Nicholls v Michael Wilson & Partners Ltd - [2010] NSWCA 222

No judgment structure available for this case.

New South Wales

Court of Appeal

CITATION: NICHOLLS v MICHAEL WILSON & PARTNERS LIMITED [2010] NSWCA 222
This decision has been amended. Please see the end of the judgment for a list of the amendments.

HEARING DATE(S): 26, 27, 28, 29, 30 July 2010

JUDGMENT DATE:
15 September 2010

JUDGMENT OF: Basten JA at 1; Young JA at 114; Lindgren AJA at 190

DECISION: (1) On the motion of the appellants, admit as further evidence pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW)
(a) the second interim award of the London Arbitrators made on 22 February 2010;
(b) the 17th procedural order made by the London Arbitrators on 24 March 2010, and
(c) the Clarification made by the London Arbitrators on 6 April 2010.
(2) On the motion of the respondent, admit as further evidence pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW)
(a) bundle of documents constituting Exhibit JR1, and
(b) bundle of documents constituting Exhibit JR2
each being exhibited to the affidavit of James Malcolm Robinson sworn 18 June 2010.
(3) Allow the appeal from the judgments in the Equity Division delivered on 6 October 2009 and 11 December 2009 and set aside the declarations and orders 1-33 made on 11 December 2009.
(4) Direct that there be a further hearing of the proceedings in the Equity Division, but that the trial not commence until the determination of the appeal against the second interim award of the Arbitral Tribunal made on 22 February 2010 in London or, if the appeal is upheld and the Tribunal required to reconsider its reasons in any respect, until the redetermination has been made.
(5) Dismiss the cross-appeal.
(6) Order that the respondent pay the appellants’ costs, including reserved costs, in this Court.
(7) The costs incurred to date in the Equity Division are to abide the outcome of the further hearing in the Division and are to be determined by the judge conducting the further hearing.

CATCHWORDS: ABUSE OF PROCESS - respondent proceeding in Supreme Court against accessories and in an arbitration in London against the principal wrongdoer - judgment and orders made at trial against the accessories - subsequently principal wrongdoer found liable but only on limited basis in London arbitration - whether abuse of process for respondent to seek on appeal to maintain enforceability of judgment and orders in light of inconsistent arbitration award - APPEAL - reasonable apprehension of bias - trial judge hearing ex parte applications over a lengthy period - confidentiality orders - closed court hearings - other party becoming aware of number and nature of ex parte applications, confidentiality orders and closed court late in the day - Judge refusing to recuse himself - whether fair minded bystander might consider that trial judge might not bring to bear a mind free of prejudice against the party in whose absence affidavits had been read and orders made - CHOICE OF LAW - employees of respondent company incorporated in British Virgin Islands and carrying on business in Kazakhstan - employed by respondent in Kazakhstan - whether trial Judge erred in holding that New South Wales law applied to claims in contract , tort and for breach of fiduciary duty - presumption that law of forum is the same as that of foreign country - whether presumption operated - whether presumption displaced - REMEDIES - equitable compensation - whether exemplary or punitive component can be included as part of a "robust" approach - declarations - whether declarations in appropriate form

LEGISLATION CITED: Arbitration Act 1966 (UK)
Building and Construction Industry Security of Payment Act 1999 (NSW)
Family Law Act 1975 (Cth), s 93A
Foreign Corporations (Application of Laws) Act 1989 (Cth), ss 3, 7
Supreme Court Act 1970 (NSW), s 75A
Trade Practices Act 1974 (Cth), s 52
Uniform Civil Procedure Rules (NSW), r 14.14

CATEGORY: Principal judgment

CASES CITED: Akai Pty Limited v People’s Insurance Co Ltd [1996] HCA 39; 188 CLR 418
Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50
Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; [1558]-[1774] All ER Rep 121
Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] 1 WLR 1041
AWG Group Ltd v Morrison [2006] 1 WLR 1163
Barnes v Addy (1874) LR 9 Ch App 244
Blain v The Doctor’s Co 272 Cal Rptr 250 (Cal Ct App 1990)
Brinsley v Lynton & Lynnmouth Hotel & Property Co [1895] WN (Eng) 53
Bristol & West Building Society v Mothew [1998] Ch 1
British American Tobacco Australia Services Ltd v Laurie [2009] NSWCA 414
CDJ v VAJ [1998] HCA 67 and 76; 197 CLR 172
Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; 229 CLR 577
Coulls v Bagot’s Executor and Trustee Co Ltd [1967] HCA 3; 119 CLR 460
Council of NSW Bar Association v Davison [2006] NSWSC 699
Damberg v Damberg (2001) 52 NSWLR 492
Drinkwater v Caddyrack Pty Ltd (unrep NSWSC, 25.9.1997)
Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; 74 NSWLR 190
Dyno Wesfarmers Limited v Knuckey [2003] NSWCA 375
Edwards v Noble [1971] HCA 54; 125 CLR 296
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89
Global Funds Management (NSW) Ltd v Rooney (1994) 36 NSWLR 122
Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404
Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; 56 NSWLR 298
Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46
Johnson v Johnson [2000] HCA 48; 201 CLR 488
Kyrwood v Drinkwater [2000] NSWCA 126
Lee v Cha [2008] NSWCA 13
Lloyd v Guibert (1865) LR 1 QB 115
Lohar Corp Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177
McKenzie v McDonald [1927] VLR 134
Michael Wilson & Partners Ltd v Nicholls [2009] NSWSC 505
Murakami v Wiryadi [2010] NSWCA 7
National Commercial Bank v Wimborne (1978) 5 BPR [97423]
Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54, 223 CLR 331
New Brunswick Railway Co v British and French Trust Corporation [1939] AC 1
Nocton v Ashburton [1914] AC 932
Paramasivam v Flynn (1998) 90 FCR 489
Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165
Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589
Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10; 210 CLR 491
Reichel v Bishop of Oxford (1889) 14 App Cas 259
Reichel v McGrath (1989) 14 App Cas 665
Rickshaw Investments Ltd v Baron von Uexhell [2007] 3 LRC 223, [2006] SGCA 39
Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; 53 NSWLR 198
Rogers v The Queen [1994] HCA 42; 181 CLR 251
Ruthol Pty Ltd v Mills [2003] NSWCA 56; 11 BPR 20,793
Shirvell v Hackwood Estates Co Ltd [1938] 2 KB 577
Smits v Roach [2006] HCA 36; 277 CLR 423
State Bank of NSW Ltd v Stenhouse Ltd (1997) Aust Torts Reports § 81-423
Tannous v Mercantile Mutual Insurance [1978] 2 NSWLR 331
Target Holdings Ltd v Redfern [1996] AC 421
United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766
Vakauta v Kelly (1988) 13 NSWLR 502
Vakauta v Kelly [1989] HCA 44; 167 CLR 568
Youyang Pty Ltd v Minter Ellison [1981] NSWCA 198
Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; 212 CLR 484

TEXTS CITED: Borchard, Declaratory Judgments, 2nd Ed 1941
Broom’s Legal Maxims (10th ed [1939]), p 191
Conaglen, Fiduciary Loyalty (Hart Publishing, (2010))
Dharmananda & Papamatheos (eds), Perspectives on Declaratory Relief (Federation Press, 2009)
Nygh’s Conflict of Laws in Australia
Spencer, Bower and Handley, Res Judicata (4th Ed 2009) at [1.08]-[1.09]
Tilbury, Civil Remedies, Vol 1 (1990)
T M Yeo, Choice of Law for Equitable Doctrines (OUP, 2004)
Zamir & Woolf, The Declaratory Judgment 3rd ed 2002
Foreign Corporations (Application of Laws) Bill 1989 (Parl Debs, Senate, 21 December 1989) (Cth) p 4987

PARTIES: Robert Colin Nicholls (First Appellant/First Cross-Respondent)
David Ross Slater (Second Appellant/Second Cross-Respondent)
Temujin Services Limited (Third Appellant/Third Cross-Respondent)
Temujin International Limited (Fourth Appellant/Fourth Cross-Respondent)
Temujin International FZE (Fifth Appellant)/Fifth Cross-Respondent)
Michael Wilson & Partners Limited (Respondent/Cross-Appellant)

FILE NUMBER(S): CA 2009/298561

COUNSEL: G C Lindsay SC/G W McGrath/A Fox (Appellants/Cross-Respondents)
M Walton SC/J Carney (Respondent/Cross-Appellant)

SOLICITORS: Henry Davis York (Appellants/Cross-Respondents)
Clayton Utz (Respondent/Cross-Appellant)

LOWER COURT JURISDICTION: Supreme Court - Equity Division

LOWER COURT FILE NUMBER(S): SC 50151 of 2006

LOWER COURT JUDICIAL OFFICER: Einstein J

LOWER COURT DATE OF DECISION: 11 December 2009

LOWER COURT MEDIUM NEUTRAL CITATION: [2009] NSWSC 1033; [2009] NSWSC 1377

CA 2009/298561

BASTEN JA
YOUNG JA
LINDGREN AJA
15 September 2010

ROBERT COLIN NICHOLLS, DAVID ROSS SLATER, TEMUJIN SERVICES LIMITED, TEMUJIN INTERNATIONAL LIMITED and TEMUJIN INTERNATIONAL FZE v MICHAEL WILSON & PARTNERS LIMITED

Judgment

1 BASTEN JA: The background to this appeal has been recounted by Lindgren AJA. I address below the first ground of appeal raised by the appellants, namely that the primary judge should have recused himself when requested to do so, prior to the commencement of the trial.

Apprehended bias
(a) legal principles

2 On two occasions, in 2008 and 2009, the appellants requested the primary judge not to hear the trial, on the basis that he had made a series of pre-trial orders in circumstances which could give rise to a reasonable apprehension of bias. The approach to be applied in determining those applications was whether a fair-minded lay observer might have formed the opinion that the primary judge might not have brought a mind free from pre-judgment to the assessment of the case at the trial. On each occasion, his Honour rejected the application for recusal.

3 So stated, the approach required to be applied by the Court is a relatively undemanding one: that is because of the value placed by the law on not merely the fact, but the perception, that judges will determine cases on the material before them, uninfluenced by extraneous views, namely views formed otherwise than in the ordinary course of the trial, hearing from the parties on both sides of the record, and based on admissible evidence. On the other hand, the administration of justice would soon become unmanageable if judges were too readily disqualified because of pre-trial judgments, adverse to the interests of a particular party. The answer in a particular case will depend on the nature of the decision being made and the surrounding circumstances, a position which gives rise to important questions as to the knowledge and understanding of the proceedings which must be attributed to the hypothetical fair-minded lay observer.

4 As explained by Allsop P in British American Tobacco Australia Services Ltd v Laurie [2009] NSWCA 414 at [5]:

“The fictitious ‘fair-minded lay observer’ and what he or she might think is a mechanism deployed by the courts for protecting the respect and integrity of the judicial system through a test employing a reasonable member of the public. That test involves an evaluation by judges as to how the public, through the posited ‘fair-minded lay observer’, would view the working of the legal system in the particular instance under consideration.”

