 – Whether Judge made unsound findings of fact - Robinson Helicopter Company Inc v McDermott (2016) 331 ALR 550.
COURTS AND JUDGES – Statement of reasons for decision – Adequacy of reasons.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr N J O’Bryan SC with Mr M W L Symons | Portfolio Law Pty Ltd |
| For the Respondent | Ms W A Harris QC with Mr K A Loxley | Herbert Smith Freehills |
WARREN CJ
TATE JA
WHELAN JA:
Introduction
This is an application for leave to appeal from a judge’s decision not to recuse himself from hearing an interlocutory application. The applicant is Melbourne City Investments Pty Ltd (‘MCI’) and the respondent is UGL Limited (‘UGL’).
On 18 February 2014 MCI purchased 100 ordinary fully paid shares in UGL for $6.20 each. On 1 April 2015 MCI commenced a group proceeding against UGL alleging that UGL engaged in misleading or deceptive conduct and breached continuous disclosure obligations (‘the UGL proceeding’). The group members are all persons who acquired ordinary shares in UGL on or after 12 August 2013 and who were shareholders at the commencement of trading on 6 November 2014.
In the UGL proceeding MCI seeks on its own behalf and on behalf of the group members to recover the losses which are said to have been caused by the alleged conduct/breaches. The loss claimed is the difference between the prices paid for the shares and the prices that would have prevailed had UGL not engaged in misleading or deceptive conduct and had it made proper disclosure.
At a directions hearing before Judd J on 8 May 2015, UGL foreshadowed the making of an application to strike out MCI’s statement of claim (‘strike out application’). The strike out application was referred to Robson J, whom we will refer to as the trial judge. No summons was issued.
The trial judge heard the strike out application on 24-25 June and 20 July 2015, and delivered his reasons on 7 October 2015.[1] His Honour struck out the statement of claim, but noted that the proceeding remained on foot. He then observed that ‘the question arises of whether or not the proceeding as a whole should be struck out’,[2] due to possible breaches of obligations under the Civil Procedure Act 2010 (‘Civil Procedure Act’) and the possibility that the Court’s process was being abused. His Honour proposed to relist the matter to hear the parties on those issues before making final orders on the strike out application.
[1]Melbourne City Investments Pty Ltd v UGL Ltd [2015] VSC 540 (‘Strike out Reasons’).
[2]Ibid [160].
Subsequently, on 19 February 2016, UGL issued a summons seeking to have the UGL proceeding stayed as an abuse of process (‘stay application’).
MCI then made an application seeking that the trial judge recuse himself from hearing the stay application and from any further management or hearing of the UGL proceeding on the grounds of apprehended bias and incompatibility of roles (‘recusal application’). MCI argued that the reasonable apprehension of bias arose from three instances:
(a) comments made by the trial judge on days one and three of the hearing of the strike out application;
(b) comments made by the trial judge (then sitting as an additional judge of appeal in the Court of Appeal) at the hearing of the application for leave to appeal in Melbourne City Investments Pty Ltd v Leighton Holdings Ltd on 25 August 2015;[3] and
(c) the Strike out Reasons, in particular the fact that the trial judge raised the question of whether the proceeding as a whole should be struck out, despite no such application having been made by UGL.
[3][2015] VSCA 235.
The trial judge dismissed the recusal application.[4] It is the decision on the recusal application from which MCI seeks leave to appeal. MCI advances three proposed grounds of appeal. In summary, they are:
[4]Melbourne City Investments Pty Ltd v UGL Ltd [No 2] [2016] VSC 554 (‘Recusal Reasons’).
(a) the Recusal Reasons are inadequate, constituting an error of law;
(b) the trial judge failed to apply the correct legal test for apprehended bias; and
(c) the trial judge’s conclusions on apprehended bias are unsound because he improperly characterised and/or ignored certain comments he had made earlier concerning MCI and the legal principles applicable to MCI’s case.
MCI submitted that if it is successful on any of those proposed grounds, the trial judge’s decision must be set aside and this Court is well-placed to consider afresh whether the trial judge should have recused himself on account of apprehended bias and/or incompatibility. MCI asked this Court to order that the trial judge be disqualified from hearing UGL’s stay application or any other application alleging abuse of process against MCI.
For the reasons that follow, we would grant leave to appeal on the second proposed ground, but dismiss the appeal. We would otherwise refuse leave to appeal.
Background
Mr Mark Elliott has been, and may still be, MCI’s sole director and secretary. Mr Elliott was previously MCI’s sole shareholder, however, on 9 September 2015 BSL Litigation Partners Limited (‘BSL’) became MCI’s sole shareholder.[5] BSL was incorporated as a litigation funder on 20 January 2014. Mr Elliott has been a major shareholder of BSL.[6] Mr Elliott has been, and may still be, the secretary and one of three directors of BSL.
[5]Melbourne City Investments Pty Ltd v Myer Holdings Ltd [No 2] [2016] VSC 655, [2].
[6]Ibid [58].
Before us the parties made reference to other proceedings to which MCI was a party.[7] Indeed, there are published judgments of the Supreme Court and Federal Court in several proceedings in which MCI, BSL and/or Mr Elliott have been involved.[8] Those proceedings generally raised similar claims to those made in the UGL proceeding.
[7]Melbourne City Investments Pty Ltd v Leighton Holdings Ltd S CI 2013 05159 (‘the Leighton Holdings proceeding’); Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd S CI 2013 05731 (‘the Treasury proceeding’); Melbourne City Investments Pty Ltd v WorleyParsons Ltd S CI 2013 06536 (‘the WorleyParsons proceeding’).
[8]See eg Bolitho v Banksia Securities Ltd [2014] VSC 8; Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [No 3] [2014] VSC 340; Melbourne City Investments Pty Ltd v Leighton Holdings Ltd [2015] VSC 119; Melbourne City Investments Pty Ltd v WorleyParsons Ltd [No 2] (2014) 104 ACSR 15; Walsh v WorleyParsons Ltd [2015] VSC 135; Camping Warehouse Australia Pty Ltd v Downer EDI Ltd [2016] VSC 784; Melbourne City Investments Pty Ltd v Myer Holdings Ltd [No 2] [2016] VSC 655; Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd (2016) 243 FCR 474.
As MCI’s recusal application concerns comments made by the trial judge in the application for leave to appeal in the Leighton Holdings proceeding, and before us the parties discussed findings made in the Treasury proceeding, it is relevant to set out briefly what occurred in those proceedings.
Leighton Holdings proceeding and Treasury proceeding
The Leighton Holdings proceeding and the Treasury proceeding involved allegations of non-disclosure and misleading and deceptive conduct, and they have both been permanently stayed. MCI was the lead plaintiff and it was represented by Mr Elliot as solicitor and Mr O’Bryan as senior counsel. Leighton Holdings and Treasury contended that the proceedings were brought by MCI for the collateral purpose of generating legal fees for Mr Elliott and they were therefore an abuse of process and should be stayed. Alternatively, they sought orders restraining Mr Elliott from acting for MCI in the proceedings while MCI was the lead plaintiff, or orders that the proceeding not continue as a group proceeding while MCI was lead plaintiff and Mr Elliot was MCI’s solicitor. On 23 July 2014 Ferguson J held that the Leighton Holdings proceeding and the Treasury proceeding were not abuses of process, but that ‘the proceedings ought not be permitted to continue as group proceedings while MCI and Mr Elliot act in tandem as plaintiff and solicitor’.[9] Treasury appealed.
