Smales Jewellers (A firm) v Protea Diamonds Pty Ltd
[2000] WADC 267
•26 OCTOBER 2000
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CIVIL
LOCATION: PERTH
CITATION: SMALES JEWELLERS (A firm) -v- PROTEA DIAMONDS PTY LTD [2000] WADC 267
CORAM: YEATS DCJ
HEARD: 13 OCTOBER 2000
DELIVERED : 26 OCTOBER 2000
FILE NO/S: CIVO 168 of 2000
MATTER :In the matter of an Appeal from a Decision of Magistrate Lane SM in the Local Court of Western Australia held at Perth in Plaint No 11096 of 1997
BETWEEN: SMALES JEWELLERS (A firm)
Applicant (Defendant)
AND
PROTEA DIAMONDS PTY LTD (ACN 003 101 380)
Respondent (Plaintiff)
Catchwords:
Appeal from Local Court - Apprehension of bias - Whether proceedings were tainted by disclosure to trial Magistrate of pre trial negotiations and "without prejudice" negotiations - Whether fair minded people might reasonably apprehend or suspect that the trial Magistrate has prejudged or might prejudge the case - Magistrate outspoken in view that there was no defence on the merits - Reasonable apprehension of bias - Trial Magistrate should have disqualified herself - Appeal allowed
Legislation:
International Covenant on Civil and Political Rights (ICCPR)
Local Court Act
Local Court Rules
Result:
Appeal allowed
Representation:
Counsel:
Applicant (Defendant) : Mr I A Morison
Respondent (Plaintiff) : Mr T Mijatovic
Solicitors:
Applicant (Defendant) : Corsers
Respondent (Plaintiff) : T R M Legal Services
Case(s) referred to in judgment(s):
Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642
Ilievska‑Dieva v SGIO Insurance Ltd [2000] WASCA 161
Johnson v Johnson [2000] HCA 48
Laws v Australian Broadcasting Tribunal (1990) 170 CLR 60
Livesey v New South Wales Bar Association (1983) 151 CLR 288
Perre v Apand Pty Ltd (1999) 164 ALR 606
R v Watson: Ex parte Armstrong (1976) 136 CLR 248
Re L: Ex parte L (1986) 161 CLR 342
RPS v The Queen [2000] HCA 3
Ruffles v Chilman (1997) 17 WAR 1
Webb v The Queen (1994) 181 CLR 41
Case(s) also cited:
Nil
YEATS DCJ: The applicant (defendant) seeks leave to appeal from a decision of Magistrate Lane in the Local Court wherein she refused to disqualify herself from hearing the matter at trial on the basis of an apprehension of bias. The application for leave to appeal and the appeal came on as a matter of urgency on Friday 13 October 2000. The trial in the action was to have commenced in the Local Court on Monday 16 October 2000 and was set down for three days. At the completion of the hearing I took the unusual step of granting leave to appeal and allowing the appeal. I now publish my reasons for doing so.
History of the matter
The plaintiff brought an action in the Local Court alleging negligence on the part of the defendant or, alternatively breach of the defendant's duty of care as a bailee or, alternatively its duty to return the jewellery goods of the plaintiff to the plaintiff in its normal state. The facts pleaded indicate that the plaintiff carried on a jewellery business in New South Wales and the defendant carried on a jewellery business in Subiaco in Western Australia. During November 1995 the defendant received a number of diamonds on consignment from the plaintiff by way of Ansett Airfreight. It seems to be accepted that the defendant sent the diamonds back to the plaintiff by way of Ansett Airfreight but the goods were lost in transit. The defendant paid the sum of $3,325 to the plaintiff being the insurance payout less $5,000 excess. The plaintiff's claim is for the sum of $5,933 and the interest thereon. The defendant's defence admits a number of facts but denies that it was negligent; the defendant pleads that it returned the diamonds to the plaintiff in the same manner of carriage as when they were sent to the defendant and that the diamonds were lost without any negligence or default or want of care on the part of the defendant. The defendant also pleads that the plaintiff voluntarily consented to accept risk and to waive any claim in respect of loss or damage. In particulars the defendant contends that the plaintiff gave no specific instructions as to the manner in which the diamonds were to be returned and that the plaintiff was aware or ought to have been aware that the defendant would be likely to return the diamonds in the same manner as they were sent to it. The defendant also referred to the normal course of business between the plaintiff and defendant when Ansett Airfreight was used to transport jewellery items.
That was the state of the pleadings on 26 July 2000 when the matter came before Magistrate Lane in the Local Court on what is referred to in the Local Court Rules as the "first trial date". As part of case management reforms in the Local Court a practice direction has been issued in relation to the "first trial date". I have been unable to locate a copy of the practice direction in Seaman's Civil Procedure in Western Australia. I rely on the setting out of the practice direction in the transcript of proceedings before the learned Magistrate dated 27 September 2000. The practice direction is in these terms:
"On the first trial date it is intended that the trial Magistrate will inquire as to the settlement or likelihood of a settlement and attend the questions of jurisdiction and law, the pleadings, any variations in the number and availability of witnesses, including expert witnesses, any undisputed matters and any variation to the likely duration of the trial.
After clarification of these matters the trial will continue on the nominated continuation date."