5 The assessment is complicated in the present case by the fact that the matters which might have created a reasonable apprehension of bias occurred in closed court. A question thus arises as to whether the hypothetical observer would take that fact into account, would consider the manner in which the events became known to the appellants and others entitled to observe the litigation, and the explanations given by the primary judge in his judgments on the recusal applications as to how his Honour viewed the matter. In accordance with principle, all of these matters are to be taken into account. As noted in Johnson v Johnson [2000] HCA 48; 201 CLR 488 at [14]:

“There was argument in this Court, prompted by [the trial judge’s] explanation of what he intended to communicate, about whether the effect of a statement that might indicate prejudgment can be removed by a later statement which withdraws or qualifies it. Clearly, in some cases it can. So much has been expressly acknowledged in the cases. 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.”

6 This passage raises a temporal issue which had relevance to the manner in which the appellants presented their case. If, at the time of the recusal applications, the test of reasonable apprehension of bias were satisfied, could the refusal of the application nevertheless be justified by reference to subsequent events or conduct? On the other hand, if the recusal application were properly refused on the material available at the time when it was made, should the final judgment nevertheless be set aside on appeal because, viewing the whole of the trial, the Court is satisfied that there was a reasonable apprehension of bias?

7 The correct approach to these questions may be found in the principles to be applied by this Court in considering an appeal against a final judgment. At least on one approach, where a recusal application, which should have been granted at the time it was made, was later shown to be unwarranted, the appeal should be dismissed on the basis that no substantial miscarriage of justice has eventuated. In the other circumstance, because the appeal is brought against the final judgment and is not in form an appeal against the failures to recuse, the judgment must be set aside if, on the material before the appeal court, a reasonable apprehension of bias is demonstrated.

8 Various explanations given in the cases as to the knowledge and attitudes of the fair-minded observer may be found in the judgment of Tobias JA in British American Tobacco at [78]-[103]. It is sufficient for present purposes, to note the passages from the judgment in Johnson relied on by his Honour at [81]-[82]:

“[12] … 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’.

[13] 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.”

9 As was made clear by the references in footnotes to the judgment of McHugh JA in Vakauta v Kelly [1988] 13 NSWLR 502 at 527, and to its adoption by Toohey J in Vakauta v Kelly [1989] HCA 44; 167 CLR 568 at 584-585, the description of the professional judge forms part of the knowledge against which the fictional lay observer assesses the conduct and behaviour in the particular case.

10 Because the hypothetical fair-minded observer is postulated to emphasise the purpose of maintaining public confidence in the administration of justice, the postulate has particular relevance in circumstances where a judge may have confidence in her or her colleague’s ability to avoid prejudgment, but the lay observer may not. On the other hand, where the reviewing judge holds an apprehension of prejudgment it seems unnecessary to ask whether that apprehension would be shared by the lay observer. As the present case illustrates, to inquire into the mind of the lay observer may, in some circumstances, require the attribution of quite sophisticated knowledge about how the legal system usually operates. Without that knowledge, the lay observer may say, ‘If that is how the system usually operates, I am content with that’. A judge may know that that is not how the system usually operates, or is not how it should operate. It might be thought sufficient for the reviewing judge to rely on his or her own apprehension of bias in such circumstances, rather than undertaking the wholly artificial exercise of transferring the knowledge of the professional to the hypothetical lay observer. To reiterate, the role of the lay observer may be critical in the reasoning process where the reviewing judge does not personally entertain a relevant apprehension.

(b) factual background

11 In pursuing proceedings against the appellants, who were the defendants in the Court below, the respondent (which was the plaintiff in the Court below) obtained freezing orders in 2006 in relation to certain identified assets of the appellants, both in Australia and elsewhere. Further, the respondent took steps to “trace money flows and asset transfers” involving the appellants and other persons, through proceedings in various parts of the world. In particular, pursuant to orders made by Bergin J on 19 October 2006, affidavits were required to be filed by the individual appellants, Messrs Nicholls and Slater, identifying bank accounts and other assets in which they had interests (the disclosure affidavits). Pursuant to an agreement between the parties, orders restricting access to the disclosure affidavits to the respondent’s legal representatives, were made by consent.

12 On 26 March 2007 the respondent filed a notice of motion, supported by affidavits, none of which were then served on the appellants, seeking orders in three categories, namely:

(i) leave to issue a subpoena to Macquarie Bank Ltd, and consequential orders on return of the subpoena;

(ii) an order varying the confidentiality requirements in the consent orders with respect to the disclosure affidavits, so as to permit “Mr Michael Earl Wilson, and the plaintiff’s legal advisors retained in each of the UK, the BVI [British Virgin Islands], [the] Bahamas, the USA and Switzerland access to the affidavits filed by the defendants …”;

“(a) the [respondent’s] proposed ex parte proceedings for a receiver to be appointed over Incomeborts Ltd, Norgulf Holdings Ltd and Tigakhan Ltd in proceedings No 307 of 2006 commenced by the [respondent] in the Eastern Caribbean Supreme High Court of the British Virgin Islands;

(b) considering the relief and remedies available to the [respondent] and possible proceedings in Switzerland.”

13 The three companies named in the last order sought were believed by Mr Wilson to be the recipients of shares in a company known as Max Petroleum Plc with interests in hydrocarbon blocks in Kazakhstan. Max Petroleum was listed on the Alternative Investment Market of the London Stock Exchange on 27 October 2005. In an affidavit filed in support of the motion, Mr Michael Wilson stated:

“Based on the matters referred to above I believe that Mr Emmott, Mr Nicholls and Mr Slater have each been rewarded (directly or indirectly) with shares, options or other significant benefits in relation to the respective transactions for work carried out by them during their employment by [the respondent] and for which they are required to account to [the respondent].”: Affidavit par 22.

14 Mr Wilson further stated at par 44:

“Based upon Mr Slater’s attempts to raise $US10 million, and Mr Nicholls’ apparent involvement in that process, from investors in Australia …, and the fact that he offers the shares which Incomeborts and Norgulf hold in Max, I believe that:

(a) both Mr Nicholls and Mr Slater have an interest in Incomeborts and/or Norgulf on the basis that they were offering shares held by those companies in Max as security for a loan to Temujin;

(b) both Mr Nicholls and Mr Slater through Incomeborts and/or Norgulf benefited from the Max floatation as did Mr Risby [sic] through the companies of which he is a director and which gained a significant shareholding in Max upon its listing on AIM ….”

15 Mr David Risbey was said to be a director of Tigakhan. He was not a party to the current proceedings in this State.

16 The respondent relied upon a “confidential affidavit” dated 26 March 2007 of Katherine Jane Dixon, a special counsel employed by Clayton Utz Lawyers, acting for the respondent. The affidavit, which contained information obtained from the disclosure affidavits, was described as “confidential” in order to comply with the requirements of an order made by Bergin J, by consent of the parties, on 26 October 2006. Ms Dixon asserted that there were discrepancies in relation to the contents of the disclosure affidavits, when they were compared with other material available to the respondent: par 5.

17 In a second affidavit of the same date, Ms Dixon set out her understanding of the various proceedings instituted by the respondent in the jurisdictions identified above and stated (par 11):

“In my opinion, the stage has been reached where it is necessary for me to seek instructions from Mr Wilson in respect of the matters contained in the Disclosure Affidavits sworn in these proceedings. This is principally because the material is relevant to a complete understanding of the activities of the [appellants] which is necessary for the ongoing tracing exercises that are being undertaken. In order to seek proper instructions from the [respondent], the basis upon which instructions are being sought needs to be disclosed to Mr Wilson, and those that assist him in the task of tracing exercises and identification of assets for preservation.”

18 Ms Dixon also stated that she had been “informed by Mr Wilson” and believed that “the contents of the Disclosure Affidavits may well be relevant to applications to be made in the jurisdictions identified earlier in this affidavit for the further securing of asset preservation and tracing exercise”: at par 12. (Why the Court was being asked to rely upon an opinion of Mr Wilson, who had not seen the disclosure affidavits and did not know their contents, is unclear and was not explored in Court.) On the basis of that uninformed opinion, she sought that “the Disclosure Affidavits also be available for use in the identified jurisdictions”.

19 Finally, Ms Dixon noted the purpose for which the affidavits would be used if the respondent were released from its implied undertaking not to use them otherwise than for the purposes for which they had been obtained: affidavit, par 13. They were sought to be used:

(i) “In undertaking the complicated asset preservation and tracing exercise that is necessary to be performed, to not only obtain complete relief against each of the [appellants] in the NSW proceedings but also against Mr Emmott in the UK proceedings and Temujin and others in the BVI proceedings;”

(ii) “To use the documents for further applications that are needed from time to time in the British Virgin Islands, in particular the proposed Application to the BVI Court to appoint a Receiver over companies associated with Mr Nicholls and Mr Slater”, and

20 The basis on which the Court was being invited to sanction a unilateral departure by the respondent from its agreement with the appellants, as encapsulated in the consent orders, was not explained. Nor was it explained why the appellants could not be heard on that issue.

21 Ms Dixon’s somewhat coy reference to “proceedings being contemplated in Switzerland” was the subject of elaboration in the affidavit of Mr Wilson of 26 March 2007. First, in relation to a topic which he identified by a heading in his affidavit as “Swiss Criminal Proceedings”, Mr Wilson stated:

“75 I understand that the best course of action to get information and/or preserve any assets which may be held by Mr Emmott, Mr Risbey and/or the entities controlled by them in Switzerland is to make a criminal complaint against each of them to the Swiss authorities.

76 I believe that, in order to obtain relevant information and to put measures in place to protect assets which are alleged to belong to MWP, criminal proceedings are the most appropriate forum to obtain the relief sought. That is the case as the Swiss authorities are not restricted by Swiss banking legislation regarding privacy. I believe that the nature of the charges that would be laid under the Swiss penal code against each of Mr Risbey and Mr Emmott include embezzlement, money laundering, forgery and disloyal management.”

22 That the orders were sought by the respondent, partly in aid of criminal proceedings, and for the principal (if not the sole) purpose of providing information for further civil action, should have raised a question as to the propriety to the course being undertaken before the primary judge. That the proposed course did not directly involve the appellants should have raised a further question.

23 Mr Wilson also gave evidence as to the questions of confidentiality and urgency. However, Mr Wilson identified no urgency except the general wish to test the accuracy of the disclosure affidavits. Ms Dixon, however, identified the need for urgency in the following terms (open affidavit, par 13):

“Further, I am informed by Mr Lawrence Cohen QC, MWPs counsel in the UK, BVI, the Bahamas and NSW, and verily believe that it is necessary to use the documents for further applications that are needed from time to time in the British Virgin Islands, in particular the proposed Application to the BVI Court to appoint a Receiver over companies associated with Mr Nicholls and Mr Slater and in relation to proceedings being contemplated in Switzerland.”