[9]Melbourne City Investments Pty Ltd v Treasury Wine Estates Ltd [No 3] [2014] VSC 340, [68].
On 10 October 2014 the Court of Appeal heard Treasury’s appeal from Ferguson J’s decision not to stay the Treasury proceeding as an abuse of process. On 22 December 2014 the Court of Appeal allowed Treasury’s appeal. Maxwell P and Nettle JA noted that the proceeding was brought by MCI for the predominant purpose of enabling Mr Elliott to earn legal fees by acting as MCI’s solicitor.[10] They held that:
In the present case, MCI is using the cause of action to create an income-generating vehicle for its solicitor. It has no interest in vindicating its rights, or obtaining a remedy, as such.
The nature of the cause of action — as a claim based on an alleged breach of disclosure requirements — is immaterial to MCI’s purpose. Its sole purpose has only ever been to create for itself — in this case, by acquiring a small parcel of shares — a cause of action of sufficient merit to induce the defendant company to pay Mr Elliott’s fees.
It seems to us that this is a clear example of an abuse of process.[11]
[10]Treasury Wine Estates Ltd v Melbourne City Investments Pty Ltd (2014) 45 VR 585, 586 [1].
[11]Ibid 588 [12]-[14].
Accordingly, the Court of Appeal permanently stayed the Treasury proceeding. MCI later sought special leave from the High Court, which was refused on 15 May 2015.
Following the Court of Appeal’s decision to stay the Treasury proceeding, Leighton Holdings filed a further summons seeking a permanent stay of the Leighton Holdings proceeding on 19 February 2015. On 14 April 2015 Sifris J ordered that the Leighton Holdings proceeding be stayed until further order. His Honour foreshadowed that if special leave was refused in relation to the Treasury proceeding, or if granted and the appeal was unsuccessful, he would grant a permanent stay of the Leighton Holdings proceeding.[12] On 11 May 2015 MCI applied for leave to appeal from Sifris J’s decision.
[12]Melbourne City Investments Pty Ltd v Leighton Holdings Ltd [2015] VSC 119, [46].
On 25 August 2015 the Court of Appeal, constituted by Tate and Beach JJA and Robson AJA, heard MCI’s application for leave to appeal against Sifris J’s decision in the Leighton Holdings proceeding. On 7 September 2015 the Court of Appeal refused MCI’s application and ordered that the Leighton Holdings proceeding be permanently stayed.[13]
UGL proceeding
[13]Melbourne City Investments Pty Ltd v Leighton Holdings Ltd [2015] VSCA 235, [52].
We return now to the UGL proceeding. In its recusal application MCI took issue with statements made by the trial judge in three instances.[14]
[14]See [7] above.
When considering the trial judge’s statements it is important to bear in mind that by the time the trial judge commenced hearing the strike out application on 24 June 2015, the Treasury proceeding had been permanently stayed, and the Leighton Holdings proceeding had been stayed until further order.
Just over a month later, on 25 August 2015, when the Court of Appeal heard the application for leave to appeal in the Leighton Holdings proceeding, the trial judge had already heard the strike out application in the UGL proceeding.
The Court of Appeal handed down its decision refusing MCI leave to appeal in the Leighton Holdings proceeding on 7 September 2015, and on 7 October 2015 the trial judge granted UGL’s strike out application.
Within this context, we turn to MCI’s recusal application and its application for leave to appeal.
The recusal application
In the recusal application MCI argued that:
(a) there was a reasonable apprehension of prejudgment in respect of:
i. abuse of process; and
ii. causation; and
(b) the trial judge’s dual roles as prosecutor in respect of the Court’s own-motion application that MCI has engaged in an abuse of process and as judge engaged in determining whether that allegation is made out, were incompatible, which we will term ‘the incompatibility argument’.
As already observed, MCI contended that the reasonable apprehension of prejudgment arose from three instances;[15] namely, the comments in the hearings, comments in a leave to appeal application, and the judge’s raising of the possibility of abuse of process when determining the strike out application. We will term this ‘the prejudgment argument’.
[15]See [7] above.
In the incompatibility argument, MCI contended that the trial judge had a personal interest in the determination of whether the proceeding was an abuse of process, because he was the moving party in respect of that allegation. The hypothetical lay observer might apprehend that the judge might have a personal interest in vindicating his opinion. According to MCI, it was irrelevant that UGL later made the stay application.
The first instance: the judge’s comments made during the strike out application
MCI submitted that on day one of the strike out application the trial judge developed a theme of MCI not having a bona fide claim. He expressed the view that some shareholders may purchase shares in the hope that there had been a disclosure failure by the listed company, and then said that if MCI disclosed ‘the real reason for buying the shares, they have no cause of action’. He asked ‘[w]ho buys $700 worth of shares as a profit making venture? … it doesn’t ring true’. MCI submitted that the trial judge had concluded that MCI had not suffered any loss because its purchase of UGL shares was made in the hope of commencing a group proceeding and not with a profit motivation. MCI said that the trial judge reached a conclusion on abuse of process:
The court’s here to compensate people for loss and damage. If they’ve suffered no loss and damage, it is an abuse for the process to come to court and have a big proceeding about it and they don’t allege, suffered one cent of loss or damage.
It goes straight to the core of this case.
That they’ve got a huge statement of claim, six barristers at the Bar table, tying up a Supreme Court judge, $720 was invested and there’s not one allegation a cent of that was lost.
MCI then relied on comments made by the judge on day three of the strike out application, which it said restated the conclusions reached on the first day. The trial judge said:
It appeared to me that the plaintiff’s allegation that it suffered loss is patently false because it bought the shares, hoping and intending that they’d bought them in a price inflated market. That was the whole point of buying them. And the fact that it turned out to be right doesn’t mean that it suffered loss.
…
wouldn’t the plaintiff have to plead that they bought the shares – perhaps they do – hoping and expecting the market was fully informed, with intention of making money from the purchase. Whereas in fact your client bought the shares with the hope and intention the market wasn’t informed…with the desire of making a loss…
Doesn’t your client have real trouble in saying they bought the shares hoping and intending that they bought them in a fully informed market … Normally a person who buys shares, you would say, well of course they buy them to make money. They don’t normally plead that but in this case where you’ve bought $600 worth of shares, isn’t it necessary to plead the facts giving rise to the loss and you have real problems doing that … because how’s your solicitor going to certificate [sic] it’s correct? You may have an answer to all this, hopefully you have. I think I should raise it because it troubled me. It’s troubled me, I’m sitting about this saying, well, the plaintiff hasn’t made a loss. This is exactly what the plaintiff wanted.
