Royal Guardian Mortgage Management Pty Ltd v Nguyen

[2016] NSWCA 88

Court of Appeal

Supreme Court

New South Wales

• Summary available
• Amendment notes

Medium Neutral Citation:	Royal Guardian Mortgage Management Pty Ltd v Nguyen [2016] NSWCA 88
Hearing dates:	9 and 10 February 2016
Decision date:	29 April 2016
Before:	Basten JA at [1]; Ward JA at [51]; Emmett AJA at [289]
Decision:	1.   Appeal allowed. 2.   Set aside the judgment for the defendants and the orders made on 24 and 26 September 2014 by Adams J. 3.   Remit the proceedings to the Common Law Division for re-hearing. 4.   Respondents to pay the appellant’s costs of the appeal. Costs of the proceedings at first instance to be dealt with by the judge re-hearing the matter in the Common Law Division. 5. The respondents to be given a certificate under the Suitors' Fund Act 1951 (NSW).
Catchwords:	APPEAL AND NEW TRIAL – whether denial of procedural fairness as a result of excessive judicial intervention in course of trial – whether reasonable apprehension of bias arising from conduct of trial and/or private communication by primary judge with counsel for the respondents during the course of the trial – matter remitted for re-trial   APPEAL – allegations of apprehended bias and procedural unfairness – whether to be addressed first – whether retrial required – whether other grounds should be addressed – addressing other grounds involving credibility findings
Legislation Cited:	Corporations Act 2001 (Cth), s 182 Suitors' Fund Act 1951 (NSW) Supreme Court Act 1970 (NSW), s 75A(7) Uniform Civil Procedure Rules 2005 (NSW), r 51.53
Cases Cited:	Aussie Airlines Pty Limited v Australian Airlines Pty Limited (1996) 65 FCR 215 Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387 Ball v McInerney [2014] NSWCA 331 BP Refinery (Westernport) Pty Limited v Shire of Hastings (1977) 180 CLR 266 Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 Byrne v Australian Airlines Limited [1995] HCA 24; (1995) 185 CLR 410 Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 80 ALJR 458 Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 Ellis v R [2015] NSWCCA 262 Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 Galea v Galea (1990) 19 NSWLR 263 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd [2003] FCA 50; (2003) 128 FCR 1 Goodrich Aerospace Pty Ltd v Dusan Arsic [2006] NSWCA 187; (2006) 66 NSWLR 186 Hasler v Singtel Optus Pty Ltd (2014) 87 NSWLR 609; [2014] NSWCA 266 Hospital Products Limited v United States Surgical Corp [1984] HCA 64; (1984) 156 CLR 41 Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 Jones v National Coal Board [1957] 2 QB 55 Knaggs v Director of Public Prosecutions (NSW) [2007] NSWCA 83; (2007) 170 A Crim R 366 Kuru v State of New South Wales [2008] HCA 26; (2008) 236 CLR 1 Lockwood v Police [2010] 107 SASR 237 Michael Wilson & Partners Limited v Nicholls [2011] HCA 48; (2011) 244 CLR 427 Michel v The Queen [2009] UKPC 41; [2010] 1 WLR 879 Nominal Defendant v McLennan [2012] NSWCA 148 Nominal Defendant v Smith [2015] NSWCA 339 North-West Transportation Co Limited v Beatty (1887) 12 App Cas 589 Owners of the Ship “Shin Kobe Maru” v Empire Shipping Company Inc [1994] HCA 54; (1994) 181 CLR 404 R v T, WA [2014] SASCFC 3; (2014) 118 SASR 382 Royal Guardian Mortgage Management Pty Limited v Nguyen [2014] NSWSC 665 Royal Guardian Mortgage Management Pty Limited v Nguyen (No 2) [2014] NSWSC 1327 RPS v The Queen [2000] HCA 3; (2000) 199 CLR 620 Small v K & R Fabrications (W’Gong) Pty Ltd [2016] NSWCA 70 Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256 Smits v Roach [2006] HCA 36; (2006) 227 CLR 423 Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568 Visscher v the Honourable President Justice Giudice [2009] HCA 34; (2009) 239 CLR 361 Yuill v Yuill [1945] P 15; [1945] 1 All ER 183
Category:	Principal judgment
Parties:	Royal Guardian Mortgage Management Pty Limited (Appellant) Beth Ngoc Nguyen (First Respondent) Ian Stolyar (Second Respondent)
Representation:	Counsel: TD Blackburn SC with Ms N Oreb (Appellant) RG McHugh SC with RJ May (Respondents)   Solicitors: Bransgroves Lawyers (Appellant) Gilbert + Tobin (Respondents)
File Number(s):	2014/00185879
Decision under appeal	Court or tribunal: Supreme Court of New South Wales Jurisdiction: Common Law Division Citation: [2014] NSWSC 665 Date of Decision: 28 May 2014 Before: Adams J File Number(s): 2010/00105936

HEADNOTE

[This Headnote is not to be read as part of the judgment]

From 2001 to 2005, the appellant, Royal Guardian Mortgage Management Pty Ltd (RGMM), a company involved in mortgage lending, employed the respondents, Ms Nguyen and Mr Stolyar, in managerial roles.

In April 2010, RGMM commenced proceedings against the respondents, claiming damages for alleged breaches of their employment contracts and the statutory duty they owed to it under s 182 of the Corporations Act 2001 (Cth). The claim was brought on the basis that the respondents had referred loan applications to RGMM through entities with which they were associated (the Dibelle entities) and thereby obtained around $2m in commissions, which they would not otherwise have been paid. The respondents denied the alleged breaches and in turn brought a cross-claim against RGMM alleging non-payment of bonuses and shares in the profits of the company to which they claimed to be contractually entitled. RGMM maintained that the respondents were not entitled to any profit share and that any liability it had in relation to bonus entitlements had been discharged by payments it made at the respondents’ direction to a company associated with them.

The primary judge dismissed RGMM’s claims and found for the respondents on their cross-claims, ordering RGMM to pay damages in the amount of $1.9m to Ms Nguyen and $970,000 to Mr Stolyar and to pay their costs on an indemnity basis. A positive finding of dishonesty was made against RGMM’s principal witness.

RGMM appealed from his Honour’s decision on grounds including alleged procedural unfairness and apprehended bias.

Held, allowing the appeal with costs, setting aside the orders of the primary judge and remitting the proceedings for re-hearing:

(1) by Basten JA (at [22]); Ward JA (at [229]; [257]) (Emmett AJA agreeing with Ward JA at [298]), that there was excessive judicial intervention in the conduct of the trial giving rise to procedural unfairness;

(2) by Basten JA (at [34]) (Ward JA agreeing at [255]; Emmett AJA agreeing with Ward JA at [298]), that RGMM was not precluded, by not having raised objection to the judicial intervention during the course of the trial, from raising on appeal its complaint as to procedural unfairness;

(3) by Ward JA (at [233]; [248]) (Basten JA and Emmett AJA agreeing at [43]-[44] and [298], respectively), that the evidence did not, either alone or in context with the conduct amounting to procedural unfairness, lead to a conclusion that there was a reasonable apprehension of bias on the part of the primary judge;

(4) by Basten JA (at [34]); Ward JA (at [259]; [261]); Emmett AJA (at [299]), that the matter should be remitted for re-trial;

(5) by Ward JA (obiter) (at [262]) (Basten JA and Emmett AJA agreeing at [45] and [299], respectively) had the conclusion been otherwise as to whether the appellant had waived the complaint now made as to the procedural unfairness of the trial, the judgment should nevertheless still be set aside and the matter remitted for a re-trial on the basis that the credibility findings on critical issues were not sustainable on the reasoning of the primary judge.

Judgment

1. BASTEN JA: The appellant, Royal Guardian Mortgage Management Pty Ltd (“RGMM”), was established in October 2000 as a mortgage originator and manager. Its business, relevantly for present purposes, involved the approval of loan applications received from members of the public seeking funds on the security of a mortgage. As a mortgage originator, RGMM was “accredited” by particular non-bank credit providers. It was remunerated by way of a commission paid on settled loans.

2. The respondents, Beth Ngoc Nguyen and Ian Stolyar (who were at all relevant times a married couple) were employed by RGMM under separate contracts of employment, Ms Nguyen as a general manager and Mr Stolyar as a senior manager. Ms Nguyen’s employment with RGMM commenced on 12 March 2001 and terminated on 30 August 2005. (She continued to work for a related company, Royal Mortgage Management Pty Ltd (“RMM”) from 1 September 2005 until June 2006.) Mr Stolyar commenced employment with RGMM on 14 May 2001, his employment terminating on 16 June 2005.

3. On 29 April 2010 the appellant commenced proceedings against both Ms Nguyen and Mr Stolyar (who may be collectively referred to as “the respondents”) seeking damages for breach of their contracts of employment. Briefly stated, the basis of the claim was that RGMM did not pay commissions to loans introduced by employees, but only where the introducer was an independent broker. It was alleged that the respondents, in breach of their obligations of good faith, channelled loan applications through independent entities associated with them, thereby obtaining commissions in excess of $2 million which would otherwise not have been paid.

4. The respondents not only denied the wrongdoing alleged, but brought a cross-claim against RGMM for bonuses and shares in the profits of the company to which they said they were entitled, but which had not been paid.

5. The claims and cross-claims were heard by Adams J in the Common Law Division, the trial running from 20-29 May 2013. A lengthy and detailed judgment was delivered one year later. The claims by RGMM were dismissed and each of the respondents obtained a judgment on the cross-claims in amounts which, with interest, were, in round terms, $1.9 million in favour of Ms Nguyen and $970,000 in favour of Mr Stolyar. [1] Orders in those amounts were entered on 24 September 2014. Costs orders in favour of the respondents were entered two days later.

   1. Royal Guardian Mortgage Management Pty Ltd v Nguyen [2014] NSWSC 665.

Issues on appeal

6. The grounds of appeal may be grouped in three categories, namely, (a) complaints of procedural unfairness and apprehended bias, (b) challenges to findings with respect to the terms, obligations and alleged breaches of the contractual arrangements between the parties (primarily alleging errors in fact finding) and (c) challenges to the calculation of damages.

7. The factual basis for the allegation of procedural unfairness rested upon the frequency and nature of the involvement by the trial judge in the cross-examination of Mr Tomazin (the principal witness for the appellant) and the cross-examination of Ms Nguyen. In addition to procedural unfairness, this conduct was said to give rise to a reasonable apprehension of bias, though not actual bias.

8. There was a second basis for alleging an apprehension of bias, namely an association between the trial judge and Bruce McClintock SC (senior counsel for the respondents), which resulted in the judge engaging Mr McClintock to represent him in defamation proceedings instituted by the judge, albeit a matter entirely unrelated to the present proceedings.

9. Identification of the issues raised on the appeal leads to a significant question as to how they should be addressed. On one view, convenience would dictate that the conventional challenges, at least in relation to the contractual arrangements and the breaches of contract, should be addressed first. That is because an assessment of the nature and significance of the judge’s interventions in the course of the trial are not readily assessed, absent a detailed understanding of the issues. On the other hand, the High Court has stated that the issue of bias (and by extension procedural unfairness) should be addressed first. In Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd,[2] a case involving a substantive claim relating to copyright in architectural plans, Gummow ACJ held that the Full Court of the Federal Court had fallen into error by dealing first with the substantive issues and then with the alleged appearance of bias on the part of the trial judge. He continued:[3]

“If the bias submissions were to succeed, the remedy would be a retrial. If the copyright submissions were to succeed, the Full Court would itself provide the orders which should have been made and there would be no occasion to order a retrial.”

2. (2006) 229 CLR 577; [2006] HCA 55.

