Michael Wilson & Partners Ltd v Nicholls

Case [2011] HCA 48

HIGH COURT OF AUSTRALIA

GUMMOW ACJ,
HAYNE, HEYDON, CRENNAN AND BELL JJ

MICHAEL WILSON & PARTNERS LIMITED  APPELLANT

AND

ROBERT COLIN NICHOLLS & ORS  RESPONDENTS

Michael Wilson & Partners Limited v Nicholls [2011] HCA 48
1 December 2011
S67/2011

ORDER

1.        Appeal allowed with costs.

2.Set aside paragraphs 3, 4, 5, 6 and 7 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 15 September 2010.

3.        Remit the matter to the Court of Appeal for further consideration of:

(a)grounds 5(b) to (c), 6 to 15, 17(b) to (d), 18, 20 and 21 of the Amended Notice of Appeal dated 7 May 2010; and

(b)the Notice of Cross-Appeal dated 29 January 2010.

4.Costs of the appeal to the Court of Appeal, including the costs of the hearing on remitter, be in the discretion of that Court.

5.Money paid into Court by the appellant, in satisfaction of a condition of the grant of special leave, be paid out to or at the direction of the appellant.

On appeal from the Supreme Court of New South Wales

Representation

B W Walker SC with M Walton SC and D F C Thomas for the appellant (instructed by Clayton Utz Lawyers)

G C Lindsay SC with G W McGrath SC and A D B Fox for the respondents (instructed by Henry Davis York)

Notice:  This copy of the Court's Reasons for Judgment is subject to formal revision prior to publication in the Commonwealth Law Reports.

CATCHWORDS

Michael Wilson & Partners Limited v Nicholls

Courts and judges – Bias – Apprehended bias – Appellant successfully applied ex parte to use respondents' affidavits for foreign proceedings and criminal investigations on several occasions – Judge relied on appellant's unchallenged affidavit evidence – Applications heard in closed court and orders made preventing respondents knowing about applications – Whether fair-minded lay observer might reasonably apprehend judge might not bring impartial and unprejudiced mind to resolution of issues at trial of action.

Practice and procedure – Appeal – Trial judge refused respondents' pre-trial disqualification applications – Trial judge offered to make orders facilitating urgent appeal – Whether order on disqualification application capable of appeal – Respondents did not seek leave to appeal – Whether respondents permitted to raise disqualification on appeal from final judgment.

Abuse of process – Multiple proceedings – Appellant commenced arbitration proceeding against solicitor in London for breach of fiduciary duty then proceeding against respondents in Supreme Court of New South Wales for knowingly assisting solicitor's breach and in tort – Loss from substantially same breaches of fiduciary duty alleged in both proceedings – Proceedings could not be brought in one venue – Supreme Court delivered judgment before arbitrators delivered award on liability – Findings about appellant's loss differed – Whether Supreme Court proceeding abuse of process.

Equity – Remedies – Solicitor liable to appellant for breach of fiduciary duty – Respondents liable to appellant for knowingly assisting solicitor's breach – Whether respondents' liability ancillary to, coordinate with…

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Details
AGLC
Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48
Case
[2011] HCA 48
Decision Date

CaseChat Overview and Summary

The High Court of Australia considered an appeal by Michael Wilson & Partners Ltd (MWP) against orders of the Court of Appeal of the Supreme Court of New South Wales. The dispute originated from allegations by MWP that certain individuals, including Messrs Nicholls and Slater, had conspired to divert clients and business opportunities for their own benefit, causing loss to MWP. MWP pursued claims in both a London arbitration against Mr Emmott and proceedings in the Supreme Court of New South Wales against Messrs Nicholls, Slater, and others. The core of the appeal concerned whether the trial judge, Einstein J, should have been disqualified from hearing the New South Wales proceedings due to an apprehended bias.