The answer that MCI’s counsel gave to those concerns was that the plaintiff’s purpose in purchasing the shares was irrelevant and that MCI did not need to plead why it bought the shares. MCI contended that in an exchange with its counsel, Mr Armstrong, the trial judge indicated extreme scepticism about MCI’s motivations:
HIS HONOUR: It doesn’t plead why it bought the share.
…
MR ARMSTRONG: It doesn’t matter.
…
HIS HONOUR: It does. It goes right to the heart of whether you suffered loss and damage.
MR ARMSTRONG: No, with respect, your Honour. If the plaintiff pleads that it expected the defendant had complied and had no knowledge of non-compliance ---
HIS HONOUR: [They] hoped that it had not.
MR ARMSTRONG: Well, we can’t – that’s not an element of the cause of action.
HIS HONOUR: Well, that’s the reason why it bought the shares. I mean, you’re trying to plead a loss. How do you get a loss when you expect that [UGL] had [complied] but hoped it hadn’t?
Counsel for MCI then said that no one had put anything before the judge to support that proposition. The trial judge responded ‘I’m putting the proposition’. Later, after Mr Armstrong explained why MCI’s pleadings were sufficient to support its claim for loss and damage, the trial judge said:
HIS HONOUR: It’s just, I know what you say, it’s just like Alice in Wonderland, I mean, they were bought hoping and expecting the market wouldn’t be informed. You’ve got to plead out your facts.
MR ARMSTRONG: No your Honour they were bought expecting that the market had been informed…That’s the pleading in 27a.
HIS HONOUR: I see, yes well – so the question for me solely is what’s pleaded sufficient, I understand that.
MR ARMSTRONG: Yes.
HIS HONOUR: Yes.
The second instance: the judge’s comments made during the Leighton Holdings application
MCI relied on the trial judge’s comments during the hearing of the Leighton Holdings application for leave to appeal, when the judge said that:
the object of the plaintiff in buying these shares is the hope that the market’s been misinformed so it will be able to mount such a claim, that is, it doesn’t suffer any loss when it turns out the market has been not properly informed, in fact it strikes gold because this is a case which can now run an action.
… the plaintiffs are pleading they have suffered loss, when in fact that’s what they wanted to do. That was the sole purpose of buying these shares, the hope that some information hadn’t been released to the market, therefore this proceeding could be instituted. You might take issue with some of these facts but aren’t we moving outside the case of a legitimate proceeding?
… in this case you have a proceeding where the plaintiff claims it’s suffered loss when it patently hasn’t.
…
I'm putting the situation where it's got no claim because its intention was hopefully to buy a share in a market that was over-valued so its object was to sustain this loss and by sustaining this loss, can therefore bring a group action and therefore it can bring the solicitor's fees for the costs. You've answered by saying the point was never run. I was just postulating that in those circumstances, if it had been run, then you may get to the situation where the proceeding being run, on the basis that the plaintiff made a loss when in fact it bought the shares in the hope and expectation it would make a loss and the underlying reason, well, why would any do that? So they could earn legal costs in a class action.
MCI then submitted to the trial judge that he was postulating a good defence to the case. The trial judge responded ‘No, I’m not postulating a defence, I’m just postulating some grounds which might support the abuse of process’. MCI’s senior counsel, Mr O’Bryan, said:
But it would be a good defence, your Honour. If the defendant could say, you have bought these shares in the expectation and hope of achieving a loss and you’ve achieved that objective, then there is no basis for a claim.
The third instance: the judge’s comments made in the Strike out Reasons
As already observed, the trial judge granted UGL’s strike out application. The trial judge analysed each of MCI’s four causes of action and found that the first two causes of action did not have a real prospect of success,[16] and MCI did not have standing to bring the third and fourth causes of action.[17] The proceeding itself was not struck out and the trial judge observed that ‘normally’ an application to amend would be entertained.[18]
[16]Strike out Reasons, [76], [98].
[17]Ibid [135].
[18]Ibid [160].
The trial judge separately considered the issue of causation as pleaded by MCI. MCI advanced a case of market based causation, which is a form of indirect reliance. MCI had submitted that its pleading that it bought the shares in an inflated market ignorant of the true situation and expecting that UGL had complied with its obligations, was sufficient to establish causation. UGL had argued that causation cannot be established by showing nothing more than that the claimant bought its shares at a price that was higher than the price that would or may have prevailed had the alleged disclosure breaches not occurred. The trial judge considered several authorities on market based causation, including Camping Warehouse Australia Pty Ltd v Downer EDI Ltd[19] and Caason Investments Pty Ltd v Cao,[20] before concluding:
the market based causation damages claims should be allowed to proceed (absent other grounds). In the face of these authorities, no useful purpose would be served for me to express any view on the ultimate validity of the market based causation claim to damages.[21]
[19][2014] VSC 357.
[20](2015) 236 FCR 322.
[21]Strike out Reasons, [156]; see also [159].
After concluding on the four causes of action as pleaded and on the market based causation pleading, the trial judge went on to make the following comments:
In this case, MCI has pleaded that it expected that UGL had complied with its obligations … This plea was of critical importance to the claim. It provided the base upon which MCI could act as plaintiff. Without that plea it might be argued that the proceeding could not have proceeded.
To my mind, the question arises whether MCI had a proper factual basis to support that allegation. The question arises whether MCI purchased the shares in the hope and expectation that prior to its purchase, UGL had failed to comply with its disclosure obligations under the Listing Rules or engaged in misleading or deceptive conduct. The question arises whether the real reason MCI purchased the UGL shares was to establish a base to bring a market based causation group proceeding against UGL.
The question arises whether the damage claimed by MCI is a genuine plea or whether any damages claimed by MCI have been manufactured to enable it to claim (wrongly) that it has suffered loss and damage.
If a person deliberately drove their car onto train tracks, in the hope and expectation that it would be hit by a train so that the person could commence a group proceeding with other drivers who had accidentally been hit by a train on the crossing, alleging safety failures at the level crossing, then, to my mind, that may well be an abuse of process by that person or a breach of the [Civil Procedure Act] by that person.
Similarly, in this case, if the loss of MCI has been deliberately manufactured to found a group proceeding for the financial benefit of Mr Elliott and his associates, the issue arises whether Mr Elliott has breached his obligations under the [Civil Procedure Act] and abused the processes of the Court.[22]
[22]Ibid [163]-[167].
The trial judge also referred to the Court of Appeal’s findings in the Treasury proceeding and Leighton Holdings proceeding, proceedings he described as similar to the UGL proceeding. He also discussed the WorleyParsons proceeding and noted Mr Elliott’s role as solicitor in the various proceedings. The judge said:
In light of the conduct of MCI in this Court, it might be argued that it bought the shares in order to provide a platform to launch a group proceeding, for the financial advantage of Mr Elliott and/or his business associates, and it may be suggested that if that is the case there has been a breach of the [Civil Procedure Act] or an abuse of process.
If the proceeding be an abuse of process, or there has been a breach of any of the overarching obligations imposed by the [Civil Procedure Act], then the question may arise as to whether Mr Elliott ought be ordered to pay UGL’s costs on an indemnity basis or some other basis or what other orders may be made.[23]
[23]Ibid [174]-[175].