3. Concrete at [2].

10. Callinan J expressed the same view in language similar to that of Gummow ACJ. [4] The same principle was articulated in the joint reasons of Kirby and Crennan JJ: [5]

“An intermediate appellate court dealing with allegations of apprehended bias, coupled with other discrete grounds of appeal must deal with the issue of bias first. It must do this because, logically, it comes first. Actual or apprehended bias strike at the validity and acceptability of the trial and its outcome. It is for that reason that such questions should be dealt with before other, substantive, issues are decided. It should put the party making such an allegation to an election on the basis that if the allegation of apprehended bias is made out, a retrial will be ordered irrespective of possible findings on other issues. Even if a judge is found to be correct, this does not assuage the impression that there was an apprehension of bias. Furthermore, if, as here, an intermediate appellate court finds the allegation made out, but grants no relief because it otherwise finds in favour of the party making the allegation, a defect in the administration of justice has been found to have occurred which, in the absence of any successful appeal on the point, will remain unremedied. Inevitably, this adversely affects public confidence in the administration of justice.”

4. Concrete at [172].

5.    Concrete at [117] (reference omitted).

11. The suggestion of the appellant being put to an “election” is troubling. No authority was cited for that proposition, nor was it adopted by other members of the Court. The rationale appeared in the following statement that a defect in the administration of justice should not go unremedied. However, there is no defect until the Court finds it to be so and in principle (as discussed below) the parties can waive such a defect. [6] Indeed, “election” assumes that to be the case.

    6. Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48 at [76].

12. The appellant was not put to an election in the present case, although no doubt it could have been raised with the parties after judgment was reserved, if that had been thought necessary. (The Court is not aware of any case where an election was imposed.) It is not necessary to pursue the question of election further, because, to the extent that the appellant is entitled to succeed on substantive issues, those issues turn to a large extent on questions of credibility, which cannot be resolved in this Court and which will, inevitably, call for a retrial.

13. There is, however, a separate issue which will arise if claims of procedural unfairness or apprehension of bias are upheld. Because there will necessarily be a retrial, the matter will return to the trial court, possibly without any comment upon the validity or otherwise of the substantive grounds of appeal. Thus, a challenge based on a reasonable apprehension of bias (as opposed to actual bias), even if upheld, may be seen as casting no doubt upon the findings made by the trial judge as properly made on their merits. On the other hand, whenever a matter is remitted for a retrial, it is preferable that the appellate court restrict its assessment of the evidence to matters necessary to the finding of error.

Procedural unfairness

14. Appellate challenges to trial judgments, based on complaints of excessive intervention by the trial judge in the course of the hearing are never easy to evaluate. Appellate reasoning has, on occasion, appeared to conflate different principles. On other occasions, the quest for a principled approach appears to have led to unnecessary categorisation. However, it is not in doubt that different considerations will apply to a judge only trial, in contrast to a trial with a jury. Similarly, different considerations will apply to judicial intervention in the course of an opening or final submissions, as compared to intervention in the questioning of witnesses. The present case was a civil trial without a jury and the interventions complained of came in the course of the evidence given by the principal witness for the appellant (Mr Tomazin) and the principal witness for the respondents (Ms Nguyen).

15. Further, colourful language does not always elucidate principle, particularly when taken out of context. Speaking of a judge who himself conducts the examination of a witness, Lord Greene MR said in Yuill v Yuill, [7] “he, so to speak, descends into the arena and is liable to have his vision clouded by the dust of the conflict.” In R v T, WA [8] Kourakis CJ said of this passage:

“I prefer to state the dust of conflict ground in terms of compromising the capacity of the Judge to adjudicate because an appeal court can never do anything more than speculate as to whether the judicial officer’s vision was in fact ‘clouded by the dust of conflict’. If the appeal court, on an appeal by way of rehearing, concludes that a judge’s findings were wrong in fact on the evidence, it may correct them without relying on the Judge’s excessive judicial intervention. However, in those cases in which the facts, as found, were open to the trial Judge, particularly given the Judge’s advantage in assessing the credibility of the witnesses, it is impossible for an appeal court to say whether or not the Judge’s finding in fact proceeded from a clouded, or clear headed, evaluation of the evidence. Moreover, because this ground, in effect, alleges an error of law which will generally result in a retrial irrespective of the appeal court’s view of the weight of the evidence, it is better based on an objective standard measured by an assessment of the degree to which the departure from a judge’s traditional role compromises the judicial capacity to objectively evaluate the evidence.”

7. [1945] P 15 at 20.

8. [2014] SASCFC 3 at [39].

16. The image of a melee in a dusty amphitheatre is so far from the reality of the court room that it should be abandoned. However, the explanation given by the Chief Justice suggests that appellate intervention on this ground may be rare. Yet there will be circumstances when appellate intervention is not only justifiable, but necessary. Quite apart from doubts as to the capacity of the judge to assess demeanour in such circumstances, there are important institutional characteristics at stake, as helpfully identified by Lord Brown in Michel v The Queen. [9] In such a case, as Lord Brown explained by reference to the position of the appellant:[10]

“He is denied too the basic right underlying the adversarial system of trial, whether by jury or Jurats:[ [11] ] that of having an impartial judge to see fair play in the conduct of the case against him. Under the common law system one lawyer makes the case against the accused, another his case in response, and a third holds the balance between them, ensuring that the case against the accused is properly and fairly advanced in accordance with the rules of evidence and procedure. … The core principle, that under the adversarial system the judge remains aloof from the fray and neutral during the elicitation of the evidence, applies no less to civil litigation than to criminal trials.

9. [2010] 1 WLR 879; [2009] UKPC 41 (on appeal from the Court of Appeal of Jersey).

10. Michel at [31].

11.    Jurats were assessors under Jersey law who sat with a Commissioner.

17. Lord Brown continued, referring to the judge’s role:[12]

“Of course he can clear up ambiguities. Of course he can clarify the answers being given. But he should be seeking to promote the orderly elicitation of the evidence, not needlessly interrupting its flow. He must not cross-examine witnesses, especially not during evidence-in-chief. He must not appear hostile to witnesses, least of all the defendant. He must not belittle or denigrate the defence case. He must not be sarcastic or snide. He must not comment on the evidence while it is being given. And above all he must not make obvious to all his own profound disbelief in the defence being advanced.”

12. Michel at [34].

18. These statements are not merely aspirational; they describe the judicial function. Nor is the problem necessarily analysed as one involving an appearance of pre-judgment. The idea that the judge must maintain the appearance of impartiality, by maintaining an appropriate degree of detachment, are essential aspects of his or her function as the officer presiding in the court. Nor is it just a matter of maintaining his or her capacity to assess the demeanour of witnesses, although that is undoubtedly important. As noted by Lord Greene MR in Yuill v Yuill, in the passage to which reference has already been made, “the demeanour of a witness is apt to be very different when he is being questioned by a judge from what it is when he is being questioned by counsel”.

19. As explained by Vanstone J in Lockwood v Police, [13] “the intervention may make it impossible for defence counsel to properly present the defence, or it might impede a witness in giving his account in such a way as to do himself justice.” Indeed, pressure from the judge (even if not consciously applied) may result in a witness making concessions which would otherwise not have been made. Whether or not the concession was justified in a particular case will not readily be assessable, especially by the judge who obtained it. Most people will seek, to some degree, if not to ingratiate themselves with, at least to avoid antagonising, the person in authority with the power to determine the fate of their litigation.

    13. [2010] 107 SASR 237 at [16].

20. It is this aspect of the problem which may properly be characterised as a potential breach of procedural fairness, rather than a form of pre-judgment. That distinction was articulated by the High Court in RPS v The Queen. [14] In joint reasons, Gaudron ACJ, Gummow, Kirby and Hayne JJ stated:[15]

“The appellant's contention was cast in terms of apparent bias but it was not clear exactly what was meant by this. In particular, it was not clear whether it was being suggested that a fair-minded observer would have concluded that the judge had predetermined some issue. And, if that was what was being suggested, it was far from clear what issue or issues that would fall for decision by the judge (as opposed to the jury) would have appeared to have been prejudged. When pressed on this aspect of the matter, counsel for the appellant suggested that the trial judge had been antagonistic to counsel who had appeared for the appellant and that the conduct of the trial generally tended to undermine the defence case and bolster that of the Crown. But these are not complaints of bias or the appearance of bias; they amount to a complaint that the conduct of the trial was unfair. That is a radically different complaint and it is wrong to seek to apply tests developed in connection with questions of apparent bias in deciding whether the trial was fair. That question will turn largely on whether the accused has had a proper opportunity to advance his or her defence to the charge.”

14. (2000) 199 CLR 620; [2000] HCA 3.

15. RPS at [11].

21. The ground of appeal relied upon as demonstrating a denial of procedural fairness contained the following particulars:

“a.   His Honour’s insistent and frequent interruption of cross-examination by Senior Counsel for the Respondent (Defendant) of Mr Tomazin (a witness for the Plaintiff).

b.   His Honour’s questioning of Mr Tomazin leading evidence and eliciting concessions.

c.   His Honour demonstrating argumentative behaviour towards Mr Tomazin during cross-examination.

d.   His Honour’s insistent and frequent interruption of cross-examination by Senior Counsel for the Appellant (Plaintiff) of Ms Nguyen (a witness for the Defendant).

e.   His Honour interrupting Senior Counsel for the Appellant during cross-examination of Ms Nguyen at critical times by diverting the subject away from Senior Counsel’s line of questioning.

f.   His Honour coaching Ms Nguyen how to answer questions during cross-examination.

g.   His Honour questioning Ms Nguyen to adduce evidence from her to explain away inconsistencies in her evidence.

h.   In the foregoing respects His Honour entered the well of the Court and participated in the course of evidence in the trial.”

22. As demonstrated by Ward JA, a perusal of the transcript reveals that these particulars were made good. [16] Interventions may be found on almost every page of the transcript, some involving antagonistic and argumentative cross-examination of Mr Tomazin, others providing an opportunity for Ms Nguyen to explain potentially damaging evidence. I agree with the conclusion reached by Ward JA that these interventions rendered the trial unfair. [17]

    16.    Below at [173]-[215].

    17. Below at [229].

Waiver

23. The next question is whether the failure of senior counsel for the appellant to take issue with the interventions constituted a form of “waiver”, thus precluding the appellant from challenging the judgment on this ground.

24. The concept of “waiver”, as applied in this context, is by no means easy to state. Most of the cases in which the concept has been developed and applied involved an apprehension of bias. Not all bias cases involve pre-judgment, but those that do are closest to the concept in its application to procedural unfairness of the kind under consideration. Thus in Vakauta v Kelly [18] the High Court was called upon to consider whether references by the trial judge to the defendant’s doctors as “that unholy trinity”, being part of the “usual panel of doctors who think you can do a full week’s work without any arms or legs” and whose “views are almost inevitably slanted in favour of the [insurer] by whom they have been retained, consciously or unconsciously” demonstrated a reasonable apprehension of bias. [19] However, speaking generally, and not with respect to those particular remarks, the joint reasons of Brennan, Deane and Gaudron JJ stated: [20]

“Where… comments which are likely to convey to a reasonable and intelligent lay observer an impression of bias have been made, a party who has legal representation is not entitled to stand by until the contents of the final judgment are known and then, if those contents prove unpalatable, attack the judgment on the ground that, by reason of those earlier comments, there has been a failure to observe the requirement of the appearance of impartial judgment. By standing by, such a party has waived the right subsequently to object. The reason why that is so is obvious. In such a case, if clear objection had been taken to the comments at the time when they were made or the judge had then been asked to refrain from further hearing the matter, the judge may have been able to correct the wrong impression of bias which had been given or alternatively may have refrained from further hearing.”

18. (1989) 167 CLR 568.

19.    Vakauta at 572.

20.    Ibid.

25. That statement should not, however, be read out of context: it was not applied in the circumstances of the case itself. Thus, the joint reasons continued, having noted that there had been no clearly stated objection when the statements were made: [21]

“The statements which the learned trial judge had made about his preconceived views of Dr Lawson were, however, effectively revived by what his Honour said in his reserved judgment. The appellant's failure to object to the comments made in the course of the trial cannot, in our view, properly be seen as a waiver of any right to complain if comments made about Dr Lawson in the judgment itself would, in the context of those earlier comments, have the effect of conveying an appearance of impermissible bias in the actual decision to a reasonable and intelligent lay observer.”

21.    Vakauta at 573.

26. There are, therefore, two significant features of Vakauta which need to be borne in mind in the application of the principle regarding waiver. First, there was a precise point in time at which the appellant could have identified an element of pre-judgment, when there was a reasonable opportunity to object. Secondly, the judgment itself may revive the earlier appearance of bias, in which case, there being no further opportunity to take objection, the ground is available on appeal.