The legal issues before the High Court included whether a fair-minded lay observer might reasonably apprehend that the trial judge might not bring an impartial mind to the resolution of the issues, given that the judge had made several orders ex parte in favour of MWP, which affected the respondents without their immediate knowledge or opportunity to be heard. The court also considered whether the respondents could raise the issue of disqualification on appeal from the final judgment, having not sought leave to appeal the pre-trial disqualification applications. Furthermore, the court examined whether the Supreme Court proceedings constituted an abuse of process due to the existence of parallel arbitration proceedings, and whether MWP's liability in equity to prevent double recovery from the respondents where the same loss had been satisfied by an arbitral award against Mr Emmott.

The High Court allowed the appeal, setting aside parts of the Court of Appeal's orders and remitting the matter for further consideration. The Court found that the Court of Appeal had erred in its approach to the apprehended bias issue. Applying the principles from *Ebner v Official Trustee in Bankruptcy*, the High Court emphasised the need to identify the source of the apprehended bias and articulate the logical connection between that source and the feared deviation from impartial decision-making. The Court noted that the trial judge had made orders on the basis of unchallenged affidavit evidence from MWP, which could have caused embarrassment when the judge was later required to make adverse credit findings against MWP at trial. This, coupled with other factors such as the nature of the ex parte orders and the respondents' lack of opportunity to rebut material, supported the conclusion that there was a reasonable apprehension of bias. The High Court also indicated that the issues of abuse of process and double recovery warranted further consideration.

Orders

Orders of the court

1. Appeal allowed with costs.

2. Set aside paragraphs 3, 4, 5, 6 and 7 of the orders of the Court of Appeal of the Supreme Court of New South Wales made on 15 September 2010.

3. Remit the matter to the Court of Appeal for further consideration of:

(a) grounds 5(b) to (c), 6 to 15, 17(b) to (d), 18, 20 and 21 of the Amended Notice of Appeal dated 7 May 2010; and

(b) the Notice of Cross-Appeal dated 29 January 2010.

4. Costs of the appeal to the Court of Appeal, including the costs of the hearing on remitter, be in the discretion of that Court.

5. Money paid into Court by the appellant, in satisfaction of a condition of the grant of special leave, be paid out to or at the direction of the appellant.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GUMMOW ACJ, HAYNE, CRENNAN AND BELL JJ HEYDON J
The trial proceeded and, as already noted, MWP succeeded. The respondents in this Court appealed to the Court of Appeal on grounds including grounds alleging that Einstein J should not have tried the case because there was a reasonable apprehension of bias.Apprehension of bias – the Court of Appeal's conclusions The Court of Appeal concluded that Einstein J should have disqualified himself because there was a reasonable apprehension of bias. The principal reasons of the Court of Appeal on this issue were given by Basten JA, who identified[10] the circumstances said to be relevant to whether there was a reasonable apprehension of bias.[10](2010) 243 FLR 177 at 197‑198 [79]‑[80]. Five matters were identified[11] as pointing against that conclusion: (a) the rulings of which complaint was made were interlocutory, not final, (b) there had been a significant lapse of time between the rulings (in 2007) and trial (in 2009), (c) some but not all of the orders and the supporting material were supplied in April 2007 to those against whom the orders had been made, (d) there was no material in the reasons for judgment given in respect of the ex parte applications "which would provide unequivocal support for a reasonable apprehension of prejudgment", and (e) in so far as the matters of concern arising from the interlocutory proceedings may have been thought to affect the assessment by Einstein J of the argument that the proceedings were an abuse of process, that argument had not been raised until four weeks after the trial began.[11](2010) 243 FLR 177 at 197‑198 [79]. Six matters were said[12] to be "countervailing considerations":"(e)the material placed before the primary judge was not entirely supportive of the orders made;(f)some of the orders were, in their nature, contestable;(g)neither the transcripts nor the various ex parte judgments revealed full and proper disclosure and consideration of the weaknesses of the applications;(h)it might be thought that the confidentiality regime was maintained beyond a justifiable period;(i)the primary judge acted on a basis as to the credibility and possible criminality of [Messrs Nicholls and Slater], which they had no opportunity to rebut; and(j)the judge made orders on the basis of material put on through the affidavits of Mr Wilson, which he accepted for the purposes of the interlocutory applications, a factor which could have caused him embarrassment when invited to make adverse credit findings against Mr Wilson at the trial."[12](2010) 243 FLR 177 at 198 [80]. Each of these countervailing considerations was a particular expression of a single central complaint: that "on seven separate days"[13] Einstein J had made orders which affected the defendants, without hearing from them, and without providing them with an early opportunity to challenge the bases upon which the orders were made by applying to discharge or vary those orders.[13](2010) 243 FLR 177 at 199 [85]. In Ebner v Official Trustee in Bankruptcy, the plurality pointed out[14] that application of the apprehension of bias principle requires two steps. First, it requires the identification of what it is said might lead the judge to decide a case other than on its legal and factual merits. And second, there must be an articulation of the logical connection between that matter and the feared deviation from the course of deciding the case on its merits. The plurality in Ebner went on to say[15] that "[t]he bare assertion that a judge (or juror) has an 'interest' in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated". So too, in this case, the bare assertion that the judge appeared to be biased through prejudgment would be of no assistance without articulation of the connection between the events giving rise to the apprehension of bias through prejudgment and the possibility of departure from impartial decision making.[14](2000) 205 CLR 337 at 345 [8].[15](2000) 205 CLR 337 at 345 [8].