His Honour said that ‘the Court has a duty to ensure its processes are not being abused and that the [Civil Procedure Act] is being observed’.[24] In his view the Court had a duty to raise possible breaches of the Civil Procedure Act on its own motion where it considered that the overarching obligations may not have been met. In making those observations his Honour relied on Yara Australia Pty Ltd v Oswal.[25] The trial judge said he had ‘an open mind on these issues, but I feel I am duty bound to raise them with the parties’.[26] The trial judge then proposed to relist the matter to hear the parties on those issues before making final orders.[27] This next hearing became the recusal application.
The submissions on the recusal application
[24]Ibid [171]; see also [172].
[25](2013) 41 VR 302 (‘Yara’).
[26]Strike out Reasons, [176].
[27]Ibid [177].
In the recusal application MCI argued that the hypothetical lay observer who had witnessed the three instances ‘would’ not consider that any of the questions the trial judge raised in the Strike out Reasons remained open. MCI contended that the hypothetical observer ‘would’ reasonably conclude that the trial judge had prejudged or was committed to conclusions on abuse of process and causation, and that he was incapable of altering his views, whatever evidence or arguments may be presented. His Honour’s statement that he had ‘an open mind on these issues’ was insufficient to put to rest the hypothetical observer’s reasonable apprehension of prejudgment. The precise terms in which these submissions were made was a matter particularly relied upon by UGL before us, and we will return to them.
UGL’s response to MCI’s argument on reasonable apprehension of prejudgment was that the trial judge could not be understood to have expressed a concluded view on abuse of process or causation. Rather, he expressed tentative views that were open to dissuasion or modification. The trial judge’s comments were designed to elicit assistance from the parties. Further, references to other group proceedings commenced in the Court by MCI were relevant and not improper. The fair-minded observer would have expected the trial judge to be aware of, and have regard to, those matters.
UGL argued that the judge posed several questions in the Strike out Reasons because the Court had a duty to ensure its processes were not being abused and that the parties were complying with the Civil Procedure Act. The judge had an open mind on those issues and took an appropriate course in giving the parties an opportunity to be heard on those issues before making final orders.
In relation to causation, UGL submitted that the trial judge had not prejudged that issue because he had rejected UGL’s arguments on market based causation.
UGL’s response to MCI’s incompatibility argument was that any personal interest the trial judge had in vindicating his opinion would not suffice for disqualification on the grounds of apprehended bias. The authorities MCI relied on did not contemplate any incompatibility where the Court raises a question of its own motion.[28] Exercising the Court’s inherent jurisdiction to prevent its processes from being abused does not amount to being a ‘prosecutor’. UGL submitted that MCI’s complaint was really that the judge invited the parties to make submissions on abuse of process before the stay application was made. If inviting the parties to make submissions on abuse of process amounts to apprehended bias, then the same conclusion should apply whenever a judge invites submissions as to why indemnity costs should not be awarded. UGL noted that the judge in that hypothetical situation could not be said to be prosecuting the costs application. UGL also relied on the Court of Appeal’s injunction in Yara to the effect that judges must, in the absence of an application by the parties, of their own motion instigate the hearing of potential breaches of the Civil Procedure Act.
[28]Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 (‘Ebner’); Isbester v Knox City Council (2015) 255 CLR 135 (‘Isbester’).
Trial judge’s decision on the recusal application
After an introduction, the trial judge addressed the relevant legal principles. He began by stating the relevant test as follows:
In Ebner v Official Trustee in Bankruptcy, the High Court of Australia held that the test to be applied in determining whether a judge is disqualified by reason of apprehended bias is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.[29]
[29]Recusal Reasons, [20] (citation omitted).
The trial judge set out in detail the matters relied upon by MCI, quoting extensively from the relevant transcripts.[30] He then set out the submissions of MCI,[31] and of UGL,[32] again in considerable detail, addressing, as he did so, how the respective submissions interacted.
[30]Ibid [24]–[42].
[31]Ibid [43]–[64].
[32]Ibid [67]–[132].
The trial judge then dealt with the prejudgment argument in a passage at [134]–[141] of the Recusal Reasons which it is necessary to quote in full. The judge said:
In my opinion, for the reasons advanced by UGL, a fair-minded lay observer having the features laid down by the High Court, as discussed above at paragraph 76, would not form the view that I had prejudged the issue as to whether MCI’s claim in fact constitutes an abuse of process of the Court. On the contrary, in my opinion, a fair-minded lay observer would form the view that I have not formed a concluded view and have raised the matter for hearing for the very purpose that the usual and proper legal approach should be adopted, so I am able to form a concluded view one way or the other.
In my view, a fair-minded lay observer would be of the view that I put forward the arguments that I did so that a full and comprehensive examination of the issues by the parties could be undertaken.
In my opinion, a fair-minded lay observer would understand that I was duty bound to raise the issue once I perceived that an abuse of process may have arisen. A fair-minded lay observer would have understood that a judge can only perform his duty of raising his view that a possible abuse of process has arisen by articulating the issues and permitting the parties to argue the matter out.
A fair-minded lay observer would not have concluded that I had shut my mind to the arguments. I had already refused to strikeout the statement of claim on the basis that MCI did not plead any reliance on the projections issued by UGL or the implied representations conveyed by UGL and that its claim to damages was instead based on the market based causation theory. It would have been apparent to a fair-minded lay observer who had read my reasons in MCI v UGL, that I had accepted that a market based causation approach to establishing damages was arguable (and did not constitute an abuse of process).
I find that a fair-minded lay observer would have appreciated that my query about whether a plaintiff who bought shares in anticipation of her, him, or it, being able to make a market based causation claim, in fact suffered any justiciable damage, was an issue that I had not yet addressed and about which I had not formed a concluded view. The fact that I thought such a claim may (not would) constitute an abuse of process, or a breach of the [Civil Procedure Act], when I was duty bound to raise the issue, does not suggest that I had formed a concluded view on the matter. On the contrary, it would have conveyed to a fair-minded lay observer that I had merely raised a question that I did not propose to resolve until after hearing full argument from the parties.
The fact that I had not heard argument on the issue and had requested to hear argument on the matter would strongly suggest to a fair-minded lay observer that my mind was open and as yet I did not have a concluded view.
In Vakauta v Kelly Brennan, Deane and Gaudron JJ spoke of ‘the dialogue between Bench and Bar which is so helpful in the identification of real issues and real problems in a particular case.’ I have already quoted the observations in Johnson of Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ on this matter at paragraph 82 above.
In my opinion, a fair-minded lay observer would have concluded that, in discussing the issue of damages alleged to be incurred by MCI and in discussing whether in the circumstances MCI had alleged or sustained a claim for damages that may be an abuse of process, I was merely raising an issue and, at its highest, expressing tentative views to flesh out the issue to be resolved. In my opinion, a fair-minded lay observer would not have apprehended I had a concluded view about the matter and that I did not have an open mind as to the resolution of the question raised.[33]
[33]Ibid [134]-[141] (citations omitted).