27. In other cases, of which the present is an example, no inference as to bias or indeed unfairness can be reached at a specific point in time. As Kirby and Crennan JJ noted in Concrete:[22]

“Sometimes judicial interventions and observations can exceed what is a proper and reasonable expression of tentative views. Whether that has happened is a matter of judgment taking into account all of the circumstances of the case.”

22. Concrete at [112].

28. In applying the stated principles to the case, the joint reasons noted that there was nothing in the remarks of the trial judge “taken individually, or considered cumulatively” which gave rise to a reasonable apprehension of bias. [23] In a similar vein, Callinan J noted that the Full Court of the Federal Court “was right in determining this issue to look not only at the course of the trial, but also at the reasons for judgment, and to read them together to see whether the cumulative effect was one of apparent bias.”[24]

    23. Concrete at [114].

    24. Concrete at [179].

29. That statement was consistent with the following observations of Toohey J in Vakauta: [25]

“Counsel for the respondent conceded, correctly in my view, that it is permissible to evaluate what was said in the judgment in the light of what had been said at the hearing. …

Once it is accepted that there was bias, at any rate ostensible bias, in the judgment itself, no question of waiver or estoppel can then arise. What was delivered was a reserved judgment, without any opportunity for counsel to question what it contained.”

25.    Vakauta at 588.

30. Applying those principles to the present case, there are three obstacles in the way of a conclusion that, by failing to object, counsel for the appellant effectively waived his client’s right later to take the point that the trial had been unfair.

31. The first difficulty is the identification of a point in time at which objections should have been taken, absent which any right of appeal based on the unfairness of the trial was deemed to have been waived. Counsel is not generally expected to maintain a running commentary on how the judge is handling a trial, nor should such conduct be encouraged. While it is possible to say at the end of the trial that there has been unfairness, that, as in the present case, will be an evaluative assessment made on the basis of the course of the trial taken as a whole, even if it is not necessary for that purpose to refer to the judgment. The unfolding situation is quite different from one where a single incident, or known association, is relied upon. [26]

    26. Cf Smits v Roach (2006) 227 CLR 423; [2006] HCA 36.

32. Secondly, it could hardly be said that counsel for the appellant stood by, taking no point about unfairness, and saving the challenge for an appeal in the event that his client’s case was dismissed. It was clear that senior counsel for the respondents, whose cross-examination of Mr Tomazin was regularly interrupted, sought on occasion to recover control of the process, unsuccessfully. It would have been awkward, to say the least, for senior counsel for the appellant to intervene in his opponent’s cross-examination to object to the course being taken by the judge. Even supposing that course should have been taken at some point, it does not follow that the appellant’s right to a fair trial was “waived” because its counsel did not intervene.

33. Thirdly, the full extent to which the risks associated with the judge’s interventions were to materialise was not apparent until the judgment was delivered. Whether or not he had pre-judged issues, he found in several respects that Mr Tomazin’s evidence was dishonest. He did that, despite expressly disavowing reliance on Mr Tomazin’s demeanour. However, the difficulty of judging Mr Tomazin’s demeanour (and hence credibility) was partly a result of his own constant interventions in the cross-examination. In effect, Mr Tomazin was deprived of the opportunity to satisfy the judge by his demeanour in the course of cross-examination, free from judicial intervention, that he was entirely honest. On the other side of the coin, the judge accepted the evidence, particularly of Ms Nguyen, of whom he formed a “generally favourable view”. Again, the appellant was deprived, through interruptions of the cross-examination of Ms Nguyen, of the opportunity to persuade the judge to a different view.

34. In these circumstances, waiver was a false issue: it could not be said that there was some inescapable point at which counsel for the appellant had either to request the judge to desist from his intrusive interventions, or to abort the trial, absent which no complaint of unfairness could be raised on appeal. The trial was unfair and the judgment must be set aside on that ground.

Apprehension of bias

35. In R v T, WA, Kourakis CJ acknowledged “the subtlety of the distinction between the bias ground and the dust of conflict ground as I have articulated it.”[27] It will be recalled, that the Chief Justice identified the “dust of conflict” ground as conduct demonstrating a compromised capacity to adjudicate on the issues raised at trial. Although it may be possible that both grounds are satisfied in a particular case, it is also possible that a particular case is better judged by reference to one ground than the other. In any event, a ground more broadly identified as the unfair trial ground is also more clearly distinguishable from an apprehension of bias than the more limited concern about a compromised capacity to adjudicate.

    27. R v T, WA at [40].

36. An example of circumstances where there may be an unfair trial, but no necessary element of pre-judgment, is continual disruption of the orderly flow of evidence on both sides of the record. On one view that occurred in the present case, in so far as the interruptions occurred both in the evidence of Mr Tomazin and that of Ms Nguyen. On the other hand, although it is true that many interruptions were neutral, many were not. Further, on balance, the interruptions in the questioning of Ms Nguyen tended to be sympathetic rather than antagonistic.

37. There was an argument that the various interventions, especially when viewed in the light of the findings in the judgment, some of which may be characterised as glaringly improbable, might have led an intelligent lay observer to be satisfied that the judge might not have determined the case impartially on the basis of the evidence presented. However, it is sufficient that the appeal be disposed of on the basis that the interventions were so extensive as to prevent the fair and orderly presentation of the evidence, with the result that the appellant did not enjoy a fair trial according to law.

38. Some of the authorities reveal a willingness to accord a trial judge significant leeway in his or her interventions in circumstances where counsel are conducting the trial ineptly, potentially causing significant delays and prolongation of the hearing and themselves disrupting the orderly presentation of evidence. It is appropriate to add, although it hardly needs saying given the experienced counsel involved on each side at trial, that this was not such a case.

39. On occasion appellate courts have also been sympathetic in circumstances where the trial judge appears to have been confronted by a witness who was prevaricating and failing to answer proper questions. Again, a reading of the transcript does not suggest there was any such element in the present case and, in any event, a display of judicial frustration with a particular witness is fraught with danger.

Apprehended bias – communications with one counsel

40. There was a second ground of appeal relating to apprehended bias, based on the relationship between the trial judge and counsel for the respondents. The factual background to this issue has been recounted by Ward JA and need not be repeated. [28]

    28.    See below at [236]-[238].

41. There are three aspects of this matter which are troubling. The first is that the judge sought to have a private conversation with one counsel to the exclusion of the other on the first day of the trial, albeit with the consent of the other, but without revealing the subject matter of the proposed discussion. Given that there had been reference to the judge’s defamation proceedings in the course of the exchanges at morning tea, it might be inferred that that was the proposed topic, but, if so, then the subject matter could readily have been disclosed. The fact that it was not (and still has not been) identified leaves the topic of discussion as a matter for speculation on the part of the hypothetical lay observer aware only of the facts as revealed in the evidence.

42. Secondly, the request made on 22 May 2014 that both senior counsel attend at the delivery of judgment, together with the conversation which occurred in the corridor after judgment had been delivered on 28 May, revealed that the trial judge had been intending to brief senior counsel for the respondents in relation to his own defamation proceedings at some stage whilst judgment was reserved. The email exchanges revealed that a mediation had been planned at a teleconference on 8 May, and it may be inferred from an email of 20 May from the solicitor for the judge that an intention had already been formed to brief Mr McClintock for the mediation. The evidence certainly did not reveal any private communications between the judge and Mr McClintock between morning tea on the first day of the trial and the date on which judgment was delivered. Although the respondents had an interest in preserving the judgment against this particular challenge, they did not respond to the ground of appeal, nor supply any further evidence, for example as to the absence of any contact between the judge and counsel in the period identified.

43. On this material, I agree with Ward JA that, taken in isolation, it has not been demonstrated that the fair minded lay observer might have taken the view that the judge might not decide the case impartially on the evidence presented at trial.

44. The third issue requires a cumulative assessment of this information together with the extensive interventions in the trial which tended to be favourable to the respondents and critical of the evidence of the appellant’s principal witness. Again, I agree with Ward JA that it is unlikely that, even on the test of possibilities, the lay observer might link all of the material so as to form the relevant view as to possible pre-judgment. However, because of the earlier finding, it is not necessary to reach a firm conclusion in this regard.

Challenge to factual findings

45. If the reasoning set out above as to the unfairness of the trial, as to which more than one view is undoubtedly open, were not to be accepted, then I would agree with the reasoning and conclusions of Ward JA in respect of the grounds of appeal challenging the credibility findings.

46. Where the findings of fact depend upon the oral evidence of the witnesses given at trial, it is necessary to give full weight to the advantages enjoyed by the trial judge in assessing the testimony.

45. This Court has commented on more than one occasion on how the language adopted in Fox v Percy [29] should be understood by a court exercising its statutory functions on an appeal by way of rehearing, pursuant to s 75A of the Supreme Court Act 1970 (NSW). That case is often cited in submissions as authority for the proposition that a challenge to factual findings must depend upon a finding of error based on “incontrovertible facts or uncontested testimony”,[30] or that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. [31] However, it is not correct to read that language as imposing a gloss upon the powers conferred by the statute. It is clear that such language was not intended to exclude intervention by the appellate court in circumstances where error could otherwise be demonstrated. [32]

    29. (2003) 214 CLR 118; [2003] HCA 22.

    30. Fox at [28].

    31. Fox at [29].

    32. See generally, Nominal Defendant v Smith [2015] NSWCA 339 at [7]-[11] (in my judgment) and [73]-[77] (Leeming JA); Small v K & R Fabrications (W’Gong) Pty Ltd [2016] NSWCA 70 at [13] (in my judgment), McColl JA and Simpson JA agreeing).

46. Although one may properly describe those findings identified by Ward JA as erroneous as being contrary to compelling inferences or even, perhaps, glaringly improbable, there are two further reasons why this Court is entitled to and should hold those findings to be erroneous. First, it follows from the matters identified above going to the unfairness of the trial that the trial judge did, in the language of Kourakis CJ, deprive himself of the capacity to make sound judgments as to the credibility of the contending testimony. Secondly, as demonstrated by Ward JA, the reasoning by which particular findings were made (and particularly in reference to the findings that Mr Tomazin was dishonest) was unpersuasive.

Costs

49. Senior counsel for the respondents asked the Court to reserve the question of costs. In the event, it is difficult to see any reason why costs would not follow the event; the Court can assume an application would be made under the Suitors' Fund Act 1951 (NSW). Because further expense should be avoided if possible, the Court should order that the costs in this Court be paid by the respondents and that they should have a certificate under the Suitors' Fund Act. If some different order is sought, the parties have the usual 14 days to file a notice of motion seeking to vary that costs order, or to agree a different outcome.

Orders

50. The judgment of the trial judge of 28 May 2014 and the consequential orders made on 24 September 2014 and (in relation to costs) 26 September 2014 should be set aside. The respondents must pay the appellant’s costs in this Court and should have a certificate under the Suitors' Fund Act. Both the claims by the appellant and the cross-claims by the respondents must be reheard. Costs of the first trial should be in the discretion of the judge hearing the retrial.

51. WARD JA: The appellant, Royal Guardian Mortgage Management Pty Limited (RGMM), is a company described as a “wholesale aggregator”. At the relevant time, its mortgage lending business involved the aggregation of loan applications submitted to it by intermediate financial advisors and mortgage brokers (the introducing brokers) and the referral of those applications to another entity, Royal Guardian Mortgage Corporation Pty Limited (RGMC). RGMC was “accredited” with various lending institutions and would in effect place the aggregated loans with the ultimate lenders (sometimes referred to as funders). RGMM, apparently in some informal arrangement with RGMC, the details of which were not made clear, operated its business through or with the benefit of the accreditation secured by RGMC from the respective lenders.

52. With minor exceptions such as loan applications submitted by members of its staff, RGMM did not receive loan applications directly from borrowers, unlike RGMC, which had what was described as a retail (as opposed to wholesale) operation.