24 In the course of the hearing on 26 March before the primary judge, counsel for the respondent informed the Court (apparently without supporting evidence) that the application in the British Virgin Islands was to be made “in the next few days”: Tcpt, 26/03/07, p 4 (25) and p 6 (45). Counsel further stated (Tcpt, p 7 (45) and p 14 (30)):

25 The question of urgency may not have been critical, although from the phrase “excruciatingly urgent parameter”, which emanated from his Honour in the first place, it is clear that his Honour was concerned about the asserted urgency. The question of confidentiality was of greater significance. That was addressed by Mr Wilson in his affidavit at par 82, in the following terms:

“The need for confidentiality arises for the following reasons:

(a) if finance has been provided to the Temujin Companies, Mr Slater and/or Mr Nicholls, and Incomeborts and Norgulf are controlled by Messrs Slater and Nicholls, which the evidence referred to in paragraph[s] 38 and 44 suggests that they are, should the [appellants] become aware that MWP seeks information in relation to those companies from Macquarie Bank it is highly likely that the assets controlled by those companies, being at least 15 million shares in Max Plc, currently worth £18,750,000 at £1.25 per share, will be removed from those companies;

(b) if a receiver has been appointed over the assets of Norgulf and Incomeborts in the BVI, the $10m which was provided to Temujin, will still be in the hands of Temujin; and

(c) if Mr Risbey and/or Mr Emmott becomes aware that MWP will be provided information that will show that each has interests other than those that they have set out in their respective Affidavits, there is a danger that the assets controlled by each of them in Switzerland will be dissipated thereby endangering the purpose of the proposed criminal complaint to the Swiss authorities referred to in paragraphs 75 to 78 above.”

26 Paragraphs 38 and 44, referred to by Mr Wilson in (a) above, related attempts by Mr Slater to obtain funds in Australia to invest in the Chilisai project. Mr Wilson inferred from an exchange of emails that funding had been sought from Macquarie Bank Ltd. Mr Wilson was of the view that the transaction (if it eventuated) should have been referred to in the disclosure affidavits, which provided the reason for the subpoena to Macquarie Bank. What precisely the appellants would have done to conceal the information if the application had been made inter partes, was not entirely clear.

27 In the course of the hearing, his Honour noted that there was “a mountain of material and detail” which made it “very difficult” to provide a short judgment supporting the orders made: Tcpt, p 15(42). He sought the assistance of counsel for the respondent, asking him to provide something in “summary form” setting out “that which is said to be really proven” so as to “put before me a piece of paper which I could have marked for identification, adopt and accept as proven”: Tcpt, p 15(45)-(50). It appears that that course was not ultimately taken, as there was no break in the proceedings before his Honour delivered judgment in relation to the confidential subpoena to Macquarie Bank Ltd: Tcpt, p 25. Counsel then addressed separately on orders 6 and 7 relating to the variation of the consent orders and the use of the disclosure of affidavits in other jurisdictions: Tcpt, p 26. Again, there was no break before his Honour delivered a judgment: Tcpt, p 29. (The request for assistance was repeated on a later occasion.)

28 There was no copy in the materials of either ex tempore judgment, but only a revised version, apparently completed on 5 April 2007 and provided to the respondent. That version combined brief reasons in relation to the separate orders.

29 The primary judge made orders on 26 March broadly in accordance with the orders sought in the notice of motion. Thus, the respondent was granted leave to issue a subpoena to Macquarie Bank, to be served by 7pm on Monday, 26 March and to be returnable before his Honour at 2pm on 28 March. Order 3 read:

“Macquarie Bank shall not inform any person or entity that it has been served with and/or produced documents pursuant to the Subpoena referred to in order 2 above, other than for the purposes of obtaining legal advice in connection with such Subpoena.”

30 The substance of the other orders was noted at [12] above. The judgment noted that it was important for the Court to “scrutinise very closely” an application to vary orders made by consent: at [20]. His Honour identified the test as whether there had been “a significant change in the circumstances” since the consent orders were made: at [21]. To that end, his Honour was satisfied that there were “a number of stark inconsistencies” between the disclosure in these proceedings and the disclosures made in the British Virgin Islands: at [22]. The discrepancies were described as “significant, indeed very significant”: at [25]. The reasons indicated that this conclusion was derived from the “confidential affidavit” of Ms Dixon. No attempt was made in the reasons to identify the discrepancies.

31 On the return of the subpoena on 28 March, documents were produced by Macquarie Bank and the respondent was given access. It was also given leave to use the documents in connection with the other proceedings identified on the first motion. Confidentiality was sought to be maintained by orders that the notice of motion, the documents produced and the associate’s note of the making of the orders not be shown on the Court file, but that the documents be retained in the chambers of Einstein J. The Registry was directed not to make an electronic record of the orders, the notice of motion or “any other aspect of the closed Court hearing of 28 March 2007”. The orders were to be entered forthwith and the sole Registry copy of the orders was to be “directly delivered to the chambers of his Honour Justice Einstein”. The fact that the regime was instituted for documents to be retained in the judge’s chambers was a significant aspect of the regime to maintain confidentiality. Why it was thought necessary that a person inspecting the Court file was not to be allowed to discover even the occurrence of the ex parte hearing is unclear.

32 The matter came back before his Honour on 30 March 2007, again ex parte, at which time he was informed that the receivers had been appointed in the British Virgin Islands’ proceedings. Further production by Macquarie Bank was expected on the following Tuesday and the matter was stood over until Wednesday, 4 April 2007. The expectation noted by counsel for the respondent was that on 4 April “we should be able to have orders made lifting most of the confidentiality”: Tcpt, 30/03/07, p 2 (10). The regime for confidentiality noted above was continued in the orders of 30 March 2007.

33 As foreshadowed in a hearing on 5 April 2007, the next day his Honour made further orders which purported to lift the confidentiality requirements in respect of all the material which had been before the Court over the previous 10 days, with the exception of any references to the possible criminal complaint proposed to be made in Switzerland. The respondent was ordered to serve that material, in redacted form, on the solicitors for the appellants by 5pm on 5 April 2007. The original documents were ordered to be retained in the chambers of Einstein J. Copies of the documents in the form served on the appellants were also to be provided by the respondent to the Court for placing on the Court file. The order of 5 April was also to be served on the appellants on that day. That occurred.

34 On 12 April 2007 a further ex parte motion (dated 10 April 2007) came before the primary judge, pursuant to which the respondent sought the following orders:

“2. To the extent necessary, the [respondent] be granted leave to:

(a) make a criminal complaint to the District Attorney, Zug, Switzerland and, if criminal proceedings are commenced in that jurisdiction, to be joined as a civil party to such proceedings;

(b) provide assistance to the receiver of: [the BVI companies] to furnish money laundering report to the Financial Investigation Agency in the British Virgin Islands; and

(c) make a criminal complaint to the police in the United Kingdom.

3. For the purposes of making the complaints, being joined as a civil party to criminal proceedings in Switzerland and/or providing assistance as described in paragraph 2 above, the [respondent] be permitted to supply and make use of the following affidavits:

(a) the Disclosure Affidavits filed by the First and Second Defendants …; and

(b) documents produced on subpoena by Westpac Banking Corporation in these proceedings.”

35 The confidentiality regime earlier established was sought to apply to the motion.

36 As explained in the supporting affidavit of Mr Wilson dated 10 April 2007, the proposed criminal complaint in Switzerland related to “allegations of the following criminal activities by Emmott, Risbey and others”, the ‘others’ apparently being intended to comprehend Messrs Slater and Nicholls who were alleged to have facilitated the money laundering. The criminal activities were said to be embezzlement, money laundering, forgery and “disloyal management”. Mr Wilson asserted a continuing need for confidentiality and urgency on the following bases:

“29. The need for confidentiality arises, because if any of the Defendants to any of these proceedings, the UK Proceedings and the BVI Proceedings, including Risbey, Emmott, Nicholls and/or Slater or others, become aware of the proposed Criminal Complaints, there is a danger that the assets controlled by them will be dissipated thereby endangering the purpose of the proposed criminal complaints.

30. The need for urgency arises as MWP, and its advisors worldwide, are engaged in a tracing exercise in relation to assets, monies and interests which MWP allege were stolen and improperly taken by Emmott, Nicholls and Slater (and their nominees) and there is a real danger that, as more time passes, more of the assets which are in the hands of Emmott, Nicholls, Slater (and their nominees) and/or their associates and entities controlled by them, will be dissipated and unrecoverable.”

37 The orders sought by the respondent were made by Einstein J on 12 April 2007, in the terms sought.

38 In the course of a hearing, which probably took place on 11 April, although the transcript is confused in respect of dates, counsel for the respondent noted that neither Mr Emmott nor Mr Risbey was a party to the New South Wales proceedings, and continued (Tcpt, p 8(25)-(45):

“I mention that for the purposes of making clear that the principal direction of the criminal complaints is Mr Emmott and Risb[e]y, however, the Court ought to be aware that the complaints do also make some reference to Messrs Nicholls and Slater, so that whilst we can say that those individuals are not the focus of the complaints our client proposes to make to the authorities, I should tell your Honour that I can’t guarantee what the authorities are going to do and, of course, once information is put before prosecuting authorities they can take views and they may well wish to do something with Messrs Nicholls and Slater, but as I said, they are not the focus of the complaint from our perspective, but because they form part of the factual matrix I can’t guarantee that they won’t be caught up in it in due course.”

39 An exchange with counsel, which later drew some attention appears in the transcript at pp.13-14:

“HIS HONOUR: Mr Jones, I certainly don’t understand that there is a crisis about this being done this afternoon. I can see that it is important to have it finalised, but there is no receivership application tomorrow afternoon or anything like that going on now.

What I would really like to do, if you don’t mind, is to ask you in terms of assisting the Court from the notes that you have been taking and the matters that you have been putting forward to give me a document which sets out in the cogent manner in which you have endeavoured this afternoon to deal with it what are the suggested substantive reasons for the Court making those orders.

MR JONES: Yes.

HIS HONOUR: It is an important area and it is one which is slightly off the radar in many ways for many people and I wouldn’t like to make orders without giving the reasons as clearly as I can. That shouldn’t take you too long.

HIS HONOUR: … This is all ex parte. I will read the materials and presumably likely will grant the leave that is sought, etc, but it shouldn’t be taken as read that this is a given. I think I follow everything that you have been putting. …

MR JONES: There is actually a skeleton argument commencing at page 47, which Mr Cohen put before the UK court in obtaining similar orders, which is probably a more useful set of notes.

Attorney General for Gibraltar v May

HIS HONOUR: In any event, what it amounts to I suppose is a weaving together of that which has passed and that which is now sought and the essential justice of the situation, which from my past and present experience with you I don’t think you would find too difficult, but there is now an obligation on a judge hearing an ex parte application to give some reasons and I want to give some reasons which I follow fully and which will be of the necessary substance in an area which is somewhat unusual.”

40 The effect of the orders, made without notice to Mr Nicholls or Mr Slater and inconsistently with the original consent orders under which the affidavits were provided, was to permit further disclosure of the affidavits to authorities in other countries, for purposes which, it appears to have been conceded, were not directed to the appellants. That concession did not sit comfortably with counsel’s further statement that “at the time the disclosure affidavits were supplied to this Court, neither Mr Nicholls nor Mr Slater sought to invoke a privilege against self-incrimination”: Tcpt, 11/04/07, p 10 (40).

41 In a judgment dated 12 April 2007, the primary judge accepted as “of substance” the following submissions, at [7]-[8]:

“i. whilst it cannot be certain that Messrs Nicholls and Slater will not become parties to any subsequent criminal prosecutions, the Court ought to take comfort from the fact that the commencement of such proceedings would follow the responsible exercise of a prosecutor’s discretion in each relevant jurisdiction;

ii. it is generally in the interests of justice to ensure that activity that may have the suspicion of criminality about it be brought to the attention of relevant prosecuting authorities for their consideration.”