With respect to the incompatibility argument, the trial judge said ‘for the reasons advanced by UGL, I reject the submissions of MCI’.[34] His Honour did not articulate or amplify his reasons beyond that statement.
[34]Ibid [142].
Proposed grounds of appeal
In its application for leave to appeal MCI advanced the following three proposed grounds of appeal:
(a) The reasons for decision given below are inadequate, such that the parties are unable to see whether or how their arguments were understood or to understand the legal basis of the judge’s reasoning process and decision, with the consequence that there has been an error in the judicial reasoning process constituting an error of law.
(b) The trial judge failed to apply the correct legal test for the apprehension of prejudgment, being that stated by the majority of the High Court in Ebner, namely that ‘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’.
(c) The trial judge improperly characterised and/or ignored strong and unqualified earlier comments and statements made by him concerning MCI and the legal principles applicable to MCI’s case in finding that a fair-minded lay observer would not have apprehended that his Honour had a concluded view about the matters to be determined in respect of UGL’s stay application, with the result that his Honour’s conclusion concerning the reasonable apprehension of prejudgment is unsound.
Ground 1 – inadequate reasons
MCI’s submissions
On this application the Court put to MCI that this proposed ground only related to the incompatibility argument, because the judge made findings in relation to the prejudgment argument. MCI maintained, however, that this proposed ground concerned both arguments.
MCI submitted that judges have an obligation to give reasons, although the scope and content of the obligation varies depending on the nature of the matter before the court. The giving of reasons enables the parties to see the basis of the decision and the extent to which their arguments have been understood and accepted. If a judge is bound to give reasons, and the reasons given do not record the steps taken in arriving at the result, there will be an error in the process of fact finding.
It was submitted that the judge simply accepted UGL’s submissions on prejudgment and incompatibility without independent reasoning or analysis. MCI submitted that it seemed that his Honour accepted every submission made by UGL and rejected every submission made by MCI, without engaging with or balancing the arguments, and without explaining why one particular argument should be preferred to another. Further, it was submitted, the Recusal Reasons do not expose the reasoning process that led to the judge’s findings with respect to the hypothetical observer. These failures were said to be errors of law.
As a consequence, it was submitted, MCI does not know the extent to which its arguments have been understood, or why its arguments were impliedly rejected in their entirety. MCI is also unable to identify whether the judge’s reasoning process is infected by any error of law other than the error the subject of proposed ground 2. MCI is therefore denied the opportunity to seek leave to appeal on the basis of any other error of law. The effective denial of a right of appeal constitutes a miscarriage of justice.
During argument before this Court MCI accepted that UGL’s submissions below had addressed all the matters addressed by MCI before the trial judge, and accepted that in some cases it will be possible to decide a matter by adopting a party’s submissions for whatever reason. MCI also conceded that a judge may discharge their duty to give reasons by recrafting a party’s submissions and turning them into his or her own.
We note that in oral argument MCI attempted to make submissions under this proposed ground to the effect that the judge’s conclusion on the incompatibility argument was incorrect. Such arguments are not contemplated by this proposed ground as expressed in MCI’s application for leave to appeal, and therefore they need not be considered.
UGL’s submissions
UGL described this proposed ground as a misguided attack on the form of the Recusal Reasons, not their substance.
UGL largely agreed with MCI’s submissions on the content of the duty to provide reasons. UGL submitted that in some procedural matters, reasons might not be required at all. It is necessary to identify the scope of the duty to give reasons in the particular case, and then determine whether the reasons satisfy that duty. UGL relied on Church v Echuca Regional Health to submit that when assessing whether reasons are adequate, the reasons must be read as a whole.[35] It may be that the path of reasoning is implicit in the material set out in the judgment.
[35](2008) 20 VR 566, 585 [91] (Ashley JA, with whom Buchanan JA and Pagone AJA agreed).
UGL also relied on the judgment of Ferguson J in Oswal v Carson where her Honour said ‘when, as here, the application at first instance is one concerning a matter of practice and procedure, more often than not the reasoning need not be in-depth … all that is required is reasoning which explains in short compass how and why one party succeeded and the other lost’.[36] UGL noted that the recusal application in this case concerned a matter of practice and procedure. There was no trial in this case, no substantive rights were determined, and there was no contested evidence.
[36][2013] VSC 355, [48].
UGL relied upon Sanders v Snell [No 2].[37] In the first instance decision, Beaumont J had dealt with a recusal application as follows:
In all the circumstances, given especially the fact that I have at no time expressed any view whatsoever on the misfeasance claim (then finding it unnecessary to do so in light of my opinion of the other claim) I do not propose to accede to the disqualification application.[38]
[37](2003) 130 FCR 149.
[38][2000] NFSC 5, [9] quoted in Sanders v Snell [No 2] (2003) 130 FCR 149, 166 [63].
UGL argued that the Full Federal Court rejected an argument that those reasons were inadequate and held that, while brief, the reasons did state the ground for the decision and they were sufficient for the exercise of a right of appeal.[39] In response, MCI submitted that Beaumont J’s reasons for refusing the recusal application were brief because he only needed to respond to one submission. That submission was simply that the judge should disqualify himself.[40] Beaumont J delivered an ex tempore judgment on the same day that the application was heard.
[39](2003) 130 FCR 149, [84].
[40][2000] NFSC 5, [9].
UGL submitted that, in any event, the Recusal Reasons were detailed and they explicitly exposed the path of reasoning the trial judge followed. The trial judge said he declined to recuse himself ‘for the reasons advanced by UGL’, which reasons had been set out ‘chapter and verse’. He therefore indicated very clearly the reasons why he rejected the recusal application. That alone was sufficient. The judge then elaborated on his conclusion by making factual findings concerning the fair-minded lay observer. The trial judge plainly set out his reasoning for concluding that there was no reasonable apprehension of prejudgment.
It was submitted that the judge was not required to set out his own independently arrived at reasons for accepting UGL’s submissions and rejecting MCI’s submissions. UGL’s submissions included submissions as to why MCI’s submissions ought be rejected. By accepting UGL’s submissions, which had been set out, the judge enabled MCI to know why its submissions were rejected. UGL also argued that if the judge had set out its submissions as his own, instead of prefacing them with ‘UGL submits’, it could hardly be said that he had not provided adequate reasons. It cannot matter that instead of doing that the trial judge set out both parties’ submissions and then said he accepted UGL’s submissions.
UGL further submitted that the adequacy of the reasons is also demonstrated by the parties being able to argue for a full day on this application for leave to appeal.
Analysis
Leave to appeal should be refused in respect of this ground of appeal. In our view, the Recusal Reasons are adequate. They discussed in detail and then adopted UGL’s submissions, which responded to all of the submissions made by MCI. For that reason alone, MCI is able to understand why its arguments were rejected and it has not been denied the ability to seek leave to appeal.
Further, in the passage at paragraphs [134] to [141] which we have earlier quoted in full, the Recusal Reasons addressed the specific conclusions which MCI had submitted that the judge ought to draw and, if drawn, ought to lead him to the conclusion that the test for apprehended bias in Ebner had been met. Those paragraphs elucidated further the judge’s reasons for rejecting MCI’s arguments on prejudgment.