53. RGMM received from the lenders both upfront commissions, calculated as a percentage of “settled loans” per month, and “trail” commissions, calculated as a percentage of the borrower-paid interest on the loan book per month. It also received loan application fees from the borrowers. It paid the introducing brokers a percentage of the upfront commissions it received, as remuneration for the referral of the loan applications to it. It also paid introducing brokers a percentage of the trail commissions.

54. It was RGMM’s practice to enter into accreditation agreements with introducing brokers. Some of those accreditation agreements were in evidence and the respondents accepted that from at least around 2005 it was standard practice (RGMM says it was a requirement) that those accreditation agreements provide for introducing brokers to hold insurance.

55. RGMM employed the respondents (a married couple, Ms Nguyen and Mr Stolyar) from around 2001 to 2005, as General Manager and Senior Manager respectively. Their roles may broadly be described as including developing and maintaining relationships with introducing brokers so as to enlarge RGMM’s business, and performing “underwriting” functions in relation to the loan applications referred to RGMM by introducing brokers (which functions included assessing the loan applications for compliance with the relevant lender’s requirements).

56. Mr Tomazin was a director and founder of RGMM and founder of RGMC. In June 2005, after some tension had arisen between Mr Tomazin’s business partners and the respondents, Mr Stolyar resigned from RGMM. He nevertheless continued to refer loan applications to the company for a period of time.

57. In August 2005, a new company, Royal Mortgage Management Pty Limited (RMM), was established. Its function seems to have been understood as the same as that of RGMM. Ms Nguyen’s description of the RMM arrangement was that it was one under which RGMM continued to trade under a new company name. Ms Nguyen became a director and shareholder of that company and it is not disputed that she was for a time employed by it.

58. By June/August 2006, Ms Nguyen had ceased to perform any work for either RGMM or RMM. Ms Nguyen returned to employment with the mortgage originator for whom she had previously worked, Mortgage Portfolio Management Pty Limited (MortgagePort).

59. In early 2007, Mr Tomazin and Ms Nguyen (somewhat informally over a dinner at which Mr Stolyar was present) discussed an arrangement pursuant to which she might return to work for RGMM. Nothing, however, eventuated from their preliminary agreement to that effect.

60. In 2010, RGMM commenced proceedings against the respondents, seeking damages for the alleged breach by them of their respective employment contracts and of the statutory duty they owed to it as employees pursuant to s 182 of the Corporations Act 2001 (Cth).

61. The breaches were alleged to have occurred between 11 February 2003 and 12 May 2005 (statement of claim at [10]) and related to the respondents’ involvement in the referral of certain loan applications (the Dibelle referrals) to RGMM. The Dibelle referrals were made, first, under the business name “Dibelle Finance” which was registered to Ms Chahine, a then friend of Ms Nguyen, and, later, through a company, Dibelle Financial Services Pty Limited (Dibelle Financial Services), the sole shareholder and director of which was Mr Stolyar’s mother (Mrs Faina Stolyar). I will refer to the introducing brokers for the Dibelle referrals as the “Dibelle entities” although Dibelle Finance was not an entity as such; rather, it was a business name under which the respondents referred loan applications “indirectly” (i.e., not in their own names) to RGMM from around 2004 until the incorporation of Dibelle Financial Services.

62. At the hearing the respondents did not dispute that they performed the broking work for the Dibelle referrals. Mr Stolyar’s evidence was that Dibelle operated by “word of mouth”. Mrs Faina Stolyar gave evidence that she introduced many potential borrowers to her son. The respondents initially denied, but ultimately conceded, that they had received significant financial benefits from the making of those referrals. Of the money paid to the Dibelle entities in commissions by RGMM (around $2m in total), a not insubstantial amount was credited to the benefit of the respondents’ mortgage account. Mr Stolyar ultimately accepted that it was in the order of about $300,000-$500,000. He characterised these payments variously as being by way of gift or as a tax free loan. (RGMM argued that the fact that no tax was paid by the respondents on that income was a matter adverse to their credibility.)

63. A critical dispute at trial was whether Mr Tomazin was aware of any association or connection between the respondents and the Dibelle entities at the time when RGMM was receiving the Dibelle referrals and paying the introducing broker commissions to the Dibelle entities in respect of those referrals. Mr Tomazin denied any such awareness but the primary judge determined this issue in favour of the respondents.

64. RGMM alleged that it had suffered loss and harm as a result of the respondents’ breaches because, had the respondents made the Dibelle referrals to it directly, rather than causing them to be made through the Dibelle entities, RGMM would not have been obliged to pay, and would not have paid, broker commissions to the Dibelle entities and would not have been obliged to pay any equivalent amount to the respondents (statement of claim at [16]).

65. However, RGMM’s position, as explained at the hearing of the appeal, was that, had the Dibelle referrals been made directly to it through the respondents as employees of RGMM, those loan applications would then have been referred to another broker for processing (because of the perceived conflict of interest in the respondents processing for approval loan applications they had themselves referred to RGMM) (T 19.21) (see also Mr Stolyar’s description at [36] of his affidavit of 24 October 2012). I interpose that if that were the case, then brokers’ commission would presumably still have been paid to that other entity in respect of the referrals and the only difference would seem to be whether or not the respondents were entitled to a bonus in respect of those referrals. However, while RGMM seemed to accept that proposition in the course of argument in this Court (T 19.17-43), it was not asked to make any express concession in that regard and did not do so.

66. An issue also seems to have arisen during the trial (though this was not part of RGMM’s claim as pleaded) as to whether the Dibelle referrals were in large part comprised of applications by entities that had already been the subject of loan referrals to RGMM (and hence were not new referrals introduced through the efforts of the Dibelle entities). Such a complaint presumably went to the question of whether any bonus would strictly have been payable in respect of those loans under the terms of the respondents’ respective employment contracts. However, Mr Tomazin’s position seems to have been that, from a practical point of view, bonuses (to either Ms Nguyen or Mr Stolyar) were paid on all loan referrals (whether or not brought to RGMM as part of their respective portfolios). Hence this point of distinction seems moot.

67. In any event, what RGMM claimed, by way of loss and damage suffered as a result of the respondents’ alleged breaches, was the sum of $2,093,124.36 that it had paid as commission to the Dibelle entities (statement of claim at [22]).

68. The respondents denied the alleged breaches and in turn cross-claimed for damages for alleged breaches by RGMM of their respective employment contracts and other agreements with RGMM. Their cross-claims related to the alleged non-payment of bonuses and profit shares to which they claimed to be contractually entitled under various agreements. Ms Nguyen claimed entitlement to a share of profits extended to the profits of both RGMM’s business and those of RMM, in each case after her employment with RGMM had ceased in 2005. Mr Stolyar claimed for bonuses which extended to a time after he had resigned from RGMM but during which time he was still referring loan applications to RGMM.

69. RGMM denied liability to pay the bonuses and profit shares claimed by the respondents. It also successfully pleaded a Limitation Act 1969 (NSW) defence in relation to causes of action or damages accruing prior to 20 June 2005.

70. As to the claimed bonuses, RGMM maintained (though this was not expressly pleaded in its defence to cross-claim) that any entitlement of the respondents to the payment of bonuses had been satisfied by payments made by it at their direction to a company known as Bethian Enterprises Pty Limited (Bethian). The respondents denied this. They asserted that the Bethian payments were management fees payable under a separate management agreement between RGMM and Bethian and hence that the making of those payments (which were almost but not quite in the same amount as the claimed bonuses) did not discharge RGMM’s liability under their employment contracts to pay bonuses. As to the claim for profit share, RGMM contended that no liability had arisen and alternatively, in the case of Ms Nguyen, that her breach of the employment contract precluded an entitlement to profit share.

71. The primary judge found for the respondents on their cross-claim and against RGMM on its claim (Royal Guardian Mortgage Management Pty Limited v Nguyen [2014] NSWSC 665). His Honour awarded damages in favour of Ms Nguyen in the amount of $1,092,947 (plus interest subsequently calculated at $837,066.91) and in favour of Mr Stolyar in the amount of $545,767 (plus interest subsequently calculated at $425,989.74).

72. RGMM appeals from his Honour’s decision on various grounds, including denial of procedural fairness and apprehended bias, and seeks orders setting aside his Honour’s judgment and remitting the matter for a new trial. In the context of the grounds of appeal asserting a denial of procedural fairness/apprehended bias, RGMM has sought leave to adduce further evidence pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW).

Background

73. It is convenient at this stage to provide the following further summary of the chronology of events and the content of the various employment contracts.

• Establishment of RGMC and RGMM

74. Mr Tomazin established RGMC in 1998 and RGMM in 2000. He was a director of RGMM and held approximately half the shares in that company. His business partners were Mr Pusic and Mr Pondelak, who each held shares in the company.

• Commencement of Ms Nguyen’s employment with RGMM

75. Prior to her employment with RGMM, Ms Nguyen was employed as Credit Manager at MortgagePort, a mortgage manager for residential home loans funded by a particular lender ([20] of her first affidavit made 29 October 2012). Ms Nguyen’s evidence ([27] of that affidavit) was that Mr Tomazin approached her in late 2000 and informed her that he wanted her to run a new company he had set up; that it would deal only with brokers; and that his aim was to increase the overall volume of the group’s business.

76. The significance of increased business volume, as noted by the primary judge at [4], was that the greater the value of loans referred by an originator or introducing broker (the “book”), the lower the wholesale cost of the loans and hence the higher the “margin” available to the mortgage manager on the final interest rate to the borrower. One advantage of a higher margin was that it enabled a reduced interest rate to be offered to the borrower and hence enabled the mortgage originator or manager to compete more effectively for business. Ms Nguyen’s evidence was that Mr Tomazin told her in December 2000 that his aim with RGMM as a wholesale company was to “increase the overall business volume” so that he could get a lower delivery rate from the funders and that, in this way, RGMC (an unrelated company but one that he controlled and in which he held a large shareholding) would be more profitable.

77. By letter dated 18 December 2000, on the letterhead of RGMC, Mr Tomazin wrote to Ms Nguyen offering her a senior management position “within our firm” at a salary of $75,000, plus superannuation, “with a generous commission structure for any directly referred successful Applicants”. The description “our firm” was somewhat misleading since Ms Nguyen’s employment contract, headed “Executive Employment Agreement” and dated 12 March 2001 was not with RGMC but, rather, with RGMM. The explanation for this seems to be that Mr Tomazin did not generally distinguish between the companies he saw as part of the so-called “Royal Guardian” group. For present purposes nothing turns on this discrepancy.

• Ms Nguyen’s March 2001 employment contract

78. In her employment contract, Ms Nguyen’s position was described as that of “General Manager with the Company [RGMM]” (Recital 2). Her appointment as general manager was for a period of two years unless terminated in accordance with the provisions of the agreement (cl 2.1), and was subject to a probation period of two months (cl 3.1). Her duties were somewhat generically specified (in cl 4.1) as including but not limited to: work “normally conducted by a General underwriter”; work “normally conducted by a relationship manager”; and “any office work which the Company may reasonably ask [her] to do even though it does not fit with the normal duties of her position”.

79. Clause 4.3 obliged Ms Nguyen, in performing her duties, to serve RGMM faithfully and diligently and to exercise all due care; to refrain from acting or giving the appearance of acting contrary to the interests of RGMM; to use her best endeavours to protect and promote RGMM’s good name and reputation; and to perform her duties to the best of her ability.

80. Relevantly, cl 6.3 provided as follows:

Performance review/bonus

…

6.3   The Executive [Ms Nguyen] shall be paid a bonus if she brings her own portfolio (clientele) to the Company and the total sum of settled loans from such portfolio in a calendar month is not less than one million dollars ($1,000,000.00). The bonus for that month shall be 0.25% of the sum of settled loans and shall be payable after settlement.

• Mr Stolyar’s May 2001 employment contract

81. On 14 May 2001, Ms Nguyen’s husband, Mr Stolyar, also commenced employment with RGMM. He was employed with the designation “Senior Manager”. His employment contract was in substantially the same terms as that of Ms Nguyen, including the same entitlement to a monthly bonus of 0.25% of the sum of settled loans if he brought his own “portfolio (clientele)” to the company and the total sum of settled loans from such portfolio in a calendar month was not less than one million dollars (cl 6.3).