42 His Honour continued at [19]:

“The final matter of substance is the need for confidentiality. The reason for confidentiality at this stage is to facilitate the effectiveness of the prosecutor’s inquiries in each jurisdiction, as well as to ensure the effectiveness of steps that may be taken by the authorities in Switzerland (in the form of disclosure and securing assets in that jurisdiction). Clearly the potential effectiveness of those steps may be placed at some jeopardy if those involved become aware of those steps being taken.”

43 It may be remarked that the fair-minded observer who was aware of these matters, might well infer that his Honour was of the view that there were reasonable grounds for suspicion that colleagues of Messrs Nicholls and Slater, and perhaps Messrs Nicholls and Slater themselves, were or might be involved in criminal activities, including embezzlement, money laundering, forgery and disloyal management (whatever the latter might involve). He or she might also infer that his Honour was satisfied that, if Messrs Nicholls and Slater became aware of the complaint and the investigations, they might take steps to jeopardise the effectiveness of the possible actions taken by criminal investigating authorities in, for example, Switzerland. What those steps might be (other than disposal of unidentified assets) was not made clear.

44 The respondent was before his Honour, again ex parte, on 6 June 2007, at his Honour’s request, “because of my anxiety to ensure that the Court was kept entirely informed as to the extent to which and reasons for which the existing confidentiality regime or regimes need to be continued”: Tcpt, 06/06/07, p 1(30). In support of continuing the regime, counsel for the respondent provided written submissions which his Honour accepted as justifying the continuation of the regime if he were satisfied that there was “evidence to corroborate what is put in these submissions”: Tcpt, p 4(35). The matter was then stood over to allow evidence to be filed, a further hearing taking place on 11 July 2007.

45 By this stage, the confidentiality regime had become self-perpetuating. On 23 April 2007 the respondent had filed what was known as a “suspicious activity report” in the British Virgin Islands. A court there had made orders imposing a confidentiality regime in similar form to that made in this jurisdiction. Solicitors in the BVI wrote to the Financial Investigation Agency there on 4 July 2007 a letter which included the following statement (par 1.3):

“We are informed by Messrs Clayton Utz that the NSW Court will not order the discontinuation of the confidentiality regime if to do so would cause Messrs Clayton Utz to commit an offence in the BVI by serving the material that was relied upon in support of the application for the NSW orders on Messrs Henry Davis York, the solicitors for Mr Nicholls, Mr Slater and [the Temujin companies].”

46 A similar letter was sent by solicitors in London to the Serious Organised Crime Agency in the UK, dated 5 July 2007, seeking confirmation of the Agency’s requirement that the material provided to it remained confidential. On 9 July, the Agency responded in the following terms:

“With regard to the proceedings in Australia, SOCA takes the view that the same factors which mitigate [sic] against the disclosure of the Suspicious Activity report (“SAR”) or the fact that the SAR was made apply equally to disclosure outside of the jurisdiction. Such a disclosure may have the effect of prejudicing any investigation which follows from the SAR and/or have a detrimental impact on the reporter.

Accordingly, SOCA … suggests that the Supreme Court of New South Wales treat the SAR with the same degree of confidentiality as the High Court of England and Wales.”

47 It has been assumed that there was a hearing on 11 July, but that is not entirely clear, there being no transcript for that day. However, orders were made on that day, the effect of which was to maintain the confidentiality regime and to stand the proceedings over to 28 September 2007. The transcript of the day’s hearing was ordered to be subject to the same regime. Further, there was an order that the transcript be kept in the chambers of the primary judge.

48 There was a note appended to the orders in the following terms:

“It is appropriate to note that absent special circumstances being shown to the Court by affidavit by the plaintiff’s solicitors on 28 September 2007 the strong likelihood is that the Court will on that day make an order revoking all confidentiality orders made at the instance of the plaintiff at any time in these proceedings.”

49 There appears to have been no hearing on 28 September, but the matter was back before his Honour on 11 October 2007. Counsel for the respondent opened the proceedings with the following statement:

“Your Honour, the position is that what we are asking for is to remove your Honour of the burden of having the material in your chambers. What should happen is that the material ought to be placed into an envelope, put on the Court file with ‘Until further order it can’t be opened’.”

50 In a judgment delivered on 18 October 2007, the primary judge made the orders sought. The judgment does not disclose any reason for the change in the confidentiality regime. The result was that numerous documents were to be placed in a sealed envelope on the Court file which was not to be opened until further order of the Court. The documents included four notices of motion, five orders of the Court, six affidavits, transcripts and Associate’s record of proceedings taken on six or seven occasions, together with three judgments, including the one providing for the new regime, which was inaccurately identified as the judgment made on 11 October 2007, together with a handful of related documents. Two matters were noted in the judgment which were of continuing significance. First, none of the overseas authorities had sought to insist on continuing non-disclosure: [4](c). Secondly, the Swiss authorities had frozen relevant assets in Switzerland and, his Honour concluded, that “continuing confidentiality could no longer be justified on this separate basis”: [6]. Whether or not his Honour’s assessment of the attitude of the criminal investigating authorities in three overseas jurisdictions was correct, the conclusions his Honour reached might have raised a serious question as to why continuing confidentiality was required at all.

51 The confidentiality regime was not finally lifted (in relation to the criminal complaints) until 13 June 2008. The circumstances in which that occurred will be addressed below.

(c) disqualification applications

52 It remains to consider the applications by the appellants for his Honour to disqualify himself. The first recusal motion was made on 12 May 2008. The grounds of the application, based on the ex parte application and judgment of 26 March 2007, were set out in a letter to the respondent’s solicitors dated 9 May 2008. A letter in reply of the same date noted, among other things, that the Court “made orders in relation to the confidentiality of the application and ancillary documentation in order not to undermine the Freezing Orders”. That was not strictly correct; no reference was made to the continuing confidentiality regime.

53 The transcript of 12 May 2008 records the submissions on the recusal application, and indicates that there was a judgment delivered. However, on the appeal, it was agreed between the parties that there was no judgment and that his Honour merely indicated his decision, which was to reject the application. His Honour then proceeded to hear other interlocutory applications and delivered a judgment on 23 May 2008. That judgment ([2008] NSWSC 501) did not address the recusal application.

54 Following his Honour’s determination of the application, senior counsel for the appellants sought access to the unredacted transcript of 26 March 2006 and the reasons for judgment. Counsel for the respondent indicated that he would need to get instructions as to whether that was opposed. The following exchange then took place between Mr Lindsay SC (for the appellants) and his Honour (Tcpt, 12.05.08, p 8 (20-30)):

“MR LINDSAY: I do no more than to draw to your Honour’s attention one of the implications arising from your Honour’s decision, which I accept has been made. One of the implications of that is that your Honour has access to material about the case that we don’t and therefore we are not able really to understand fully what material your Honour does or does not have.

HIS HONOUR: Are you suggesting that I have some material in my chambers which [is] being secreted at the moment or some such thing?

MR LINDSAY: Your Honour, I am not endeavouring to make any …

HIS HONOUR: Well, I just don’t quite follow that [what?] you are suggesting. Are you suggesting that I have been the person who has from time to time on ex parte applications been furnished with information and that is information which your clients still do not have?”

55 The suggestion that material had been supplied on the ex parte applications which had not been provided to the appellants was correct. His Honour’s response was perhaps unfortunate: it had not been suggested that he was secreting material in his chambers, but it was nevertheless true that, pursuant to the confidentiality regime, material had been held in his chambers for some months, rather than in the Registry.

56 Shortly after that hearing, a solicitor acting for the appellants inspected the Court file and discovered that there had been ex parte hearings on 10 April, 6 June and 11 October 2007, of which the appellants had never been informed. He further identified ex parte judgments dated 12 April, 11 October and 18 October 2007, copies of which, he asserted, had never been served on the appellants. Supported by an affidavit to that effect, the appellants applied to the List Judge on 6 June 2008 for access to documents held on the Court file in an envelope sealed and marked “Confidential and not to be opened pending further order of the Court”: Tcpt, 06/06/08, p 16(35). The motion was stood over until 13 June 2008, on which occasion orders granting access were made by consent, although subject to certain qualifications which are not presently relevant.

57 The second recusal application was made on 4 June 2009. The submissions of 4 June 2009 included matters which were raised before this Court, and relied, in part, upon the fact that “the questions to be determined at trial will include questions about the bona fides of the [respondent’s] ex parte applications to the judge and whether the [respondent], in making those applications, deliberately [misled] the Judge”: submissions, par 4. That statement, no doubt somewhat elliptically, foreshadowed not only the claim that the proceedings were an abuse of process (raised by a motion of which notice was given on 10 July 2009) but also the extensive cross-examination of Mr Wilson on the basis of the material that had been put before the primary judge in the course of the ex parte applications.

58 His Honour rejected the appellants’ application in an ex tempore judgment delivered on 4 June 2009: Michael Wilson & Partners Ltd v Nicholls [2009] NSWSC 505. After noting the relevant principles, and noting that each of the matters relied upon was an interlocutory decision determined by him, he proceeded to address the issues raised, by reference to the paragraphs of the appellants’ outline of submissions. Paragraph 3 thereof set out in paragraphs (a)-(f) matters which were clearly cumulative in effect. Paragraph (a) identified the various applications before his Honour in 2007 in sub-paragraphs, (i)-(iv). His Honour dealt with them seriatim, in effect treating each element as a separate “ground” and dismissing it as of “no substance”.

59 Sub-par 3(a) identified the seven occasions on which the judge had entertained ex parte applications in closed court, had delivered three confidential judgments and had made confidential orders which, it was asserted at 3.a.iii, were designed:

“(A) To expose the [appellants] to a criminal investigation overseas, which the [respondent] proposed to institute by way of a complaint to authorities in Switzerland, in aid of the [respondent’s] international pursuit of ‘discovery’ for the purpose of these proceedings; and (B) to impose upon the [appellants] an obligation to pay the costs of transcript of ‘confidential’ proceedings as part of the ordinary costs in the proceedings”: (Tcpt, 10/04/2007, p 16).

60 His Honour dealt with the complaints in sub-paragraphs (i) and (ii) in the following manner:

“[23] As to the matter referred to in a 3a[i] [which is conveniently treated with together with 3a[ii]], there is no substance in the complaint that the Court entertained ex parte applications by the [respondent] in closed Court on a number of occasions. This is the nature of the judicial process. The applications were for freezing orders across a number of jurisdictions. On each occasion reasons for giving the ex parte relief were given and to some extent these are identified in the [appellants’] outline at 3a[ii]. The confidentiality orders were deemed necessary on the evidence.

[24] As to the matter referred to in 3a[iii], the orders are self-explanatory and again on each occasion, reasons were given for ex parte orders. To the extent that the orders were ex parte the Court was satisfied that the [respondent] was entitled at that time and in those circumstances to have the orders which were made, made. The costs complaint is of no substance.”

61 The costs complaint may be left to one side. In relation to the other material, the response given by the primary judge was, in effect, that the orders were in themselves entirely appropriate. That answer, with respect, missed the point, which was whether these circumstances (in combination with others) might have led the fair-minded lay observer to apprehend prejudgment which might affect the hearing which was yet to occur.