In addition, as UGL submitted, Ferguson J’s observations in Oswal v Carson are pertinent. The Recusal Reasons were reasons for a decision on a matter of practice and procedure. The decision concerned the hearing of another application on a matter of practice and procedure, namely the stay application. Having regard to the nature of the decision, the Recusal Reasons meet the threshold of explaining how and why UGL succeeded and MCI lost.
We also note that it was not argued by MCI that the judge simply quoted verbatim all of UGL’s submissions. MCI accepted that a judge may recraft a party’s submissions and present them as his or her own reasons. The distinction between what the trial judge did and what MCI accepted as a proper exercise of a judge’s duty to give reasons, is not one of substance. Indeed, the approach of the judge did not fall within the class of cases where a judge ‘cuts and pastes’ a party’s submissions into their reasoning without attribution.[41]
[41]See LVR (WA) Pty Ltd v Administrative Appeals Tribunal (2012) 203 FCR 166, 170 [5], 184-190 [81]-[98]; Fletcher Construction Australia Ltd v Lines MacFarlane & Marshall Pty Ltd [No 2] (2002) 6 VR 1, 44 [163]-[165].
It is also to be remembered that when disposing of the recusal application the trial judge was sitting in the Commercial Court, where applications and trials are conducted and determined in an expeditious manner. What is required to meet the threshold of adequate reasons will depend on the circumstances of the case, and in this case we consider that the trial judge’s reasons for his decision were sufficient.
Ground 2 – applied incorrect test for apprehended bias
MCI’s submissions
MCI submitted that the Ebner test is not whether the fair-minded observer would perceive the judge’s mind to be closed, which MCI submitted, was the test adopted by the trial judge. Rather, the test is whether 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. The question of whether the judge might not bring an impartial mind to the resolution of a question is one of possibility (real and not remote). Under the Ebner test, the observer may simultaneously consider that there is a real possibility that the judge is impartial, and a real possibility that the judge is not impartial. Whenever there is a real possibility that the judge might not bring an impartial mind, the judge should not hear the case.
It was submitted that the Recusal Reasons did not address the question required by the Ebner test. MCI submitted that the question addressed by the trial judge was whether the hypothetical observer would or would not conclude the judge was not impartial, rather than whether there was a real possibility that the judge might not be impartial. MCI submitted that as a matter of language and logic, the fact that someone concludes that another person would not do or apprehend something, does not exclude the possibility that they might.
MCI contended that the trial judge used the expression ‘would’ or ‘would not’ 15 times in a row in the Recusal Reasons, and that this revealed the judge’s error. MCI accepted that using those expressions could effectively address the two ‘mights’ in the Ebner test, but only if the trial judge made a finding to the effect that he was ‘confident that the reasonable lay observer would not in any circumstances have reached that view’. MCI said that the trial judge did not do that. The trial judge simply stated that the reasonable lay observer would or would not form certain views, without first grappling with the Ebner test or the ‘individual integers’ of the case, namely the statements about which MCI complained. As he did not grapple with the correct test or the facts of the case, using the expressions ‘would’ or ’would not’ could not be excused as being shorthand.
When queried on MCI’s own use of the word ‘would’ in the submissions it had made to the trial judge, MCI submitted that it had used that expression because it was complaining about what had happened. MCI felt it was incumbent upon it to go further than the Ebner language and assert that the reasonable person would in fact suspect that his Honour was prejudiced. That submission encompassed and went beyond the Ebner test.
Before this Court MCI accepted that the trial judge had set out the Ebner test correctly. The disputed issue was whether the judge had misapplied the test.
UGL’s submissions
UGL submitted that this proposed ground of appeal seeks to isolate statements made by the trial judge and use those statements as a basis to contend that he misdirected himself as to the Ebner test. If, in order to make a case of apprehended bias, ‘one has to pick through words and isolated sentences of transcript and then try and mash them altogether … then it starts to look very much like the test is not satisfied’. This is because the reasonable observer will look at the whole context. When the Recusal Reasons are read as a whole and the isolated statements are read in context, it is clear that the judge did not mistake or misapply the Ebner test which he had set out in the Recusal Reasons.[42]
[42]Recusal Reasons, [20].
UGL argued that by finding that the fair-minded lay observer would positively conclude that the judge had an open mind on the abuse of process and causation questions, the trial judge set out the basis on which he had concluded that there was no reasonable apprehension of bias. That positive finding answered the ‘real possibility’ of partiality and prejudice test. Once that finding was made, the Ebner test could not be satisfied. The Ebner test was therefore addressed and answered.
UGL submitted that the expressions ‘would’ and ‘would not’ relied upon by MCI appear in the passage at [134]-[141] of the Recusal Reasons (which we have quoted earlier in full). UGL submitted the trial judge was then engaging with, and using the precise words that MCI had put to him, in its written submissions. MCI’s written submissions to the trial judge were as follows:
Below are set out the statements in question, and what [MCI] submits the hypothetical reasonable lay observer would take from them.
… any decision on abuse of process, or at trial on causation, would appear to the hypothetical lay observer to be matters that Robson J had prejudged on Days 1 and 3 of the strikeout application.
…
The hypothetical lay observer who had witnessed [the impugned statements] would not consider that any of these questions remained open questions for Robson J.
… the hypothetical lay observer would reasonably conclude that:
i.Robson J had prejudged or was committed to the conclusion that MCI had purchased shares in UGL in the hope and expectation that UGL had had [sic] contravened ss 674 and 1041H of the Corporations Act 2001 (Cth);
ii.Robson J had prejudged or was committed to the conclusion that MCI purchased UGL shares to establish a base to bring a market-based causation group proceeding against UGL; and
iii.Robson J had prejudged or was committed to the conclusion that accordingly MCI has suffered no loss and does not have a genuine claim for damages.[43]
[43]The italicised words are those emphasised by counsel for UGL.
MCI had then submitted to the trial judge that in the circumstances, ‘the hypothetical observer might reasonably consider, as a real possibility, that [the trial judge] is incapable of altering those judgments’.[44] UGL also pointed to the following written submission made by MCI to the trial judge:
Thus, the hypothetical lay observer would conclude that [the trial judge’s] statements which were expressed without qualification or doubt to demonstrate an actual persuasion of the correctness of those conclusions. The hypothetical lay observer would fear that there would be deviation from the true course of decision-making should any part of this proceeding be left for [the trial judge] to decide or manage.[45]
[44]The italicised words are those emphasised by counsel for UGL.
[45]The italicised words are those emphasised by counsel for UGL.
UGL submitted that in light of MCI’s submissions to the trial judge, MCI is not in a position to complain about the way in which the trial judge expressed himself. While UGL accepted that MCI did not have to establish that the lay observer would conclude there had been prejudgment, it contended that the trial judge in the passages relied upon was responding simply directly to the submissions put to him. Despite the way he expressed himself, it was submitted that the trial judge had engaged directly with the Ebner test and had not misapprehended or misapplied it.
Analysis
We would grant leave to appeal in respect of this proposed ground, but dismiss the appeal.