• Incorporation of Bethian

82. On or around 23 May 2001, Bethian was incorporated. The respondents were directors and equal shareholders of the company. According to the respondents, Bethian and RGMM entered into an accreditation agreement in June 2001 (the respondents signing on behalf of Bethian and Mr Tomazin on behalf of RGMM). No such document was produced at the hearing. (As will become apparent, this was one of a number of crucial documents on which the respondents relied and of which there was no physical evidence of their existence.) Ms Nguyen deposed in her first affidavit of 29 October 2012 that she had been given a copy of the Bethian accreditation agreement and had placed it in a drawer in her office at Campsie but that she did not then have a copy in her possession and did not know where it was located ([71]). Mr Stolyar also gave evidence of the Bethian accreditation agreement in his affidavit (at [39]-[41]).

83. The existence of a Bethian accreditation agreement seems to have had at best a peripheral relevance; in that, if Mr Tomazin knew of and acquiesced in the referral of loans through Bethian, it would arguably cast doubt on his denial of a similar arrangement with the Dibelle entities. However, as will become apparent, the respondents’ own evidence suggested that when Mr Tomazin, or his business partners, learnt of a Bethian loan referral it caused sufficient concern on their part as to a perceived conflict of interest that this was raised with one or both of the respondents by Mr Tomazin (see [98] below). This may explain why, as Ms Nguyen deposed, Bethian did not introduce many clients to RGMM.

• February 2002 employment contracts

84. In February 2002, each of the respondents signed a further employment agreement with RGMM. The recitals to those agreements recorded that the parties had agreed to terminate the first employment contract and to sign this new agreement. In Ms Nguyen’s case, she was still described as “General Manager” of the company and her duties were similarly described (though this time by reference to work normally conducted by a “senior underwriter” not “general underwriter” and by a “relationship underwriter” not “relationship manager”) (cll 4.1.1, 4.1.2). It is not suggested that there was any relevant difference in her roles under the successive employment agreements.

85. In the respondents’ February 2002 employment contracts, the remuneration clause, instead of simply specifying an annual salary of $75,000 as their contracts previously had done, tied the level of salary to the total sum of settled loans from portfolios brought in by the employee, there described as the “Executive”. The new remuneration clause in Ms Nguyen’s contract, cl 5 provided as follows:

Remuneration

5.1   If the total sum of settled loans from portfolios brought in by the Executive in a quarter (either February – April, May – July, August – October, or November – January) is not less than ten million dollars ($10,000,000.00), the Executive shall be paid a salary on the basis of One Hundred Thousand dollars ($100,000,00 [sic]) per annum.

5.2   If the total sum of settled loans from portfolios brought in by the Executive in a particular quarter (either February – April, Ma [sic] – July, August – October, or November – January) is less than ten million dollars ($10,000,000.00), the Executive shall be paid a salary on the basis of Seventy-five Thousand dollars ($75,000.00) per annum.

5.3   The salary shall be paid weekly.

86. Clause 5 in Mr Stolyar’s contract was in the same terms (even down to the obvious typographical error in the numerical specification of the salary in cl 5.1) but included an entitlement to a fully maintained company vehicle, the fuel costs for which Mr Stolyar was to bear (cl 5.4).

87. Clause 6.3 contained a bonus provision largely in the same terms as before but with a threshold in each case of $2m of “settled loans” from his or her portfolio in a calendar month (in Mr Stolyar’s case there was a typographical error in that the words “one million dollars” were not changed but in numerical terms the amount was specified as $2m and there is no challenge to the primary judge’s finding that the relevant sum was $2m).

88. Relevantly, the amount specified as the monthly bonus was in each case stated to include GST: in Ms Nguyen’s contract by the parenthetical addition, after the words “shall be 0.25%”, of “(plus GST)”; in Mr Stolyar’s contract by the parenthetical addition “(and GST)” after the specified percentage. It seems to have been accepted at the hearing that no GST would ordinarily be payable on a bonus payment of this kind to an individual employee.

• November 2002 variation to respondents’ employment contracts

89. According to Ms Nguyen, she became aware in about July 2002 that one of RGMM’s introducing brokers had been approached by someone on behalf of Mr Tomazin, in what she considered to be an attempt to have that broker become directly accredited to RGMC ([93] of her first affidavit). She deposed that she raised this issue with Mr Tomazin and that she told him that she wanted RGMM to trade under a new name so that there was a distinction between RGMM and RGMC ([96]). Ms Nguyen went on to depose that in about October 2002 she had a further conversation with Mr Tomazin about that issue and that she told him that if he did not agree to her proposal she could not see how their working relationship could continue. According to Ms Nguyen, Mr Tomazin then said that he would offer her, in addition to her 0.25% bonus, a profit share arrangement and shareholding at a later date to “tie [her] in” ([97]).

90. It seems that the profit share arrangement to which Ms Nguyen deposed Mr Tomazin had offered in October 2002 was formalised in November 2002. On 1 November 2002, Mr Tomazin, together with each of the respondents, signed letters varying the terms and conditions of the respondents’ existing February 2002 employment contracts.

91. Ms Nguyen’s contract was varied to increase her salary, effective 1 October 2002, to $125,000 per annum, subject to RGMM “averaging $15 million in settlements per calendar month”. There was a further provision in relation to profit share (consistent with what Ms Nguyen said Mr Tomazin had offered her in October), as follows:

●   The employee shall be entitled to profit share of 25% for any profits over $210,000 per annum as from 1st July 2002 but if there are any losses in any financial year such loss shall be set off against any profits made in the future financial years before the employee shall be entitled to share any profit.

92. The 1 November 2002 letters also included bullet point terms to the effect that the name of RGMM was to be changed to Precise Mortgage Management Pty Limited (PMM); that RGMM/PMM was (or were) to be separately accredited for all Macquarie Bank loans subject to its approval; that RGMM/PMM was (or were) to “go under RGMC banner for all Origin loans”; and for entry into a new employment contract in due course once a lease agreement for “the City office” was finalised. A similar variation letter was signed in respect of Mr Stolyar’s contract but without any such provision in relation to profit share.

93. On their face, there was nothing to suggest that the 1 November 2002 letters were not intended to take effect in accordance with their terms. However, an issue at the trial seems to have been whether they gave rise to any binding variation of the employment contracts. Nothing turns on this because, as will be seen shortly, on 17 March 2003 the employment contracts for each of the respondents were again the subject of variation agreements.

• December 2002 loan application by Ms Nguyen and Mrs Faina Stolyar

94. In December 2002, a loan application was signed in the names of Ms Nguyen and Mrs Faina Stolyar as joint borrowers for an amount of $500,000. Ms Nguyen deposed that a meeting took place on or around 10 December 2002 between Mr Tomazin and Mrs Faina Stolyar, for part of which she was present, when the loan application was signed ([104]). Mr Tomazin denied ever having met Mrs Faina Stolyar.

95. The borrowing was stated in the application form to be for investment purposes, namely for the purpose of raising funds for a share portfolio. However, Ms Nguyen deposed in her first affidavit to having informed Mr Tomazin that she needed to apply for a loan with her mother-in-law for the purpose of Ms Nguyen and Mr Stolyar purchasing a place at Kirribilli ([103]).

96. The signed loan application was therefore clearly inconsistent with what Ms Nguyen says she told Mr Tomazin as to the purpose for which that loan was sought. There seems to be no dispute by the respondents that the loan funds were in fact utilised in connection with a residential property purchase (not the acquisition of a share portfolio). Though a small point, this does indicate that Ms Nguyen was prepared, at least in that one instance, to sign a document misrepresenting the true nature of the transaction in question. (Although the point appears not to have been raised, it may be that the investment purpose was so stated in order to avoid the lending being governed by the Credit Code, which may have been a condition of lending approval.)

• Events leading up to commencement of Dibelle referrals

97. According to Ms Nguyen, in December 2002/January 2003 ([105], [106]) Mr Tomazin told the respondents that his business partners wanted to create another wholesale company called Royal Mortgage Direct (RMD) to deal with small introducers. Ms Nguyen says she objected to this and that she said she would not work under those conditions. According to her, Mr Tomazin asked her if she wanted to compete with them (i.e., presumably, his business partners) as well as with her retail clients; said that he did not care where the business came from as long as it all came to RGMC; and said that it was fine if she competed with them “as long as we keep it all within the Royal Guardian family and under RGMC accreditations”. (I emphasise the latter words because Ms Nguyen’s evidence of this conversation suggests that Ms Nguyen was aware of Mr Tomazin’s concern to maintain RGMC’s accreditation with lenders; an issue that later became relevant when the question of potential conflict of interest arose.) Mr Tomazin denied having made any such proposal.

98. Ms Nguyen then deposed that in around late January 2003 an issue arose as to a perceived conflict of interest on the part of Mr Stolyar (again consistent with a concern at any perceived conflict of interest in the respondents processing their own loan referrals). Ms Nguyen says that at that time one of Mr Stolyar’s principal roles at RGMM was as credit manager responsible for verifying information in a loan application and recommending approval and, in that capacity, Mr Stolyar had processed a loan application that had been referred to RGMM by Bethian ([108]).

99. According to Ms Nguyen, when this issue arose Mr Tomazin suggested that she get a friend or family member to be the face of another new company in place of Bethian which would be accredited with RGMM for her direct deals; said that he did not care to whom the commission was paid as long as the new company was not treated more favourably than any other brokers and she brought in the business; said that the cost to RGMM must be the same; and told her that the arrangement was to be kept secret from his two business partners ([109]). Mr Tomazin similarly denied such a proposal.

• Dibelle Finance business name

100. The Dibelle Finance business name was registered on 31 March 2003. Ms Nguyen deposed to the circumstances in which that occurred; in effect as the result of a business proposal put to her friend, Ms Chahine ([115]-[116]). The respondents do not appear to have disputed that Ms Chahine’s involvement was simply to provide a “shopfront” and that they were the ones who performed the broking work involved in referrals from Dibelle.

101. Ms Chahine, a hairdresser by occupation, swore an affidavit shortly before she died in which she deposed that she had never carried on a business in the name of Dibelle Finance or Dibelle Financial Services; had never been a loan broker or carried on a business in the mortgage or finance industry; and had never received any money from or in respect of Dibelle Finance. She deposed that Ms Nguyen had told her that she and her husband wanted to open an account in her name; that they would just use her name; and that she would not have to do anything.

102. Ms Chahine and Mr Stolyar were joint signatories on the Dibelle business bank account. Ms Chahine’s assertion that she had never received any money from or in respect of Dibelle Finance was shown to be incorrect. Nevertheless there was nothing to suggest that she had herself ever performed any broking work under the Dibelle trading name or referred any loans to RGMM.

103. Ms Nguyen’s evidence was that Ms Chahine signed an accreditation agreement with RGMM on behalf of Dibelle Finance at a meeting with Mr Tomazin in or about early February 2003 and that Mr Stolyar had witnessed the signatures of Ms Chahine, Ms Nguyen and Mr Tomazin ([117]). Mr Stolyar deposed ([76]) that he had witnessed Ms Chahine “fill out” and sign the RGMM accreditation agreement “which she sent to RGMM”. He did not depose to any meeting at which he was present with Ms Chahine and Mr Tomazin.

104. Ms Chahine’s affidavit did not address whether any such meeting had taken place but the notion of her knowingly signing such an accreditation agreement seems implausible if her affidavit evidence is taken at face value. That said, it is also not inconsistent with her affidavit evidence that she may have signed a document which in fact was (or purported to be) an accreditation agreement on the understanding expressed in her affidavit that the respondents just wanted to “use her name”.

105. Mr Tomazin denied signing any such agreement and denied meeting Ms Chahine. No copy of the alleged Dibelle Finance accreditation agreement was produced at the trial. Ms Nguyen, however, deposed to subsequent conversations with Mr Tomazin as to how well the Dibelle arrangement was working for her ([120] of her first affidavit).

• Alleged Bethian management agreement

106. Ms Nguyen deposed (in her second affidavit at [18]) that in or around February 2003 she had a conversation with Mr Tomazin in which he agreed to her proposal that he pay to Bethian “a management fee of 0.25% of that monthly amount [RGMM’s minimum monthly upfront fee of 1% from the funders for all net settlements] in lieu of a 25% shareholding in RGMM”. She maintained in cross-examination that this was a sum distinct from and additional to the bonus of 0.25% on all settled loans.