62 The events referred to in 3.a.iv involved the exchange which occurred during the hearing on 10 (or 11) April 2007 and set out at [39] above. Again his Honour said there was “no substance in the complaint”: at [25]. He described the document sought as a “more detailed submission”. However, the remarks in the transcript are in a form which might have suggested to a lay observer that his Honour was seeking assistance in providing adequate reasons to justify the orders which he expected to make.

63 In the statement of grounds, at paragraph 3.b.i and ii, the appellants had noted that the orders were predicated upon acceptance by the judge of matters asserted by Mr Wilson and upon –

“(ii) findings that conduct of the [appellants] was ‘suspicious’ and that they could not be trusted: (A) to respect orders of the Court as to the maintenance of confidentiality; (B) to co-operate with police investigations; or (C) not to dissipate assets.”

64 His Honour referred to these matters as being of “no substance”. He continued at [26]:

“These were interlocutory orders based upon the evidence put before the Court and in each case reasons were given. Each of the relevant occasions involved an ex parte exercise of the appropriate approach to determining the strength or weakness of a particular case and where the balance of convenience lay.”

65 As explained at [40] above, the purposes of the orders sought in the notice of motion dated 10 April 2007 were, as his Honour acknowledged, unusual. Not only were the orders (permitting use of the disclosure affidavits for the purpose of criminal complaints) unusual, but the circumstances in which the orders were made were unusual. A freezing order which is made ex parte and takes effect immediately will usually involve notice being given to the affected party within a day or two, so that the party may have an opportunity to challenge the order, being aware of all the material that had been before the judge when the order was made. No doubt it is true to say that the order is made on the basis that there is a real risk of dissipation of property if the affected party were to be given advance warning of the proposed order. However, the assumption is of no great consequence in circumstances where the order can readily be undone without lasting prejudice and where the affected party has an opportunity to seek that step. The orders sought in April 2007, once made, were not readily to be undone, might well give rise to lasting prejudice and, in relation to the orders not disclosed on 5 April 2007, the affected parties were given no opportunity to seek relief of any kind until more than a year later.

66 None of these factors was addressed in the judgment of 4 June 2009: at the very least, that judgment would have failed to diminish any concerns that the lay observer might have had arising from the earlier proceedings of April 2007. It is probable that the manner in which this complaint was dealt with might have confirmed pre-existing fears that his Honour might not approach the substantive issues with a mind free from prejudgment.

67 Ground 3.c and 3.d were dealt with by his Honour together and need to be set out in full:

“c. Not only did the judge not disclose the ‘confidential’ proceedings to the [appellants] on 12 May 2008 (when an opportunity for him to do so naturally arose), he made observations in the course of argument on that date which, to a fair-minded observer in light of events that subsequently occurred, suggests that he unduly identified his role with the interests of the [respondent]. See transcript (12 May 2008, pages 8 (line 15) – 10 (line 2).

d. Only after Bergin J made orders on 13 June 2008 granting to legal representatives of the [appellants] access to the Court File (including ‘Confidential’ material on the File) was there a disclosure to the [appellants] of the nature and extent of the Judge’s private dealings with the [respondent].”

68 Extracts from the transcript of 12 May 2008, at the pages identified in ground 3.c, have been set out above at [54]. This transcript included his Honour’s question to Mr Lindsay as to whether he was suggesting that he (Einstein J) had “some material in my chambers” which was being “secreted at the moment”. By the stage of the hearing on 4 June 2009, it was known to all parties that the material had, perhaps unusually, been held in his Honour’s chambers and not in the Court Registry, for a period of months. Otherwise, his Honour’s comments on 12 May were directed to counsel for the respondent and, at least implicitly, suggested that he should seek instructions which would permit the revocation of the existing confidentiality regime. That material did not suggest his Honour unduly identified his role with the interests of the respondent, but it was, perhaps, an opportunity for his Honour to explain what was implicit, namely that he was concerned at the ongoing confidentiality regime, which had (by May 2008) been in place for over a year.

69 All that his Honour said in respect to these matters in his judgment of 4 June 2009 was, at [27]:

“As I made clear to Mr Lindsay SC when speaking to his outline, I had considerable difficulty following exactly what the suggested facts were in relation to the matters referred to in 3c and 3d. If and when orders were made permitting access to previously restricted material they were no doubt acted upon.”

70 In the course of submissions on 4 June 2009, Mr Lindsay SC referred to par 3.c and the transcript of 12 May 2008 and noted (Tcpt, p 6 (10)):

“… [a]n exchange between Bench and Bar took place in which following upon the delivery of the judgment, I indicated that it was apparent that there were matters of communications between the plaintiff and your Honour to which the defendants were not privy. And your Honour asked me whether I was suggesting that you had some undisclosed documents in your chambers and I said, as I had to say, that I was not in a position to advance any such proposition because we couldn’t know.

As it happens, after the passage of some time, on 13 June 2008 the then List Judge made orders granting the [appellants’] legal representatives access to the Court file including confidential material, and that disclosed that there were documents which were in your Honour’s chambers as a result of the confidential orders that were made. In our submissions, this is a factor which goes again to the question of reasonable apprehension of bias. It wasn’t until after the orders made by Bergin J on 13 June 2008 that the [appellants] became aware of the nature and extent of the private proceedings initiated by the [respondent] before your Honour.”

71 Ground 3.d may be understood as identifying the time at which a critical element in the removal of the confidentiality regime was achieved. The transcript indicates a concern on his Honour’s part that there was some implicit criticism of his conduct, arising from the fact that the orders were made by Bergin J. However, the nub of the complaint came in paragraph 3.c. In that regard, the following exchange had taken place in the course of the hearing on 4 June 2009 (Tcpt, p 8 (10)-(40):

“HIS HONOUR: Now where was that Court file?

LINDSAY: Part of it – according to the orders that your Honour made, the confidential orders you made – was to be kept off the Court file and in your Honour’s chambers.

HIS HONOUR: But I mean that did occur, there’s no doubt that at some stages I did direct that the sensitivity of the matter was such that it [should] not yet go on to the usual system but at some stage – and I can’t recall exactly when – I also opened the whole of the materials which could be disclosed to the [appellants] and I’m having very great difficulty in following the strength or fact that you’ve been putting forward when you have in your …

LINDSAY: Those matters were not disclosed to us on 12 May 2008, nobody disclosed those matters to us and the evidence put before Bergin J on 5 June was that the [appellants] had no knowledge of the various matters of 2007 … .

HIS HONOUR: Well as I say, I’m having real difficulty in following the precise chronology but the materials which, as far as I can recall it, were appropriate for the defendants to have – ultimately all materials as I think I recall – certainly came forward at some date and when you are referring to Bergin J making certain orders and then coupling that with some suggestions that the materials were not yet on the court file, I’m just having very great difficulty in understanding that.”

72 That his Honour had no clear recollection of what had occurred, in part, in 2007 and in part a year before the hearing then in progress, namely in May 2008, was unremarkable. However, there were three aspects of the hearing on 4 June 2009 which could have given rise to concern in the mind of a lay observer. First, in respect of a matter which his Honour appeared to appreciate could give rise to concern, and about which he had no sufficient recollection, he simply recorded the fact of his confusion in an ex tempore judgment without, it would appear, seeking to refresh his memory as to the circumstances. Secondly, and consequentially, he forwent an opportunity to explain publicly what had given rise to his question about any allegation of secreting documents in his chambers. Thirdly, apparently in the belief that relevant material had been disclosed at an earlier point in time, he forwent an opportunity to explain why the confidentiality regime had been allowed to remain in place until June 2008, in circumstances where the transcript of 12 May 2008 suggested that he was conscious of its continued operation at that time.

73 Ground 3.e relied upon the respondent’s conduct in opposing the recusal application of 12 May 2008, combined with its failure to disclose the nature and extent of the ex parte hearings as showing that it had acted in a manner which suggested that the primary judge was its “Judge of choice”. That raised a question as to the proper role for a party on the other side of the record from the party making the recusal application. The non-applicant party has no interest in which judge sits on proceedings. However, depending on the circumstances and timing, a successful recusal application may delay proceedings, or, where the application is made during the course of proceedings, result in increased expense and other detriments, flowing from the need to reconstitute the court and recommence the hearing. While there can be no general rule, there are circumstances in which it is inappropriate for the non-applicant to make submissions and other circumstances where, if submissions are made, care should be taken to ensure that they do no go beyond appropriate clarification of the facts and the law. It was not suggested in this case that the submissions were inappropriate and that factor can be put to one side. (At the hearing on 4 June 2009, the respondent neither consented to nor opposed the recusal application and made no submissions.)

74 A further ground, 3.f, related to findings made on 23 May 2008: his Honour’s rejection of that ground was orthodox and need not be referred to further.

75 A third recusal application was made, somewhat obliquely, on 15 June 2009 at the commencement of the final hearing. Nothing new was raised at that time and it was not expressly dealt with by the primary judge by way of a further ruling. Nothing more need be said in relation to that application.

(d) waiver

76 Before considering the application of relevant principles to the circumstances set out above, it is convenient to address a somewhat belated submission by the respondent that the appellants could not be heard to complain about any apprehension of bias based on circumstances preceding the trial, because, having made an unsuccessful recusal application, they took no steps to have the matter reviewed in this Court. That, it was submitted, constituted a waiver of any ongoing entitlement to challenge the final judgment on that basis.

77 No authority was drawn to the Court’s attention to support the submission that failure to take an interlocutory appeal could constitute waiver. There are a number of powerful reasons for rejecting the submission. First, it is clear that there was no express waiver and that, accordingly, any waiver must be implied. Secondly, the kind of situation in which waiver may be implied is where a litigant “who is aware of the circumstances constituting a ground for such objection fails to object”: Smits v Roach [2006] HCA 36; 227 CLR 423 at [43] (Gleeson CJ, Heydon and Crennan JJ). In a case where recusal applications were made on two occasions in a timely fashion (indeed the first may have been premature) and reiterated at the opening of the hearing (Tcpt, 15/06/09, p 37(15)), it is impossible to say that the appellants stood by until the contents of the final judgment were known and then, on finding them unpalatable, complained of apprehended bias: cf Vakauta v Kelly, at 572 (Brennan, Deane and Gaudron JJ). Thirdly, dismissal of the recusal application did not constitute a judgment or order from which an appeal lay: Lee v Cha [2008] NSWCA 13 at [2] (Hodgson JA), [13]-[25] (in my judgment, Bell JA agreeing). Fourthly, there was no suggestion that prohibition lay against a judge in the Equity Division: Lee v Cha at [2]. Fifthly, even if there were a right of appeal, perhaps because his Honour could have been asked to rule upon an interlocutory matter requiring determination, permitting, in effect, a collateral challenge to the dismissal of the recusal application, the appellants would nevertheless have required leave. Whether this Court would have favoured such a course at a point where the trial was about to begin may be doubted. As noted in Lee at [36] and [37], the Court will generally exercise restraint and not interfere in proceedings at an interlocutory stage unless there is some clear reason to do so, sufficient to outweigh “the undesirability of discontinuity, disruption or delay” in the orderly hearing of a claim.