The trial judge understood the Ebner test and set it out correctly in the Recusal Reasons.
The trial judge in the passage in the Recusal Reasons at [134]–[141] did use expressions which arguably reveal a misapplication of the Ebner test. It is for that reason that leave to appeal should be granted on this proposed ground.
The appeal should, however, be dismissed for two reasons.
First, when the relevant passage is read in the light of the submissions made to him on behalf of MCI it becomes clear, in our view, that the trial judge was responding directly and specifically to the submissions made. The submission made to him was, in summary, that he ought to find that the hypothetical lay observer would conclude various things. The judge addressed that and rejected it. He found the hypothetical lay observer would not reach the conclusions MCI had postulated.
Secondly, as UGL submitted, the trial judge made a positive finding that:
a fair-minded lay observer would form the view that I have not formed a concluded view and have raised the matter for hearing for the very purpose that the usual and proper legal approach should be adopted, so I am able to form a concluded view one way or the other.[46]
[46]Recusal Reasons, [134].
Reading the Recusal Reasons as a whole, that finding precluded a finding that the fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge was required to decide. The way MCI had put the case to the judge is again relevant. The trial judge addressed the issue in the same terms as MCI had done. MCI had sought to go further than the Ebner test and assert that the reasonable person would in fact suspect that the trial judge was prejudiced. The trial judge arrived at a positive conclusion that expressly rejected that proposition. In doing so, he rejected the lesser proposition that the reasonable person might reasonably apprehend that he might not be impartial. In the context, a conclusion expressed in those terms is not inherently inconsistent with the Ebner test; it did not mean he had overlooked or misapprehended the test which he had already correctly set out.
We reject MCI’s submission that, as a matter of language and logic, the fact that someone concludes that another person would not do or apprehend something, does not exclude the possibility that they might.[47] Whether that possibility is excluded depends upon whether the observation that the person ‘would’ not do or apprehend something is in substance only an expression of an assessment of probabilities, to be balanced against other probabilities, or whether it is, rather, as here, a positive finding about the state of mind of a reasonable lay observer in the circumstances of the case.
[47]See [68] above.
Given the way MCI put the case to the trial judge, the judge’s earlier correct statement of the Ebner test, and the fact that the positive finding made is not inherently inconsistent with the Ebner test, we are unpersuaded that the trial judge misapplied that test.
This ground of appeal should be dismissed.
Ground 3 – unsound findings of fact
MCI’s submissions
MCI submitted that certain of the trial judge’s findings of fact are glaringly improbable or contrary to compelling inferences, having regard to the statements he had made in the three instances. The impugned findings of fact are that:
(a) the fair-minded lay observer would form the view that the trial judge had not formed a concluded view;[48] and
(b) a fair-minded lay observer would have concluded that, in discussing the issue of damages alleged to be incurred by MCI and in discussing whether in the circumstances MCI had alleged or sustained a claim for damages that may be an abuse of process, the trial judge was merely raising an issue and, at its highest, expressing tentative views to flesh out the issue to be resolved. A fair-minded lay observer would not have apprehended that the trial judge had a concluded view about the matter and that he did not have an open mind as to the resolution of the question raised.[49]
[48]Recusal Reasons, [134].
[49]Ibid [141].
MCI contended that it is not possible to disregard or give little weight to the trial judge’s comments throughout the three instances on the basis that:
(a) they were made as a part of a robust dialogue between bench and bar;
(b) the judge was duty bound to raise the prospect of abuse; or
(c) the judge accepted that MCI’s market based causation claim was arguable.
MCI submitted that the judge’s comments in the Strike out Reasons that have been extracted above[50] require the drawing of an inference that a fair-minded observer would consider there to be a real possibility that the trial judge had prejudged the question of abuse, or was committed to a conclusion.
[50]See [36] above.
In its oral submissions MCI accepted that Robinson Helicopter Company Inc v McDermott applies to this case.[51] In Robinson Helicopter, the High Court held that it would be wrong for a Court of Appeal to interfere with a judge’s findings of fact unless they were demonstrated to be wrong by incontrovertible facts or uncontested testimony, were glaringly improbable, or were contrary to compelling inferences.[52] MCI submitted that that principle was of no moment in this application because this Court is in the same position as the trial judge with respect to the question of whether the judge should have recused himself.
[51](2016) 331 ALR 550 (‘Robinson Helicopter’).
[52]Ibid 558-559 [43]. This conclusion appears to resolve the apparent differences in earlier High Court authority on the approach to be taken to findings of fact by trial judges, referred to by Whelan JA in TAC v Cuthbertson [2013] VSCA 29, [29]–[33].
The bulk of MCI’s oral submissions were not directed at the proposed ground of appeal, in the light of Robinson Helicopter. They were directed at explaining why the trial judge should have recused himself, rather than establishing error in his Honour’s findings of fact. In effect, MCI attempted simply to re-argue its recusal application.
In that regard, during the hearing of the application before this Court, MCI traversed the three instances relied upon in some detail. MCI sought to develop chronologically a picture of the trial judge’s thinking. MCI conceded that the first two instances, in themselves, did not result in a need for recusal. MCI said it came before this Court because of what was said at the end of the third instance, in the context of the earlier two instances, and because the trial judge said those things despite UGL not suggesting or raising them. MCI particularly focused on the railway track analogy in the Strike out Reasons and the references made to MCI having manufactured its own loss. MCI described the railway analogy as ‘entirely inappropriate’ and ‘the last straw’. That analogy was said to have completely undermined the judge’s finding that market based causation was a tenable plea.
MCI argued before this Court that, while the trial judge had accepted that market based causation was a viable pleading, he had then developed a fully-fledged theory of his own, which neither of the parties had raised, which constituted a fatal objection to MCI’s case. That theory, which MCI referred to as the loss theory, was that a shareholder who purchased shares in the hope or expectation that the market price was inflated so that the shareholder could commence a class action, could not make a claim because that shareholder did not suffer any loss. What had happened was what the shareholder had hoped would happen. The shareholder, far from pursuing a profit, was hoping for a ‘loss’. MCI submitted that market based causation on the one hand, and loss and damage on the other, are separate issues. MCI argued that if a litigant suffered a loss, the fact that it had set out to suffer that loss does not result in the litigant not having suffered a loss. The litigant has still suffered a loss. Whether the litigant may recover that loss is a different question.
Before this Court MCI accepted that the loss theory might be a good defence to a proceeding such as the UGL proceeding. Conversely, when it was put to MCI that there is a link between market based causation and the reason for purchasing the shares, MCI disagreed. MCI submitted that if UGL pleaded that as its defence, MCI would address it.
MCI submitted that through the three instances, the trial judge expressed clear views about the UGL proceeding being, in his opinion, an abuse of process. These views did not stem from Mr Elliott being MCI’s solicitor, which was the basis of the conclusions reached in the Leighton Holdings proceeding and the Treasury proceeding. Mr Elliott is not MCI’s solicitor in the UGL proceeding. What was said to be the judge’s concluded view was founded on the loss theory, which he had developed himself. MCI argued that by the end of the third instance the position was irredeemable, such that the trial judge’s statement that he had an open mind on the issues had no effect on the application of the Ebner test.