107. The existence of any such agreement was hotly contested. In Ms Nguyen’s first affidavit, after referring to the Bethian accreditation agreement, she also deposed (in what his Honour later noted was said “almost [as] an aside”) that:

… Bethian also had a separate mortgage management agreement with RGMM for which it received a management fee ([71]).

Unlike her evidence as to the Bethian accreditation agreement, Ms Nguyen gave no account in that affidavit as to the circumstances in which the alleged “separate mortgage management agreement” had been entered into, including whether it was oral or in writing, or as to its terms.

108. It was in her second affidavit that Ms Nguyen recounted for the first time the February 2003 conversation she said she had had with Mr Tomazin. This conversation was there seemingly defined as the “Bethian Management Agreement”. There was no express reference to any document recording such an agreement nor as to what had happened to any such written agreement (unlike the evidence set out in Ms Nguyen’s earlier affidavit as to the Bethian accreditation agreement – a difference that his Honour nevertheless considered pointed against the conclusion that Ms Nguyen had fabricated her evidence as to the management agreement). Not surprisingly, it seems that up until Ms Nguyen’s cross-examination it was assumed by RGMM’s legal representatives that the alleged Bethian management agreement was an oral agreement. The first time the existence of a written document of this kind was referred to was during Ms Nguyen’s cross-examination. No copy of any document recording any such agreement was in evidence at the trial.

109. There was no suggestion that any management services were actually provided by Bethian. However, Ms Nguyen explained the rationale of the alleged management agreement as being that it was in lieu of her being given a 25% shareholding in RGMM as a reward for helping to build up the RGMM “book” ([18] of her second affidavit).

110. Mr Tomazin denied that RGMM ever entered into a mortgage management agreement (or accreditation agreement) with Bethian ([99]). There was, however, reference in the accounts of RGMM (on which the primary judge placed weight in reaching his overall conclusion that the respondents’ version of events should be preferred) to the payment of commission to Bethian. Under the heading “Expenses” (see for example the accounts for the year ending 30/6/04) there were separate items referable to “partners”, “directors” and “Bethian”. These items were separate from the item for “salaries”.

111. There were also in evidence copies of what were referred to as Recipient Created Tax Invoices (RCTIs) which were prepared by RGMM and addressed to Bethian, in which payment of commission (which Ms Nguyen identified as the management fee – [21]-[22] of her second affidavit) to Bethian was recorded. Those Bethian RCTIs referred variously to “net settlement” and “upfront commission” (“@ 0.25%”). They also included GST.

• March 2003 variations to employment contracts

112. On 17 March 2003, each of Ms Nguyen and Mr Stolyar signed further letters of variation in respect of their employment contracts. In Ms Nguyen’s case, the 17 March 2003 letter repeated that which had been the subject of the first two bullet points in her November 2002 variation letter but omitted the further terms relating to the change of company name, Macquarie Bank accreditation and the like. In the case of Mr Stolyar, his salary was again said to be increased to $125,000 effective 1 October 2002 but this time there was no condition that RGMM average any particular amount in settlements per calendar month. There was again no provision relating to profit share of the kind that appeared in the variation to Ms Nguyen’s contract.

• Dibelle Financial Services incorporation

113. The next relevant point to note in the chronology is that, according to Ms Nguyen, in around July/August 2004, Mr Stolyar said to her that the arrangement with Ms Chahine was not working out and that he did not really trust Ms Chahine. She said that he proposed that his mother (Mrs Faina Stolyar) “buy out” Ms Chahine. Ms Nguyen deposed that she then had a conversation with Mr Tomazin as to the proposal that the Dibelle “book” would be sold to Mr Stolyar’s mother and said that he asked her to arrange for another accreditation agreement to be signed ([127]). Mr Tomazin denied that conversation ([137]) and said that he was overseas from late July/early August 2004 to 3 October 2004.

114. Ms Nguyen also deposed to the preparation (by her and Mr Tomazin together) of the accreditation agreement for Dibelle Financial Services (which was incorporated and registered on 21 October 2004 with Mrs Stolyar as its sole director and shareholder – under her maiden name of Faina Lutsker) and to a meeting in October 2004 at which the agreement was signed by Mrs Stolyar and Mr Tomazin in the presence of the respondents ([128]-[130]). Mr Tomazin denied the alleged Dibelle Finance accreditation agreement and denied ever having met Mrs Stolyar. He deposed that he was in Slovenia at the relevant time ( [138]-[140]).

• Events leading to Mr Stolyar’s resignation from RGMM

115. Ms Nguyen deposed that around the start of April/May 2005, Mr Tomazin’s two business partners conducted an audit of loan files that were awaiting settlement ([133]-[134]). Mr Tomazin agreed that his partners had commenced an audit of RGMM loan files in or about May 2005 and said that he helped complete the audit in late May 2005 which was when he first realised that “there was an issue with the introducer Dibelle” ([141]). Ms Nguyen further deposed that at around the start of June 2005 she was approached by Mr Pondelak who queried her about Dibelle ([135]).

116. On 10 June 2005 (at a time when Mr Tomazin said he was overseas), Mr Pusic and Mr Pondelak issued a letter to Ms Nguyen suspending her employment and requesting information in relation to Dibelle. She says she called Mr Tomazin; that he told her to continue working; and that she did so.

117. Following this, Mr Stolyar, by letter dated 16 June 2005, resigned from RGMM effective immediately. Mr Tomazin’s account is that the letter of resignation was signed by Mr Stolyar after he had already been given a termination notice ([146]) and that this was “[t]o keep the brokers, prevent disruption and to keep the fiasco from funders and the mortgage insurers”. The resignation letter referred to an agreed waiver of cl 14.1 of Mr Stolyar’s February 2002 employment agreement as long as he introduced “all me [sic] residential mortgage deals exclusively to [RGMM] for the 3 months period ending 16 September 2005”. (That arguably provides the explanation for the continued referral of loan applications by Mr Stolyar to RGMM at least up until September 2005.)

• Incorporation of RMM

118. After Mr Tomazin returned from his overseas trip (the dates of which were the subject of prolonged cross-examination at the hearing, in light of inconsistent statements in his two affidavits about this), RMM was registered (on 19 August 2005) with Ms Nguyen and Mr Tomazin as directors and shareholders. Ms Nguyen commenced working for RMM in September 2005. Mr Tomazin’s evidence (in explanation for his preparedness for Ms Nguyen to continue working for him after, according to him, he had just become aware of the “Dibelle issue”) was, at least in part, that Ms Nguyen had told him that she had nothing to do with Dibelle and that it was a “front company for Ian [Stolyar] so that he could bring in big clients from the city and get paid commissions” ([143]).

More precisely the line to be crossed in each such case is defined as whether the association is such that a reasonable bystander can say that the adjudicator might not bring an impartial and unprejudiced mind to the resolution of the case.

There must be something in the nature or extent of the association which leads that bystander to conclude, whether for friendship, love, money, fear, favour or otherwise, that the adjudicator might be influenced by it. Where the association in question is trivial, remote or indirect the courts might conclude that it is not a disqualifying one.

242. RGMM further accepts that a failure to disclose an association with a party, legal representative or witness involved in the proceedings does not give rise to an automatic right of disqualification. However, it submits that a failure to disclose may cast evidentiary light on the ultimate question of reasonable apprehension of bias since, in the words used in Aussie Airlines (at 221D-E), it may cause the impression that something was “wrong about it all”. It is noted that the Court there said that “[a] failure to disclose no matter how unwitting, can undermine public confidence in the integrity of, and the administration of justice by, the judicial officer or the tribunal concerned”.

243. RGMM submits that the test for apprehended bias is satisfied having regard to: his Honour having apparently formed the intention during the trial or in the period in which judgment was reserved to engage Senior Counsel for the respondents to represent him in his private defamation proceedings or having at least considered so doing; his Honour’s conduct of the trial; and the finding by his Honour that Mr Tomazin was a dishonest witness. It submits that a reasonable lay observer might think that the trial judge might not have brought an impartial mind to the resolution of the competing evidence and issues in dispute at the trial. RGMM notes that, unlike the position in Michael Wilson & Partners Limited v Nicholls [2011] HCA 48; (2011) 244 CLR 427, here the primary judge was required to adjudicate on the evidence and to make credit findings on witnesses for the respective parties.

244. The respondents for their part submit that the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. They again argue that in a modern trial a judge hearing a civil matter without a jury is expected to intervene in proceedings to ensure a just and expeditious trial.

245. I would accept, for present purposes, that a reasonable fair minded lay observer, having the characteristics referred to above and knowing of Mr McClintock’s expertise in defamation matters, might reasonably infer (from the reference to the defamation proceedings at morning tea followed by the request that his Honour speak privately to Mr McClintock on an undisclosed subject unrelated to the proceedings then being heard by his Honour), that the topic of the relevant discussion was the defamation proceedings. Even so it is by no means an obvious inference that the observer would conclude that the discussion at that stage was about retaining Mr McClintock at some later date, particularly when in the morning tea discussion his Honour had identified another barrister who was then retained to act for him in the proceedings. Similarly, I am not persuaded that a fair minded lay observer might reasonably draw such an inference from the fact that in the post-judgment discussion there was a reference back to the topic of the morning tea discussion.

246. In any event, there is simply no logical connection between his Honour considering the retainer of, and at some point forming an intention to retain, Mr McClintock to act for him in a personal matter and the possibility that his Honour would not conduct and decide the case before him in an impartial manner.

247. As the respondents argue, there is no reason, for example, to think that the primary judge’s interventions might have arisen from a concern that Mr McClintock might not have accepted the brief to appear for his Honour, or that Mr McClintock might have worked any less diligently on the defamation matter but for those interventions. Indeed, not all of the interventions were favourable to Mr McClintock nor were they suggestive of any pre-disposition to find in his clients’ favour.

248. I accept the respondents’ submission that a fair minded lay observer, even in light of the primary judge’s interventions during the hearing, could not reasonably have apprehended that a relationship or association of the kind here in question might have resulted in any deviation from the impartial resolution of these proceedings.

249. Ground 2 fails for this reason.

Waiver

250. The principal submission by the respondents on the first two grounds is that RGMM has waived any right now to object to his Honour’s interventions, having been represented by Senior Counsel during the hearing who made no complaint about those matters.

251. It is accepted by RGMM that no complaint was made at the hearing as to his Honour’s interventions in the course of cross-examination; nor was there any application for his Honour to disqualify himself. It is also accepted by RGMM that a failure to complain at trial is usually fatal to a ground of appeal that the trial miscarried because of apprehended bias or an absence of procedural fairness (referring to Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568 at 572, 577, 587; Ball v McInerney [2014] NSWCA 331 at [90]).

252. However, RGMM argues that no question of waiver arises when ostensible bias is apparent in the judgment and submits that, in assessing whether ostensible bias appears in the judgment, it is permissible to evaluate what was said in the judgment in the light of what had been said at the hearing (by reference to what was said in Vakauta v Kelly at 573, 579, 588). As to the issue of apprehended bias (which fails in any event for the reason set out above), RGMM submits that there can be no issue of waiver in this regard since Mr Young only became aware of the issue involving Senior Counsel for the respondents after the delivery of judgment.

253. The respondents point out that in Vakauta v Kelly the judgment itself referred to the preconceived views held by the primary judge about the witness in question. It is said that the mere fact that in the present case his Honour preferred the evidence of the respondents over that of Mr Tomazin (and made strong adverse credit findings against Mr Tomazin) does not revive an apprehension of bias. The respondents submit that to hold otherwise would unfairly provide RGMM with an opportunity to wait to see whether the outcome of the proceedings was favourable to it before raising an objection the basis of which was already well known to it.