78 The suggestion that any implied waiver precluded agitation of the ground of apprehended bias must be rejected.

79 In dealing with the particular circumstances set out above, the following factors are relevant:

(a) each ruling was made on an interlocutory application and involved no final findings of fact;

(b) there was a significant lapse of time between the orders (which were made between 26 March 2007 and 12 October 2007) and the commencement of the trial on 15 June 2009;

(c) some, though not all, of the orders and the supporting materials were supplied to the appellants shortly after the orders were made, namely on 5 April 2007;

(d) there is no material in the judgments made on the ex parte applications which would provide unequivocal support for a reasonable apprehension of prejudgment, and

80 Each of the matters set out in the last paragraph were relied on by the respondent in resisting the challenge on the appeal. However, there were countervailing considerations arising from the following factors, which might have led an observer to apprehend the possibility of prejudgment:

(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 the individual appellants, which they had no opportunity to rebut, and

81 The respondent contended that the question of reasonable apprehension of bias needed to be assessed against knowledge of the issues which were known at the time of the recusal applications. However, that approach appears to have treated the challenge as, in effect, an appeal against the refusal of the trial judge to recuse himself. As a matter of form, that was not so: the challenge was to the final judgment and orders. Even if the matter had arisen as an appeal from an interlocutory judgment, the appeal being by way of rehearing, it would be open to this Court to receive evidence as to what had happened after the recusal decision.

82 Taking a broader approach, the appellants contended that the consequences of the ex parte interlocutory hearings could be seen in the reasons for judgment, resulting in the final orders, in the course of which his Honour demonstrated a mind which had been, at least subconsciously, influenced to accept the “case theory” presented by Mr Wilson in his affidavits during the interlocutory proceedings. Extensive cross-examination of Mr Wilson appeared not to have affected his Honour’s views. That, it was contended, was not the result of a careful assessment of Mr Wilson’s evidence, but was the result of simply ignoring aspects of his cross-examination which were adverse to his credit. The appellants relied upon a series of matters, which they had contended before the trial judge reflected adversely on Mr Wilson’s credit, but which were not addressed in his judgment.

83 The respondent is entirely correct to say that the making of an interlocutory order does not, of itself, preclude the judge from sitting on the trial in the same matter. Certainly that is so where interlocutory orders are made inter partes and it cannot be said that there has been communication between one party and the judge in the absence of the other party or parties. Further, an interlocutory order will not usually require a judge to determine any matter on a final basis. For example, a finding that there is a serious issue to be tried, will not generally prejudice an independent and unbiased assessment of the plaintiff’s case once all the evidence is presented.

84 An interlocutory order made ex parte, that is in the absence of one party, gives rise to different concerns. As explained at [65], those concerns will be mitigated where an opportunity is afforded promptly following the ex parte hearing which will allow the other party to present its views in respect of the interlocutory order.

85 Although, in dismissing the recusal application in June 2009, his Honour treated the matter as of no significance, the fact that one party appeared before the judge on seven separate days in closed court raised a different and additional concern. It is quite possible in such circumstances that the judge’s mind will become familiar with the character of the plaintiff’s case to an extent that, consciously or subconsciously, there will be a tendency to place the further evidence within the pre-existing mental structure. Particularly may that be so where the material presented is voluminous, the whole history of the relationships between the parties is explored, at least to some extent, and where the material is supplied and the hearings take place over a period of more than six months.

86 Against this consideration it is necessary to balance the respondent’s contention that the relevant period of the ex parte hearings (from March to October 2007) concluded some 20 months before the first day of the trial. That is no doubt a factor which the fair-minded observer would take into account. On the other hand, the impressions of the observer would also be affected by the refusal of the recusal application on 23 May 2008 (without giving reasons) and the further refusal on 4 June 2009, which was accompanied by reasons which, in some respects, might have failed to allay any existing concern and may indeed have exacerbated some concerns.

87 The other countervailing considerations have been summarised at [80] above. The remaining matter for consideration is the reliance by the appellants on the terms of the final judgments of the primary judge. For reasons which will be noted shortly, these matters may be dealt with in summary form.

88 First, and perhaps most starkly, the primary judge failed to address 11 separate matters which were put to his Honour as supporting adverse findings on credit, in relation to Mr Wilson’s evidence. The fact that they were simply not addressed may be thought to have revealed a conscious or subconscious reluctance to consider the possibility that the evidence on which the interlocutory orders had been made might not have withstood proper scrutiny.

89 Secondly, it was submitted that the primary judge had simply adopted the broad-brush approach to liability proffered by the respondent in its submissions, without addressing the need to make specific factual findings in order to support the conclusions with respect to liability and the appropriate relief.

90 Thirdly, whilst referring to and apparently accepting in full the evidence of Messrs Sinclair and Schoonbrood, his Honour paid no attention to the possible consequences of their evidence in relation to the relief granted. Had he done so, he would have had to consider the extent to which the respondent would have continued to obtain instructions from them in relation to their projects after the departure of Messrs Nicholls and Slater and, in June 2006, Mr Emmott. The respondent contended that such consideration was not necessary, on its theory of the case, but that is to miss the point: what his Honour failed to do was to address, in a serious and realistic manner, the contrary submissions put on behalf of the appellants.

91 These considerations may give rise to one or more of three findings: first, it might be thought that they demonstrate not merely an apprehension of bias by way of prejudgment, but the crystallisation of that apprehension in a demonstration of actual prejudgment. However, the appellants did not put their case expressly on that basis and it is not appropriate to consider it further. The alternative basis, on which the appellants did rely, was that this material confirmed in a practical fashion the reasonableness of the apprehension of bias otherwise created by the pre-trial events. Thirdly, it may be said that these aspects of the judgment would have prevented any diminution in the apprehension which the lay observer might otherwise have felt and which might have been laid to rest by persuasive reasoning, inconsistent with the apprehension.

92 For reasons which are identified in the course of considering the substantive challenges to his Honour’s findings and orders, there is substance in each of the complaints made in relation to the judgments. It is sufficient to accept that the final reasons did not remove the pre-existing apprehension of bias, as being unfounded.

93 In the particular circumstances of the case, the challenge to his Honour’s judgment based on a reasonable apprehension of bias, as assessed by this Court, must be upheld. The critical factors which support that conclusion include the following:

(a) the number of ex parte applications made to the primary judge in 2007;

(b) the unusual nature of those applications;

(c) the absence of an opportunity for the appellants to challenge the orders made ex parte;

(d) the absence of consideration in the judgments of the existence of the power, and the appropriateness of its use, to make orders in aid of criminal complaints in foreign jurisdictions;

(e) the absence of consideration of the power of the Court, on an ex parte hearing, to vary orders made by consent, pursuant to an agreement between the parties, thus unilaterally and without hearing from the affected party varying the orders which resulted from the agreement;

(f) the circumstances in which, and the period over which, confidentiality was maintained in respect of the orders permitting use of the disclosure affidavits in support of the criminal complaints;

(g) the fact that the primary judge appeared to have formed at least a tentative view that the individual appellants had conducted themselves in a manner giving rise to a reasonable suspicion that they were involved in criminal activities, without permitting them an opportunity to present material to the contrary;

(h) forming the view last referred to on the basis of evidence of Mr Wilson in circumstances where Mr Wilson’s credit was likely to be a significant issue at the trial;

(i) the absence of persuasive reasons in the judgment on the recusal application, tending to remove the basis of the apprehension of bias, and

362 MWP submits that s 7 is a procedural or evidentiary provision and that in the absence of a pleading specifying the particular liability of Mr Emmott as a member or officer of MWP to which the foreign law was to apply and identification of that law, the appellants were not entitled to rely on s 7.

363 The present issue need not be resolved because, as noted above, subs (1) was not satisfied and ground of appeal 3(e) fails for that reason. My tentative view, however, is that if it had been satisfied, observance of sub-sections (2) and (3) of that section would have been mandatory.

Failure to hold that MWP bore the onus of proving its entitlement to relief, including the onus on all questions of the applicable law (ground of appeal 3(f))

364 It is unnecessary to say anything in relation to this ground beyond what is said in relation to other grounds, in particular, grounds 3(a) and 3(e).

Failure to hold that on the evidence, in particular that of Professor Butler, MWP had under Kazakhstan law no entitlement to relief against appellants beyond nominal compensation (ground of appeal 3(g))

365 This ground of appeal is as follows:

3. The Primary Judge misapplied principles of private international law relating to “choice of law” in that:

…

g. he ought to have held that, on the evidence before the Court (including the evidence of Professor Butler) as to the nature, content and application of the law of Kazakhstan, the Respondent had no entitlement to relief against the Appellants greater than nominal compensation.

366 This ground complains of a failure to make a finding of fact. The question of the findings of fact to be made will be a matter for the Judge who presides at the further hearing to take place on the evidence then before the Court.

Erroneously holding that his Honour could, apparently as a matter of discretion, apply the law of New South Wales without consideration what (if any) entitlements MWP had under the law of Kazakhstan or any other system of law (ground of appeal 3(h))

367 This ground complains that his Honour chose to apply New South Wales law in the exercise of a discretion “for the purpose of doing justice between the parties” without consideration of what (if any) entitlements MWP had under the law of Kazakhstan or under any other system of law.

368 It is sufficient to say that I do not read his Honour’s reasons in that way.

IV ABUSE OF PROCESS (para 4 of the grounds of appeal)

369 I deal with the Arbitration aspect of this ground below. As well, I agree with Basten JA at [99] – [109].

V FAILURE TO PUBLISH ADEQUATE REASONS IN SUPPORT OF FINAL ORDERS (para 5 of grounds of appeal)

370 In view of the Court’s remission of the proceeding for re-hearing, it is not necessary or appropriate that this ground of appeal be addressed. Moreover, the complaint that his Honour failed to publish adequate reasons in support of his determination that “equitable compensation” of $4 million should be awarded becomes otiose in view of the discussion of the question of that award by Young JA at [178] ff.

VI FAILURE TO MAKE FINDINGS ARISING FROM MWP’S CARRYING ON A LEGAL PRACTICE (paras 6 and 7 of grounds of appeal)

371 This ground complains of a failure to make findings. It need not be dealt with beyond what has been said in relation to other grounds, having regard to the remission for re-hearing.

VII CREDIT FINDINGS (paras 8 and 9 of grounds of appeal)

VIII FINDINGS OF FACT NOT SUPPORTED BY EVIDENCE OR INCONSISTENT EVIDENCE (para 10 of grounds of appeal)

IX FAILURE TO MAKE OUT ENTITLEMENTS AND CAUSES OF ACTION (paras 11 – 15 of grounds of appeal)

372 In view of the remission for re-hearing it is not necessary or appropriate for the Court to deal with these three grounds which depend on credit and fact finding – peculiarly matters for the Judge presiding at the re-hearing,

X REMEDIES (paras 16-20 of grounds of appeal)

373 I agree with what Young JA has said in relation to these grounds of appeal.

XI ERRONEOUS ADMISSION OF MR SCHILLING’S EVIDENCE AND ERRONEOUS APPLICATION OF, AND ATTRIBUTION OF PROBATIVE VALUE TO, THAT EVIDENCE (para 21 of grounds of appeal)

374 In view of the remission for re-hearing, it not necessary or appropriate for the Court to deal with this ground which depends on credit and fact-finding – peculiarly matters for the Judge who will preside over the re-hearing.