MCI accepted that it is not wrong for a judge to raise a potential abuse of process if s/he sees circumstances that give rise to that concern. Nor did MCI have any difficulty with the statement of principle in Yara. MCI’s submission was that after Isbester, judges wishing to raise serious matters such as potential Civil Procedure Act breaches must do so cautiously, by simply asking the parties to address the judge on the matter. The Court in Yara did not instruct judges to make up their minds on matters not raised or contemplated by the parties, then announce their conclusions to the parties and invite the parties to provide submissions. MCI submitted that there are plenty of things a judge can and should do in line with Yara, but they are well short of what the trial judge did here.
UGL’s submissions
UGL submitted that in order for the Court of Appeal to interfere with the trial judge’s findings of fact, MCI must demonstrate those findings to be wrong by incontrovertible facts or uncontested testimony, or show that the findings are glaringly improbable or contrary to compelling inferences. It is not enough that the Court of Appeal would have decided the matter differently.
UGL asserted that MCI has failed to particularise in any detail what made the impugned findings so improbable or the nature of the compelling inferences that favour a view of the evidence contrary to the view formed by the trial judge.
UGL also addressed the three instances relied on by MCI. According to UGL, in the first two instances the trial judge was grappling with the proposition that on market based causation theory a plaintiff may establish causation even if it purchased shares in the hope that they were overvalued and the purchase would found a class action. His Honour appeared to be troubled by that proposition. His thinking at the time seemed to be that the plaintiff would have to plead that it bought the shares hoping and expecting that the market was fully informed and that it would make a profit from the transaction, otherwise it would not establish it suffered loss and damage. UGL emphasised the trial judge’s comment to MCI that ‘you may have an answer to all this and hopefully have but I think I should raise it because it’s troubled me’. Counsel for MCI addressed the judge’s concerns by submitting that the plaintiff’s hopes or expectations when purchasing the shares were irrelevant. Ultimately the trial judge accepted MCI’s proposition because he upheld the tenability of the market based causation plea. The trial judge also acknowledged that for the purposes of the strike out application he had to assume that MCI made a loss.
The critical point, UGL submitted, is that the trial judge put forward propositions so that counsel could understand what was concerning him and could respond to those concerns. UGL said the judge explained why he was raising the concern and gave the parties an opportunity to respond to the concern. According to UGL, this was impeccable judicial technique. His Honour used examples to test MCI’s market based causation plea, but clearly he was not committed to a certain view as he found for MCI on the viability of the causation plea. The examples he used were not fanciful. Rather, they were drawn from the unchallenged findings of fact made by Ferguson J in the Treasury proceeding and the Leighton Holdings proceeding.
UGL submitted that when viewed as a whole, the trial judge’s remarks during the first two instances constituted the expression of tentative or exploratory views. The remarks were made for the purpose of eliciting a response from counsel to his Honour’s concerns.
It was then submitted by UGL that the Strike out Reasons overtook the first two instances. The Strike out Reasons contained the more precise expression of the judge’s thinking. In those reasons the trial judge posed questions that arose inexorably from Ferguson J’s unchallenged findings in the Treasury proceeding and Leighton Holdings proceeding. His Honour made it clear that he was not answering those questions. The analogy drawn with driving onto train tracks was simply an example to illustrate the trial judge’s concern. The trial judge did not conclude that MCI was like a person who had deliberately driven onto train tracks. Whether a good analogy or a bad analogy, the judge’s intention was simply to illuminate the issue on which he wanted the parties to address him. When the Strike out Reasons are properly read and analysed, the reasonable observer would have concluded that it went without saying that the trial judge had an open mind on the issues and was going to hear the parties’ further submissions.
For these reasons UGL submitted that the judge’s factual findings concerning the lay observer were open and not glaringly improbable.
Analysis
In its written submissions MCI sought to challenge the trial judge’s factual findings, in a way at least arguably consistent with Robinson Helicopter. In its oral submissions MCI sought to re-argue its recusal application and have this Court decide for itself whether the trial judge should have recused himself.
It is common ground that the principle articulated in Robinson Helicopter now applies. It is desirable to set out what the High Court relevantly said:
The fact that the judge and the majority of the Court of Appeal came to different conclusions is in itself unremarkable. A court of appeal conducting an appeal by way of rehearing is bound to conduct a “real review” of the evidence given at first instance and of the judge’s reasons for judgment to determine whether the judge has erred in fact or law. If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings. But a court of appeal should not interfere with a judge’s findings of fact unless they are demonstrated to be wrong by “incontrovertible facts or uncontested testimony”, or they are “glaringly improbable” or “contrary to compelling inferences”.[53]
[53](2016) 331 ALR 550, 558-9 [43] (citations omitted).
In our view, MCI has failed to establish that the impugned findings of fact were demonstrably wrong, glaringly improbable or contrary to compelling inferences in the relevant sense. There is therefore no occasion for this Court to consider afresh MCI’s recusal application.
For the following reasons, it was open to the trial judge to make the finding he did that a fair-minded lay observer would form the view that the trial judge had not formed a concluded view on the matters to be determined in the stay application.
Firstly, the trial judge considered the statements he had made in the three instances relied on by MCI. MCI does not suggest that the judge failed to consider any of the statements he had made upon which MCI relied.
Secondly, the trial judge raised the issue of abuse of process and invited the parties to address him on it. He has not heard submissions on the issue. In none of the three instances relied on by MCI has he expressed a concluded view, in our opinion.
Thirdly, the trial judge has demonstrated that he is prepared to change his mind after argument, as he did on the issue of market based causation in the Strike out Reasons.
Fourthly, once the trial judge had concerns about abuse of process and possible breaches of the Civil Procedure Act, it was appropriate for him to raise them, even though UGL had not agitated those matters.[54] It was also appropriate for him to explain those concerns in the Strike out Reasons by setting out questions and analogies. This assisted the parties to understand the judge’s concerns and will enable them to craft submissions accordingly. It would be less than helpful for a judge simply to say he or she had concerns about Civil Procedure Act compliance and/or abuse of process but not elaborate.
[54]See Yara (2013) 41 VR 302, 311-2 [27]; Teoh v Hunters Hill Council [No 4] (2011) 81 NSWLR 771, 775 [38] (Handley AJA, with whom Allsop P and Beazley JA agreed).
In Yara the Court of Appeal sanctioned the approach of inviting the parties to make oral submissions as to why there should not be a finding that the Act was contravened. That suggests a reverse onus. On one view, what the trial judge did in the Strike out Reasons was more favourable to MCI than the suggested approach in Yara. In this case the judge was not asking to be persuaded that there was not an abuse of process or breach of the Civil Procedure Act; he was asking for submissions on those issues.
Other matters
MCI also made a submission to the effect that there is no link between market based causation theory and a plaintiff shareholder’s reasons for purchasing shares in a particular company. It was unnecessary for us to consider this submission.
Conclusion
Leave to appeal should be granted with respect to proposed ground 2. Leave to appeal should otherwise be refused. The appeal should be dismissed.
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