254. In the present case, the fact that there was no objection at the time of the hearing to the manner and extent of his Honour’s interventions may well be explicable having regard to the difficulty of determining at what point the judicial intervention warranted such an objection (though by the time of the comment as to the difference being that of candour (see T 1/195.41 – T  197.10) that point must have been close) or by reference to the understandable disinclination of Counsel to risk putting the judge “off-side” by such an objection or to appear overly protective of a witness. However, a difficulty of that kind points to a forensic decision having been made not to raise the point. Ordinarily, parties are bound by the forensic decisions made in the course of proceedings.

255. I have had some hesitation as to whether there was a waiver of the right to object to the procedural unfairness constituted by his Honour’s level of intervention during the hearing. The respondents argue that so to conclude would allow a party to leave such a point up his or her sleeve until the outcome of the proceedings was known. I have, however, had the benefit of considering Basten JA’s reasons for concluding that in the present case there was no waiver (see [30]-[34] above). I agree that, for those reasons, in the present case there was no effective waiver of the complaint as to the unfairness of the trial.

256. As I have not found any apprehended bias, the question of waiver does not arise in that context. Had it arisen, I would have been of the view that there was no waiver at the stage of the morning tea conversation, since the topic of conversation was not known, and that there could have been no waiver by the time of the discussion after judgment was handed down, since any waiver at that point could only have been of a right of appeal and it is a moot point whether Mr Young would have had ostensible authority to waive a right of appeal at that stage.

257. Accordingly, I consider that the judgment must be set aside on the ground of procedural unfairness.

Remaining grounds – Errors of law and fact finding

258. The remaining grounds of appeal raise issues as to a range of matters in respect of which it is contended that the primary judge erred in law or in the process of fact finding: as to the proper construction of the respondents’ employment contracts (grounds 3, 4, 6 and 7); as to whether there was an oral variation to the profit sharing arrangement between Ms Nguyen and RGMM (ground 10); as to whether the respondents were in breach of their employment contracts (grounds 8 and 9); as to the findings made in relation to the alleged Bethian management agreement (grounds 11-13) and the alleged Dibelle accreditation agreements (grounds 14-17); and as to the conclusions his Honour reached as to the damages to be awarded to the respondents (grounds 19-22).

259. In light of the conclusion reached on ground 1, the matter should be remitted for re-trial. In those circumstances, there is a tension between the importance, emphasised by the majority of the High Court in Kuru v State of New South Wales [2008] HCA 26; (2008) 236 CLR 1 (Gleeson CJ, Gummow, Kirby and Hayne JJ at [12]), for an intermediate appellate court to consider whether to deal with all grounds of appeal and not just what is identified as the decisive ground; and the undesirability of this Court expressing views as to the remaining grounds of appeal when those matters will need to be considered afresh on the remittal of the matter to the Common Law Division.

260. I note that in Kuru it was expressly recognised that there could be no universal rule in this regard and that in that case the question confronting this Court had not been one raising questions of apprehended bias or procedural unfairness such as would result, if successful, in a re-trial at first instance. In the passage extracted by Basten JA (at [10]) from Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 Kirby and Crennan JJ expressed the view that if apprehended bias was made out a re-trial would be ordered irrespective of possible findings on other issues, since even if the judge were found to be correct this would not assuage the impression that there was an apprehension of bias.

261. In the present case, the argument against dealing in this Court with the remaining grounds of appeal in my opinion must prevail because here the substantive issues in dispute between the parties turned in a number of crucial respects (such as the breach of contract claim by RGMM and the cross-claim by the respondents for payment of bonuses/profit shares) on findings of credibility.

262. Indeed, had I not concluded that there had been no waiver of the complaint as to the procedural unfairness of the trial, I would still have been of the view that the judgment should be set aside and the matter remitted for a re-trial on the basis that the credibility findings on critical issues were not sustainable on the reasoning of the primary judge. Hence I have concluded that, while accepting the desirability in the ordinary case of dealing at intermediate appellate level with all grounds of appeal, this is a case where such a course is not appropriate.

263. That said, my reasons for the conclusion as to his Honour’s credibility findings should be stated and I set them out as follows by reference to the following grounds of appeal which expressly challenge the credibility findings (ground 13, which relates to the conclusion reached as to the existence of the alleged Bethian management agreement, and parts of grounds 14-16 and 18 relating to the alleged Dibelle accreditation agreements and RGMM’s knowledge of the Dibelle arrangements).

Ground 13 – The Bethian management agreement

264. The respondents relied on the existence of the alleged Bethian management agreement in answer to the basis on which RGMM had sought to defend their bonus claim, namely that the bonuses had been paid at the direction of the respondents to Bethian. Ms Nguyen’s evidence was that the amounts paid to Bethian were management fees due under a separate agreement and hence did not discharge RGMM’s obligation to pay the bonuses.

265. As noted earlier (see [133]-[136] above), his Honour’s conclusion in the respondents’ favour on this issue was explained by reference to reasons that his Honour had “already mentioned” when dealing with the surrounding facts ([193]) and influenced by two considerations, the first of which was his generally favourable view of Ms Nguyen’s evidence and his adverse view as to Mr Tomazin’s honesty.

266. Ground 13 of the grounds of appeal squarely challenges those credibility findings:

13   To the extent that his Honour’s finding as to the existence of the Bethian Management Agreement depend on the credibility of witnesses, his Honour, because of the matters in paragraph 11 above, palpably misused his advantage.

267. In Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387, Bathurst CJ emphasised (at [173]) the restraints on an appellate court in reviewing findings of a trial judge based on credit and said:

Such findings can only be overturned if the appellate court is satisfied that the findings are glaringly improbable or contrary to compelling inferences: Fox v Percy [2003] HCA 22; (2003) 214 CLR 118 at [28]-[29], or if it can be shown that the judge has palpably misused his advantage or acted on facts which were inconsistent with the evidence or glaringly improbable: Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479; Abalos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167 at 178-179.

268. Conscious of those appellate restraints, I have nevertheless concluded (for the reasons I set out at [278]-[285]) below) that his Honour’s finding that Mr Tomazin was a dishonest witness was not supported by the evidence and therefore that his Honour’s fact finding erred in this regard. Ground 13 is therefore made good.

269. In Baira, at [175] Bathurst CJ went on to note:

However, if it can be shown that in reaching his conclusion the primary judge failed to deal in a satisfactory way with the substantial amount of evidence necessary to be dealt with before the relevant finding against the Iannis could be made, an appellate court on a rehearing is entitled to order a retrial: Fox v Percy supra [104]; State Rail Authority NSW v Earthline Constructions Pty Limited supra at [60], [90], [94]. This is because in such a situation there has not been a determination of the case upon a consideration of the real strength of the body of evidence presented.

270. In the present case, the primary judge’s reasoning as to the dishonesty of Mr Tomazin is unsatisfactory for similar reasons to that which led Basten JA to criticise the not dissimilar reasoning in Baira (see [316]).

271. Since the finding as to the existence of the Bethian management agreement was based to a large extent on findings influenced, as his Honour made clear they were, by the adverse findings as to Mr Tomazin’s dishonesty, I am forced to conclude that this is a case where the primary judge has misused his advantage of seeing and hearing the respective witnesses. Thus even if I had not been of the view that ground 1 was made out and a re-trial was required, I would have concluded that the finding as to the existence of the Bethian management agreement must be set aside and the matter must be remitted for rehearing on the respondents’ respective cross-claims.

Grounds 14-16, 18 – Dibelle Finance and Dibelle Financial Services Pty Limited

272. These grounds (together with ground 18) relate to the findings that formed the basis for the primary judge’s conclusion that there was no breach by the respondents of their contractual obligations to RGMM by reason of their involvement in the Dibelle referrals. They are as follows:

14   His Honour:

a.   erred in finding that the arrangement whereby the respondents received payments from Dibelle Finance and subsequently from Dibelle Financial Services were not a means by the respondents for avoiding the payment of income tax properly payable; and

b.   erred in rejecting the appellant’s submission that such conduct was significant for the credit of each of the respondents; and accordingly

c.   erred in his assessment of the credit of the respondents.

15   In consequence of his Honour’s error referred to in ground 13, his Honour:

a.   erred in accepting the evidence of Faina Stolyar that she signed the Dibelle Financial Services accreditation agreement in the presence of Mr Tomazin, since although that finding was based in part upon an assessment of the credit of Mrs Stolyar, it was also based significantly on an assessment of the credit of the respondents, which assessment erred in consequence of the matter referred to in ground 13;

b.   erred in finding that Mr Tomazin was dishonest with regard to the meeting with Faina Stolyar and the execution of the Dibelle Financial Services accreditation agreement; and consequently

c.   erred in concluding that this finding of dishonesty should be borne in mind when weighing the evidence of Mr Tomazin on other relevant matters.

16   His Honour erred in finding that Mr Tomazin knew of, and implicitly endorsed, the Respondents [sic] use of Dibelle Finance and Dibelle Financial Services as vehicles for the introduction of loans sought by individual borrowers in circumstances where:

a.   his Honour’s finding depended in part upon his assessment of the credit of Mr Tomazin and the respondents, in circumstances where his Honour’s assessment was in error, for the reasons referred to in Grounds 13 and 14;

b.   there was unchallenged evidence that the introductioning [sic] of loans through Dibelle Financial Services and Dibelle Finance and the assessment of viability of those same loans in their employed capacity jeopardised the accreditation of Royal Guardian Mortgage Corporation Pty Ltd which held the lender accreditation for the benefit of the Appellant.

c.   Dibelle Financial Services was set up in suspicious circumstances leading to an inference of concealment from the Appellant of the formation of that business for the benefit of the Respondents; the creation of the corporate entity was in the name of the Second Respondent’s mother’s maiden name as the sole director and shareholder.

17   His Honour erred in finding that Dibelle Financial Services Pty Ltd (Dibelle Financial Services) was accredited in circumstances where:

a.   no Dibelle Financial Services accreditation agreement was tendered at hearing, nor any accreditation agreements for Dibelle Finance and Bethian;

b.   Dibelle Financial Services did not have professional indemnity insurance which was required for accreditation;

c.   the Respondents would act as introducers of loans to the Appellant through Dibelle Financial Services would then assess the viability of those loans in their employed capacity, amounting to a conflict of interest, and in circumstances where there was uncontradicted evidence that such conduct would be in contravention of the accreditation criteria with the lenders.

18   His Honour erred in finding that Ms Chahine executed an accreditation agreement on behalf of Dibelle Finance in circumstances where:

a.   To the extent his Honour’s finding was based on his assessment of the credit of the respondents, his honour [sic] erred in such finding, for the reasons referred to in ground 13;

b.   to the extent his Honour’s finding was dependent upon’s [sic] assessment of the credit of Mr Tomazin, that assessment was erroneous for the reasons referred to in ground 14;

c.   Dibelle Financial Services did not have professional indemnity insurance which was required for accreditation;

d.   the Respondents would act as introducers of loans to the Appellant through Dibelle Financial Services would then assess the viability of those loans in their employed capacity, amounting to a conflict of interest, and in circumstances where there was uncontradicted evidence that such conduct would be in contravention of the accreditation criteria with the lenders.

e.   no Dibelle Finance accreditation agreement was tendered at hearing, nor any accreditation agreements for Dibelle Financial Services or Bethian.

273. As noted earlier, the process by which his Honour reached the conclusion that Mr Tomazin was aware of the respondents’ connection with the Dibelle entities involved, first, his acceptance of Mrs Faina Stolyar’s evidence that she had attended with the respondents when the Dibelle Financial Services accreditation agreement was executed by Mr Tomazin. His Honour considered that this was something about which Mrs Faina Stolyar could not be mistaken and, having considered her to be a truthful and reliable witness, his Honour did not accept she had fabricated her account with the respondents ([196]).

274. His Honour then said that it followed, from that, that he rejected Mr Tomazin’s account. So much can be accepted. RGMM does not challenge his Honour’s acceptance of the evidence of Mrs Faina Stolyar. However, this is not (as the respondents submitted) fatal to the challenge made by RGMM to the finding of Mr Tomazin’s awareness of the Dibelle arrangement.