General

375 As noted earlier, the Arbitrators delivered the Award on 22 February 2010, made consequential orders on 24 March 2010, and issued a “Clarification” on 6 April 2010. The Clarification was issued in response to letters dated 19 and 22 March 2010 to the Arbitrators from Holman Fenwick Willan, the London solicitors for MWP.

376 The appellants filed a notice of motion on 11 June 2010 seeking an order under sub ss (5), (7) and (9) of s 75A of the Supreme Court Act 1970 (NSW) that the Court receive those documents as additional evidence on the hearing of the appeal.

377 By a responsive notice of motion filed on 18 June 2010, MWP sought an order that para 22 of the amended notice of appeal be “struck out”, or, in the alternative, an order that MWP have leave to rely on four documents in response to the documents to be tendered by the appellants.

378 By an amended notice of motion filed on 23 June 2010, the appellants sought leave to put into evidence on the appeal an additional document, namely, an order made by the United States District Court for the District of Colorado (the Colorado Court), dated 8 June 2010 on an application by MWP for judicial assistance under 28 USC § 1782 (the Colorado Proceeding). The Colorado Proceeding was brought against Sokol and Frontier and perhaps also Mr Sinclair and Brian Savage. As noted earlier, Sokol and Frontier were companies associated with Mr Sinclair. The order dismissed an application by MWP for an order that Sokol, Frontier, Mr Sinclair and Mr Savage should show cause why they should not be held in contempt of court. Moreover, the order called upon MWP to show cause on 14 July 2010 why it should not itself be held in contempt of court.

379 On the hearing of the appeal, MWP tendered the order made in the Colorado Proceeding on 14 July 2010 to the effect that the Colorado Court was satisfied that MWP was not in contempt of court.

380 An amended notice of motion filed by MWP on 14 July 2010 amended the primary order sought by MWP to an order that the ground of appeal in para 22 be “dismissed”, and in the alternative, sought leave to rely on eight documents in addition to the four that had been identified in the notice of motion.

381 Subsections (5) to (10) of s 75A of the Supreme Court Act 1970 (NSW) provides in relation to appeals such as the present one:

(5) Where the decision or other matter under appeal has been given after a hearing, the appeal shall be by way of rehearing.

(7) The Court may receive further evidence.

382 The documents the subject of both notices of motion constitute “fresh evidence”, that is to say, evidence concerning matters occurring after the hearing at first instance. Therefore the “special grounds” condition of sub s (8) does not apply: see sub r (9).

383 Sub-sections (5) and (10) of s 75A make it clear that the Court of Appeal may admit the fresh documentary evidence and may decide the appeal on the basis of the law and the evidence as they exist at the time of the appeal; cf New Brunswick Railway Co v British and French Trust Corporation [1939] AC 1 at 32 – 33; Edwards v Noble (1971) 125 CLR 296 at 304 per Barwick CJ; CDJ v VAJ [1998] HCA 67 and 76; 197 CLR 172 at [102] (concerning the power of the Full Court of the Family Court of Australia to receive further evidence on appeal under s 93A(2) of the Family Law Act 1975 (Cth)).

384 Sub-sections (5), (7) and (10) as set out above are interrelated. In deciding whether to exercise the power under subs (10) to receive fresh evidence the Court must have regard to the nature of the appeal as a re-hearing (subs (5)) and may take into account its power under subs (10) to give any judgment or direction or make any order that the nature of the case requires as at the time of the hearing of the appeal: cf CDJ v VAJ.

385 The discretion to receive fresh evidence is not to be exercised according to a formula. Its exercise turns on questions of fact and degree in the individual case.

386 Relevance is a necessary condition, but not a sufficient one. The introduction of fresh evidence may give rise to intractable problems in appellant jurisdiction. For example, the fresh evidence may include oral testimony which will need to be weighed against the testimony of witnesses called at trial, who have not been heard by the appellate court. Factors other than relevance must therefore be taken into account in considering whether to admit fresh evidence.

387 On the hearing of the appeal the Court admitted all of the documents, the subject of both motions provisionally pending a final decision on their admissibility. As well, the Court admitted on the same basis the order of 14 July 2010 made by the Colorado Court.

The Award

388 It was not suggested that the fate of the documents associated with the Award should differ from that of the Award itself, and I will refer to “the Award” as encompassing the associated documents.

389 Subject to the relevance of the Award, there are factors favouring its admission into evidence. First, the Award is documentary, its content is uncontroversial and admission of it does not require the Court of Appeal to resolve disputed questions of fact. Second, there is to be an order for a re-trial in any event and it is useful for this Court to decide whether, as the appellants contend, it is an abuse of process for MWP to pursue the appellants in respect of any claims that are inconsistent with the Award. Third, in the present respect the abuse of process ground raises only a question of law.

390 Accordingly, the Award should be admitted if it is relevant.

391 Subject to appeal (see below), the Award was final and binding as between MWP and Mr Emmott. MWP would be estopped from maintaining a claim in New South Wales against Mr Emmott inconsistent with it: Spencer, Bower and Handley, Res Judicata (4^th Ed 2009) at [1.08] – [1.09]; Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] 1 WLR 1041 at 1047; Dualcorp Pty Ltd v Remo Constructions Pty Ltd (2009) 74 NSWLR 190 at [48].

392 It is the law of the forum that would determine whether res judicata or issue estoppel would defeat MWP. In my opinion, it would not matter that cl 5.2 of the Emmott Agreement provided that that Agreement was governed by the laws of England and Wales and that any dispute was to be referred to arbitration in London. It was not suggested, and could hardly be suggested, that under the law of England and Wales an arbitration award is not final and binding subject only to the right of challenge under the Arbitration Act 1966 (UK).

393 The Award does not give rise to res judicata or issue estoppel as between MWP and the appellants because they were not parties to the Arbitration. The appellants submit, however, that the Award is relevant because to enforce the orders under appeal would be an abuse of the processes of the Court for two reasons

a. any liability attaching to the Appellants is ancillary, or coordinate with, liability attributed by the Court to Mr Emmott for the purpose of making orders against the Appellants, and entitlements of Mr Emmott and the Respondent have been determined as between themselves in the arbitration.

b. the Respondent must be taken to have received from Mr Emmott, by virtue of the Arbitration Award, satisfaction of any liability owed to the Respondent by Mr Emmott (eg, as a “co-conspirator” under the common law or in respect of a breach of fiduciary obligations in equity) in common with the Appellants.

394 It is, of course, the law of the forum that determines whether it is an abuse of the process of the forum for MWP to maintain and seek to enforce the judgment it has obtained against Messrs Nicholls and Slater in the light of the Award.

395 The conduct alleged in the TFASOC is not identical as between Messrs. Emmott, Nicholls and Slater. Of present relevance are the claims that Messrs. Nicholls and Slater knowingly participated and assisted in the breaches of contract by Mr Emmott (para 68); that TIL, TSL and TFZE knowingly participated and assisted in such breaches (para 69); that all three men unlawfully conspired to injure MWP (paras 72, 73); that TIL, TSL and TFZE joined in the conspiracy (para 78); and that each of Messrs Nicholls and Slater induced Mr Emmott to breach the Emmott Agreement (para 79A, 79B).

396 As noted above, his Honour declared that each of Mr Nicholls, Mr Slater, TSL, TIL and TFZE, for all of his or its various wrongs, was jointly and severally liability with the others of them to pay to MWP the same amounts of money.

397 Two aspects of the Award are of present importance. The first is the Arbitrators’ finding of a lack of any causal link between Mr Emmott’s wrongdoing and the suffering of any loss by MWP in respect of all clients except Kangamiut and Lancaster. The other aspect is the making of the order for a set off of amounts found to be payable by MWP to Mr Emmott against amounts found to be payable by Mr Emmott to MWP, including in the latter amounts payable for the loss to MWP of the opportunity to obtain the instructions of Kangamiut and Lancaster. These last two losses are also among the losses for which the appellants were held liable to compensate MWP by the primary Judge.

398 His Honour decided, inter alia, that Messrs Nicholls and Slater were liable to pay compensation to MWP for having knowingly participated in a breach by Mr Emmott of his fiduciary duty in relation to clients, including clients other than Kangamiut and Lancaster. The Arbitrators decided, however, that MWP suffered no loss as a result of his breaches in relation to “his” clients, and that MWP was not entitled to equitable compensation and damages in respect of the loss of those clients by MWP to TIL (see [305] – [307] above). In the light of the Award, it would be an abuse of process for MWP to seek to sustain and rely upon his Honour’s findings and declarations of accessorial liability on the part of Messrs Nicholls and Slater and his orders based on them, in so far as they relate to “Mr Emmott’s clients”, that is to say the clients other than Kangamiut and Lancaster.

399 At the time of the determination of the appeal the Award is final and binding. At that time MWP is in the position of:

• The Vicar of Sparsholt-cum-Kingston Lisle in Reichel v McGrath (1989) 14 App Cas 665, whose challenge to the validity of his resignation of his benefice had failed in Reichel v Bishop of Oxford (1889) 14 App Cas 259, but who attempted to challenge it again in his defence to an action by the new vicar for possession of the parsonage-house and glebe lands;

• The plaintiff in Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 against whom, on his claim for defamation, it was held that the pleaded imputation was incapable of being conveyed by the matter complained, but who then sought to proceed and plead as against different parties in respect of injurious falsehood and misleading or deceptive conduct, relying on substantially the same imputation; and

Rippon v Chilcotin Pty Ltd

Trade Practices Act 1974

400 In the criminal case Rogers v The Queen (1994) 181 CLR 251, Mason CJ at p 256, and in the civil case State Bank of NSW Ltd v Stenhouse Ltd (1997) Aust Torts Reports § 81-423 Giles CJ Comm D at p 64,089, identified two requirements of abuse of process in the “attempt to relitigate an issue” class of case: first, vexation, oppression and unfairness to the other party to the litigation; and second, the bringing of the administration of justice into disrepute.

401 In my opinion both requirements are met here as at the time of the hearing of the appeal. On the assumption that the Award is final and binding, it would be vexatious, oppressive and unfair to Messrs Nicholls and Slater, and it would bring the administration of justice into disrepute that they should continue to bear the accessorial liability described when the Arbitrators have concluded that the conduct of the principal, Mr Emmott, did not cause MWP any loss with the result that he, the principal is not liable.

402 I agree with Basten JA’s conclusion at [106] that although the necessary steps could be taken now to remove the offending accessorial claims from the pleading, as a practical matter it is preferable to allow the proceeding initiated by MWP in the High Court of Justice in London to run its course before that step is required to be taken.

403 In relation to the set-off point, I agree with [107] and [108] of the reasons of Basten JA.

The Colorado Proceeding documents

404 The appellants submit that the documents in the Colorado Proceeding are relevant as showing that the New South Wales proceeding was part of a world wide oppressive and vexatious campaign by MWP directed against Messrs Emmott, Nicholls and Slater, and was therefore an abuse of the process of the Supreme Court of New South Wales (cf ground of appeal IV (para 4 of grounds of appeal)). Whether this is so turns on findings of fact. His Honour’s findings of fact will not survive the order for a retrial. Therefore the Colorado Proceeding documents have lost any relevance they may otherwise have had and should not be admitted. Those documents are not relevant to any ground remaining to be dealt with by us in the light of the Court’s sustaining the first ground of appeal.