Ratio Decidendi

Legal Principle Established

Established by: GUMMOW ACJ, HAYNE, CRENNAN AND BELL JJ, HEYDON J

MWP alleged that each of Messrs Nicholls, Slater and Emmott, separately and together, furthered his or their own interests at the expense of MWP. A central allegation was that Messrs Nicholls, Slater and Emmott had conspired together to divert, and had in fact diverted, clients and business opportunities away from MWP to their own benefit by having one or more of the Temujin companies act for the clients in question or by taking advantage of business opportunities that would otherwise have gone to MWP.Arbitration and action MWP sought relief in several different jurisdictions. The persons and entities MWP sued were located in different places. The principal proceedings brought by MWP were an arbitration in London against Mr Emmott and the proceedings in the Supreme Court of New South Wales against Messrs Nicholls and Slater, the Temujin companies and the other defendants mentioned earlier in these reasons. Other litigation in other jurisdictions can conveniently be described as satellite litigation and, although some reference must be made to some of those satellite proceedings, chief focus must fall upon the London arbitration and the New South Wales proceedings. MWP served a notice of arbitration on Mr Emmott in August 2006; it commenced the New South Wales proceedings against Messrs Nicholls and Slater and others in October 2006. It will be necessary to describe the course of events in both proceedings. But before doing that it is desirable to say a little more about why there was both an arbitration and an action and the nature of the claims that were made in each. The London arbitration between MWP and Mr Emmott was instituted in accordance with an arbitration clause contained in the agreement those parties had made. Because Messrs Nicholls and Slater and the other defendants in the New South Wales proceedings were not parties to that (or any other) arbitration agreement with MWP they could not be added as parties to the arbitration between MWP and Mr Emmott. After MWP had commenced its action in New South Wales against Messrs Nicholls and Slater and others, it invited Mr Emmott to consent to being joined as a party to the New South Wales action. Mr Emmott declined that invitation and threatened to seek an anti‑suit injunction if MWP took any step to have him joined in the New South Wales proceedings. Thereafter, the London arbitration and the New South Wales proceedings took their separate courses. Because MWP had made the agreement it had with Mr Emmott, the controversy between MWP and those who it alleged had acted together to harm MWP was to be resolved as to part in one venue (the London arbitration) and as to part in another (the Supreme Court of New South Wales). Although MWP alleged that Mr Emmott had breached fiduciary duties he had owed it, and that Messrs Nicholls and Slater and the corporate defendants in the New South Wales proceedings were liable to MWP because, among other things, they had knowingly assisted Mr Emmott in those breaches, MWP could not have those complaints heard and determined by the one process, whether arbitral or curial.