275. His Honour at [197] noted that there were four significant matters that supported Mr Tomazin’s denial that the Dibelle entities were accredited but proceeded in effect to explain why those matters could be put aside or did not have sufficient force to lead to the acceptance of that denial (including, as to the third and fourth of those factors, his Honour’s acceptance of Ms Nguyen’s evidence based at least in part on his view of Ms Nguyen’s demeanour). Then, at [198], his Honour took into account matters that he considered were inconsistent with Mr Tomazin having a genuine belief that he had been deceived by the respondents.

276. His Honour’s ultimate conclusion (at [200]) that Mr Tomazin’s evidence as to the 2002 loan agreement with Mrs Faina Stolyar and the Dibelle Financial Services accreditation agreement was dishonest was expressed as follows:

Considering the evidence as a whole, including those matters pointing in the opposite direction, I am satisfied that the accreditation agreement between Dibelle Financial Services Pty Ltd was executed as the defendants and Faina assert. It follows that I reject the evidence of Mr Tomazin as to this matter. Bearing in mind the gravity of the conclusion, I am actually persuaded on the balance of probabilities (see Briginshaw v Briginshaw (1938) 60 CLR 336 at 361; Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd [1992] HCA 66; (1992) 67 ALJR 170; (1992) 110 ALR 449 at [3] per Mason CJ, Brennan, Deane and Gaudron JJ) that Mr Tomazin’s evidence as to the loan application and the accreditation agreement was dishonest. (my emphasis)

277. That conclusion then fortified his Honour in the conclusion that there had been an earlier accreditation agreement when Ms Chahine was introduced to Mr Tomazin, though his Honour emphasised that his conclusion was not dependent on his view of Mr Tomazin as a dishonest witness. It is not, however, clear what informed his Honour’s conclusion as to the agreement with Ms Chahine other than the credibility of Mr Tomazin on the one hand and the respondents on the other, since there was nothing in writing in relation to that alleged agreement.

278. The positive finding that Mr Tomazin was a dishonest witness is troubling. Since his Honour expressly disavowed reliance on demeanour as leading to that conclusion, one would assume this Court should be in as good a position as the primary judge to form a view as to that conclusion.

279. Ultimately, the difficulty with his Honour’s conclusion is that it seems to have been based on nothing more than the fact that his Honour accepted the conflicting version of events given by the respondents and by Mrs Faina Stolyar; and therefore concluded that Mr Tomazin must have lied. The fact that one version of events is seen as more credible does not carry with it the necessary consequence that the person putting forward the less credible version must be lying. There is a difference between the rejection of a person's evidence and a finding that he or she deliberately lied.

280. The respondents place emphasis on his Honour’s acceptance of Mrs Faina Stolyar’s credit, which as noted above has not been challenged. However, that evidence relevantly established only the execution of an agreement of which there was no copy before the Court. Even assuming that Mrs Faina Stolyar had given attention at the time to what she was being asked to sign and had recalled it accurately, her evidence does not establish that Mr Tomazin was aware that the respondents themselves (as opposed to Mrs Faina Stolyar, who was the sole shareholder and director and was using her maiden name for the purposes of registration of the company) were associated with the Dibelle entities, in the sense of performing work for the Dibelle entities and receiving substantial benefits from the Dibelle referrals.

281. The evidentiary basis for his Honour’s conclusion that Mr Tomazin’s denial that he had met Mrs Faina Stolyar (not accepted by his Honour) was dishonest is not clear. It is not, for example, clear why that denial could not equally have been consistent with a mistaken recollection of events.

282. The respondents submitted that his Honour’s conclusion that the denial was dishonest can be explained by reference to the fact that Mrs Faina Stolyar spoke heavily accented English and was someone who was related to senior employees of Mr Tomazin’s company. Apart from the fact that Mrs Faina Stolyar deposed in her affidavit that her ability to speak English was “constrained” there is little to enlighten the Court on that issue. Nevertheless, assuming her to have been an idiosyncratic and memorable witness in his Honour’s eyes, that says nothing as to whether she was someone that Mr Tomazin would necessarily have remembered meeting on two occasions some years before he gave evidence.

283. In the absence of an understanding of the people with whom Mr Tomazin ordinarily dealt on a business basis, or his attitude to or interest in the relatives of his employees generally or with reference to the respondents in particular, it is difficult to see how the preference of one version of events as to the execution of the Dibelle Financial Services accreditation agreement with Mrs Faina Stolyar would lead inexorably to the conclusion that the proponent of the other version was giving knowingly false evidence. That conclusion was not in my opinion supported by the objective evidence, yet it was a large plank in the reasoning that led to the finding that at all relevant times Mr Tomazin was aware that the respondents were obtaining significant benefits through their association with the Dibelle entities (and it also had significant adverse consequences for RGMM in terms of the indemnity costs orders).

284. Since the findings as to the existence and execution of the Dibelle accreditation agreements (of which there was no documentary evidence) are not of themselves sufficient to support a finding that Mr Tomazin had the requisite awareness that under the Dibelle accreditation arrangements the respondents were receiving substantial benefits, the challenge to the findings as to that aspect of the matter are made good.

285. In those circumstances the credit-based findings in relation to the Dibelle issue (and hence the Bethian management agreement issue, which turned largely on the Dibelle finding) should be set aside. This is not simply a case where (in the words of Beazley JA, as her Honour then was, in Nominal Defendant v McLennan [2012] NSWCA 148 at [141]) an appellate court thinks that the probabilities of the case are against (or even strongly against) the relevant findings of fact but rather it is where it must, with respect, be concluded that the primary judge “failed to use or has palpably misused his advantage” (see Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479). That conclusion would have the necessary consequence that the findings as to there being no breach of contract by reference to the respondents’ dealings with Dibelle (grounds 8 and 9) would also need to be set aside.

Conclusion

286. For the reasons set out above the orders made by the primary judge on 24 and 26 September 2014 should be set aside and the matter remitted to the Common Law Division for re-hearing of both the claims by RGMM and the respondents’ cross-claims.

287. Ordinarily, costs of the appeal would follow the event. In their written submissions the respondents sought to reserve argument on the question of costs until after the outcome of the appeal. In circumstances where is nothing to suggest that the ordinary order for costs would not be appropriate, I agree with Basten JA that costs should be ordered in favour of RGMM. If the respondents seek to vary that order it is open to them to apply so to do.

Orders

288. In the circumstances I propose the following orders:

1. Appeal allowed.

2. Set aside the judgment for the defendants and the orders made on 24 and 26 September 2014 by Adams J.

3. Remit the proceedings to the Common Law Division for re-hearing.

4. Respondents to pay the appellant’s costs of the appeal. Costs of the proceedings at first instance to be dealt with by the judge re-hearing the matter in the Common Law Division.

5. The respondents to be given a certificate under the Suitors' Fund Act 1951 (NSW).

289. EMMETT AJA: This appeal arises out of employment agreements between the Appellant, Royal Guardian Mortgage Management Pty Ltd (RGMM), on the one hand, and each of the Respondents, Beth Nguyen (Ms Nguyen) and Ian Stolyar (Mr Stolyar), on the other. Ms Nguyen was employed as the General Manager of RGMM’s mortgage lending business and Mr Stolyar was employed as a senior manager of that business. RGMM commenced proceedings in the Common Law Division of the Supreme Court against Ms Nguyen and Mr Stolyar, claiming damages by reason of alleged breaches of their employment contracts. RGMM claimed that Ms Nguyen and Mr Stolyar acted in breach of their employment contracts by causing referrals of potential borrowers through other parties (the Dibelle referrals), thereby being paid commissions to which they were not entitled.

290. RGMM claimed that commissions in sums exceeding $2 million were paid in respect of the Dibelle referrals. Ms Nguyen and Mr Stolyar on the other hand, filed a cross claim seeking recovery of damages for alleged failure on the part of RGMM to pay them a share of profits earned by RGMM. Ms Nguyen and Mr Stolyar claimed to be entitled to sums totalling more than $3.6 million in respect of profit shares.

291. On 24 September 2014, for reasons published on 28 May 2014, a judge of the Common Law Division (the primary judge) directed judgment for Ms Nguyen and Mr Stolyar on the claim made by RGMM. In respect of the cross claim, his Honour directed judgment for Ms Nguyen against RGMM in the sum of $1,930,013.91 and for Mr Stolyar against RGMM in the sum of $971,756.74.

292. On 27 August 2014, RGMM appealed from the orders by the primary judge. An amended notice of appeal was filed on 13 March 2015. The grounds of appeal relied on by RGMM were, first, that his Honour failed to exercise procedural fairness, such that the trial miscarried in that the conduct of the primary judge gave rise to an apprehension of bias. The other grounds related to findings made and conclusions reached by his Honour in rejecting RGMM’s claim and in accepting the claims made by Ms Nguyen and Mr Stolyar.

293. The complaint of procedural unfairness and miscarriage of justice are based on two matters. The first is the extent to which the primary judge interfered in the conduct of the trial by engaging in cross examination of witnesses, principally the principal witness called on behalf of RGMM. The second matter is that, shortly after giving judgment, the primary judge retained to act for him, in proceedings in which his Honour was personally involved, senior counsel for Ms Nguyen and Mr Stolyar. RGMM contends that an inference should be drawn that his Honour had discussed that possible retainer with senior counsel during the course of the trial.

294. RGMM’s claim against Ms Nguyen and Mr Stolyar is that they placed themselves in a position where their personal interests were in conflict with their duties to RGMM as employees, by reason of their involvement in the Dibelle referrals. Their principal answer to the claim was that their arrangements were known to and were approved by RGMM. His Honour accepted that answer. The basis for his Honour’s conclusion in that regard depends very much on his Honour’s assessment of the credit and reliability of the principal witness for RGMM, Mr Anthony Tomazin.

295. The claim by Ms Nguyen and Mr Stolyar against RGMM depended upon their claim that RGMM entered into a management agreement with Bethian Pty Limited, a company formed by them (Bethian). The existence of such an agreement depended upon the evidence of Ms Nguyen. In two affidavits sworn by her, she did not suggest that such an agreement was in writing. However, in the course of cross examination, she asserted that the management agreement was written. No document was ever produced and the explanation proffered by Ms Nguyen was hardly convincing. Nevertheless, the primary judge accepted that there was such an agreement, although his Honour made no findings as to its terms.

296. It was common ground that substantial sums were paid to Bethian. RGMM contended that those payments were made in satisfaction of the profit share arrangement sued upon in the cross claims. Ms Nguyen and Mr Stolyar contended that their entitlement to a share in profit was calculated as 0.25% of total amounts lent by lenders as approved by RGMM. They asserted that the amounts payable under the management agreement were 0.25% of the net amounts so lent. In respect of the year ended 30 June 2015, “total settlements” amounted to $32,905,877, whereas “net settlements” amounted to $32,763,977. The difference of $141,900 is insignificant in the total.

297. Having regard to the somewhat incredible evidence given by Mr Stolyar concerning the existence of a written agreement and the miniscule difference between “total settlements” and “net settlements”, I would have been disposed to conclude that Ms Nguyen and Mr Stolyar failed to establish, on the balance of probabilities, that they were entitled to receive a payment of profit share over and above the sums paid by RGMM to Bethian.

298. I have had the advantage of reading in draft form the proposed reasons of Ward JA. I agree with her Honour’s conclusions, for the reasons proposed by her Honour. In particular, I agree with her Honour’s conclusions that, in the circumstances, there was a denial of procedural fairness, as a consequence of which the orders made by the primary judge must be set aside.

299. It is therefore not necessary to deal with the other grounds raised in the appeal and cross-appeal. However, I would be disposed to conclude, even in the absence of the denial of procedural fairness, that there were errors on the part of the primary judge that would lead to the orders being set aside and the matter being remitted for retrial. Since there is to be a retrial on all issues, it is undesirable to express any conclusion on the evidence before his Honour.

300. I agree with Ward JA that the appeal should be allowed, that the orders made by the primary judge should be set aside and that the proceedings should be remitted to the Common Law Division for re-hearing. I also agree that Ms Nguyen and Mr Stolyar should pay the costs of the appeal but should have a certificate under the Suitors' Fund Act 1951 (NSW). The question of the costs at first instance will be a matter for the Common Law Division on the re-hearing of the matter.

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Endnotes

Amendments

02 May 2016 - Typographical errors

Decision last updated: 02 May 2016