CROSS APPEAL

405 The three grounds of cross appeal were referred to at [315] above.

406 All three turn on complaints about his Honour’s findings of fact or an absence of particular findings of fact. In view of the result on the first ground of appeal, it is not necessary or appropriate for this Court to deal with the cross appeal beyond dismissing it (but not on the merits).

CONCLUSION

407 For the above reasons I agree that the orders proposed by Basten JA should be made and that the following orders should be made on the motions for leave to adduce further evidence:

Supreme Court Act 1970

(c) the Clarification made by the London Arbitrators on 6 April 2010.

Supreme Court Act 1970

(a) bundle of documents constituting Exhibit JR1, and

(b) bundle of documents constituting Exhibit JR2

each being exhibited to the affidavit of James Malcolm Robinson sworn 18 June 2010.

**********

05/10/2010 - Incorrect judgment date on coversheet - Paragraph(s) Coversheet

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Citations

Nicholls v Michael Wilson & Partners Ltd [2010] NSWCA 222

Most Recent Citation

Willoughby City Council v Finlay [2010] NSWLEC 184

Cases Citing This Decision

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Michael Wilson & Partners Ltd v Nicholls [2011] HCA 48

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Cases Cited

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Statutory Material Cited

7

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Cited Sections

CITATION:	NICHOLLS v MICHAEL WILSON & PARTNERS LIMITED [2010] NSWCA 222 This decision has been amended. Please see the end of the judgment for a list of the amendments.
HEARING DATE(S):	26, 27, 28, 29, 30 July 2010
JUDGMENT DATE:	15 September 2010
JUDGMENT OF:	Basten JA at 1; Young JA at 114; Lindgren AJA at 190
DECISION:	(1) On the motion of the appellants, admit as further evidence pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW) (a) the second interim award of the London Arbitrators made on 22 February 2010; (b) the 17th procedural order made by the London Arbitrators on 24 March 2010, and (c) the Clarification made by the London Arbitrators on 6 April 2010. (2) On the motion of the respondent, admit as further evidence pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW) (a) bundle of documents constituting Exhibit JR1, and (b) bundle of documents constituting Exhibit JR2 each being exhibited to the affidavit of James Malcolm Robinson sworn 18 June 2010. (3) Allow the appeal from the judgments in the Equity Division delivered on 6 October 2009 and 11 December 2009 and set aside the declarations and orders 1-33 made on 11 December 2009. (4) Direct that there be a further hearing of the proceedings in the Equity Division, but that the trial not commence until the determination of the appeal against the second interim award of the Arbitral Tribunal made on 22 February 2010 in London or, if the appeal is upheld and the Tribunal required to reconsider its reasons in any respect, until the redetermination has been made. (5) Dismiss the cross-appeal. (6) Order that the respondent pay the appellants’ costs, including reserved costs, in this Court. (7) The costs incurred to date in the Equity Division are to abide the outcome of the further hearing in the Division and are to be determined by the judge conducting the further hearing.
CATCHWORDS:	ABUSE OF PROCESS - respondent proceeding in Supreme Court against accessories and in an arbitration in London against the principal wrongdoer - judgment and orders made at trial against the accessories - subsequently principal wrongdoer found liable but only on limited basis in London arbitration - whether abuse of process for respondent to seek on appeal to maintain enforceability of judgment and orders in light of inconsistent arbitration award - APPEAL - reasonable apprehension of bias - trial judge hearing ex parte applications over a lengthy period - confidentiality orders - closed court hearings - other party becoming aware of number and nature of ex parte applications, confidentiality orders and closed court late in the day - Judge refusing to recuse himself - whether fair minded bystander might consider that trial judge might not bring to bear a mind free of prejudice against the party in whose absence affidavits had been read and orders made - CHOICE OF LAW - employees of respondent company incorporated in British Virgin Islands and carrying on business in Kazakhstan - employed by respondent in Kazakhstan - whether trial Judge erred in holding that New South Wales law applied to claims in contract , tort and for breach of fiduciary duty - presumption that law of forum is the same as that of foreign country - whether presumption operated - whether presumption displaced - REMEDIES - equitable compensation - whether exemplary or punitive component can be included as part of a "robust" approach - declarations - whether declarations in appropriate form
LEGISLATION CITED:	Arbitration Act 1966 (UK) Building and Construction Industry Security of Payment Act 1999 (NSW) Family Law Act 1975 (Cth), s 93A Foreign Corporations (Application of Laws) Act 1989 (Cth), ss 3, 7 Supreme Court Act 1970 (NSW), s 75A Trade Practices Act 1974 (Cth), s 52 Uniform Civil Procedure Rules (NSW), r 14.14
CATEGORY:	Principal judgment
CASES CITED:	Akai Pty Limited v People’s Insurance Co Ltd [1996] HCA 39; 188 CLR 418 Amin Rasheed Shipping Corporation v Kuwait Insurance Co [1984] AC 50 Armory v Delamirie (1722) 1 Stra 505; 93 ER 664; [1558]-[1774] All ER Rep 121 Associated Electric and Gas Insurance Services Ltd v European Reinsurance Co of Zurich [2003] 1 WLR 1041 AWG Group Ltd v Morrison [2006] 1 WLR 1163 Barnes v Addy (1874) LR 9 Ch App 244 Blain v The Doctor’s Co 272 Cal Rptr 250 (Cal Ct App 1990) Brinsley v Lynton & Lynnmouth Hotel & Property Co [1895] WN (Eng) 53 Bristol & West Building Society v Mothew [1998] Ch 1 British American Tobacco Australia Services Ltd v Laurie [2009] NSWCA 414 CDJ v VAJ [1998] HCA 67 and 76; 197 CLR 172 Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; 229 CLR 577 Coulls v Bagot’s Executor and Trustee Co Ltd [1967] HCA 3; 119 CLR 460 Council of NSW Bar Association v Davison [2006] NSWSC 699 Damberg v Damberg (2001) 52 NSWLR 492 Drinkwater v Caddyrack Pty Ltd (unrep NSWSC, 25.9.1997) Dualcorp Pty Ltd v Remo Constructions Pty Ltd [2009] NSWCA 69; 74 NSWLR 190 Dyno Wesfarmers Limited v Knuckey [2003] NSWCA 375 Edwards v Noble [1971] HCA 54; 125 CLR 296 Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22; 230 CLR 89 Global Funds Management (NSW) Ltd v Rooney (1994) 36 NSWLR 122 Haines v Australian Broadcasting Corporation (1995) 43 NSWLR 404 Harris v Digital Pulse Pty Ltd [2003] NSWCA 10; 56 NSWLR 298 Houghton v Immer (No 155) Pty Ltd (1997) 44 NSWLR 46 Johnson v Johnson [2000] HCA 48; 201 CLR 488 Kyrwood v Drinkwater [2000] NSWCA 126 Lee v Cha [2008] NSWCA 13 Lloyd v Guibert (1865) LR 1 QB 115 Lohar Corp Pty Ltd v Dibu Pty Ltd (1976) 1 BPR 9177 McKenzie v McDonald [1927] VLR 134 Michael Wilson & Partners Ltd v Nicholls [2009] NSWSC 505 Murakami v Wiryadi [2010] NSWCA 7 National Commercial Bank v Wimborne (1978) 5 BPR [97423] Neilson v Overseas Projects Corporation of Victoria Ltd [2005] HCA 54, 223 CLR 331 New Brunswick Railway Co v British and French Trust Corporation [1939] AC 1 Nocton v Ashburton [1914] AC 932 Paramasivam v Flynn (1998) 90 FCR 489 Pilmer v Duke Group Ltd [2001] HCA 31; 207 CLR 165 Port of Melbourne Authority v Anshun Pty Ltd [1981] HCA 45; 147 CLR 589 Regie Nationale des Usines Renault SA v Zhang [2002] HCA 10; 210 CLR 491 Reichel v Bishop of Oxford (1889) 14 App Cas 259 Reichel v McGrath (1989) 14 App Cas 665 Rickshaw Investments Ltd v Baron von Uexhell [2007] 3 LRC 223, [2006] SGCA 39 Rippon v Chilcotin Pty Ltd [2001] NSWCA 142; 53 NSWLR 198 Rogers v The Queen [1994] HCA 42; 181 CLR 251 Ruthol Pty Ltd v Mills [2003] NSWCA 56; 11 BPR 20,793 Shirvell v Hackwood Estates Co Ltd [1938] 2 KB 577 Smits v Roach [2006] HCA 36; 277 CLR 423 State Bank of NSW Ltd v Stenhouse Ltd (1997) Aust Torts Reports § 81-423 Tannous v Mercantile Mutual Insurance [1978] 2 NSWLR 331 Target Holdings Ltd v Redfern [1996] AC 421 United States Surgical Corporation v Hospital Products International Pty Ltd [1982] 2 NSWLR 766 Vakauta v Kelly (1988) 13 NSWLR 502 Vakauta v Kelly [1989] HCA 44; 167 CLR 568 Youyang Pty Ltd v Minter Ellison [1981] NSWCA 198 Youyang Pty Ltd v Minter Ellison Morris Fletcher [2003] HCA 15; 212 CLR 484
TEXTS CITED:	Borchard, Declaratory Judgments, 2nd Ed 1941 Broom’s Legal Maxims (10th ed [1939]), p 191 Conaglen, Fiduciary Loyalty (Hart Publishing, (2010)) Dharmananda & Papamatheos (eds), Perspectives on Declaratory Relief (Federation Press, 2009) Nygh’s Conflict of Laws in Australia Spencer, Bower and Handley, Res Judicata (4th Ed 2009) at [1.08]-[1.09] Tilbury, Civil Remedies, Vol 1 (1990) T M Yeo, Choice of Law for Equitable Doctrines (OUP, 2004) Zamir & Woolf, The Declaratory Judgment 3rd ed 2002 Foreign Corporations (Application of Laws) Bill 1989 (Parl Debs, Senate, 21 December 1989) (Cth) p 4987
PARTIES:	Robert Colin Nicholls (First Appellant/First Cross-Respondent) David Ross Slater (Second Appellant/Second Cross-Respondent) Temujin Services Limited (Third Appellant/Third Cross-Respondent) Temujin International Limited (Fourth Appellant/Fourth Cross-Respondent) Temujin International FZE (Fifth Appellant)/Fifth Cross-Respondent) Michael Wilson & Partners Limited (Respondent/Cross-Appellant)
FILE NUMBER(S):	CA 2009/298561
COUNSEL:	G C Lindsay SC/G W McGrath/A Fox (Appellants/Cross-Respondents) M Walton SC/J Carney (Respondent/Cross-Appellant)
SOLICITORS:	Henry Davis York (Appellants/Cross-Respondents) Clayton Utz (Respondent/Cross-Appellant)
LOWER COURT JURISDICTION:	Supreme Court - Equity Division
LOWER COURT FILE NUMBER(S):	SC 50151 of 2006
LOWER COURT JUDICIAL OFFICER:	Einstein J
LOWER COURT DATE OF DECISION:	11 December 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	[2009] NSWSC 1033; [2009] NSWSC 1377