As I understand the procedure in the Local Court the "first trial date" hearing takes place before the trial Magistrate some six or eight weeks prior to the dates set aside for the trial of the matter. It is called the "first trial date" so that the plaintiff is required to attend ready for trial as is the defendant. In the event that the plaintiff does not appear the action is struck out. If the defendant does not appear default judgment is entered. Where, as in this case, both parties appear the matter proceeds as a sort of directions hearing before the trial Magistrate to ensure that there are no last minute issues which will lead to the trial dates being vacated. Such a procedure is a very valuable component of a case management system and nothing that I say in these reasons is meant in any way to criticise the practice direction. Courts must be pro-active during pre‑trial hearings to ensure that trial dates are not vacated at the last minute due to late settlement, changes in the pleadings or the unavailability of witnesses. It has been the experience of all courts in Australia that substantial "hands on" intervention by court officers or judicial officers is part and parcel of ensuring that public funds are not wasted by litigants being unprepared for trial.
Grounds of appeal
The defendant complains of several matters that took place during the first trial date hearing on 27 July 2000. The defendant contends that because of statements made by the learned Magistrate at that hearing she should have disqualified herself on the basis of apprehended bias from sitting as the trial Magistrate at the trial of this action. The objections fall into two categories:
(1)That proceedings were tainted by disclosure to the trial Magistrate of the details of settlement negotiations during the pre‑trial conference.
(2)That the Magistrate adopted a position in respect of the merits of the defendant's case such that it was reasonable for the defendant or any other reasonable person to be under the apprehension that the learned Magistrate may be biased against the defendant's case.
I will look at those two grounds separately.
Disclosure of settlement negotiations
At the commencement of proceedings on 26 July the Magistrate enquired in these terms:
"Now in relation to the claim between the plaintiff and the defendant, have you discussed the settlement in relation to this matter? Is there any opportunity for a settlement?"
Counsel appearing for the plaintiff then proceeded to disclose what had gone on at the pre‑trial conference including the first offer from the defendant and a further offer on the plaintiff's offer including the amounts and the discussion as to legal costs. Counsel for the plaintiff told the trial Magistrate that the defendant's offer was not accepted "notwithstanding the vigorous attempts of the Clerk of Court to attempt to persuade the defendant and third party to increase their offer". That was unsuccessful hence the listing of the trial. Plaintiff's counsel then went on to tell the trial Magistrate about written "without prejudice" communications between the parties concerning settlement. That included details of the offers and counter offers; counsel for the plaintiff made a prolonged submission as to the extent of the costs involved and the need for legal costs of about $5,000 to be paid. Counsel for the plaintiff went on to discuss the need to bring three witnesses from Sydney for the trial and there would be accommodation costs of another $2,000 or $3,000.
At the end of this the learned Magistrate replied: "plus your getting up fees". By that statement the learned Magistrate confirmed what was said to her.
It is the normal rule and necessary for the proper conduct of mediation and case management in all the courts of Western Australia that offers and counter offers made at pre‑trial conferences should not be brought to the attention of the judicial officer hearing the case on its merits. The law in this area is no different in the Local Court. Sections 45A, 45B, and 45C of the Local Court Act set out the procedures that are utilised in the Local Court for the holding of pre‑trial conferences. Section 45B(8) is in these terms:
"Subject to sub‑section (9), evidence of anything said or done or any admission made at a pre‑trial conference is not admissible in any court."
Sub‑section (9) s 45B provides:
"Nothing in sub‑section (8) prevents a court from admitting evidence of anything said or done or any admission made at a pre‑trial conference ‑
(a)for the purposes of exercising its powers and authority under sub‑section (6) or
(b)upon the trial of a person for an offence committed at a pre‑trial conference."
Section 45B(6) provides authority for a Magistrate to enforce orders made at a pre‑trial conference.
The plaintiff's counsel asserts that s 45B(8) refers only to "evidence" and he was not giving "evidence"; he was merely answering the learned Magistrate's question. I do not accept that submission. While the Local Court Act clearly refers to "evidence" the overall intention and the principles of pre‑trial case management require that those settlement negotiations will not be brought to the attention of the trial Magistrate. Whether they come there as evidence or come through submissions from the Bar table, I consider that the intention of the Act is that parties should not be prejudiced in any way by settlement negotiations conducted prior to trial. There is support for this approach in the Local Court Rules. O 10, r 2A deals with pre‑trial conferences. O 10, r 2A(4) is in these terms:
"The clerk shall ensure that notes of anything said or done at a pre‑trial conference in relation to an action are kept on a file which is separate from the file which is used by the Court during the trial or hearing of that action."
It is clear from this rule that it is not intended that the trial Magistrate learn of anything said or done during the pre‑trial conference. That is the only interpretation that would be consistent with maintaining the integrity of pre‑trial conferences.
Once the plaintiff's counsel set out the details of not only what had gone on at the pre‑trial conference but also the "without prejudice" negotiations between the parties, the learned Magistrate should have arranged for another Magistrate to hear this matter. Once those matters have been raised with her I consider that she has been tainted and should not conduct the trial. In her Reasons for refusing the application to disqualify herself the learned Magistrate said she no longer can remember what was said to her. That is not an answer. In this area, it is the apprehension by the parties or a reasonable member of the public of bias that is of concern, not actual bias. The test which is to be applied when bias is raised has been clearly laid down. It is whether in all the circumstances the parties or the public might entertain a reasonable apprehension that the Judge might not bring an impartial and unprejudiced mind to the resolution of the matter before him. (R v Watson: Ex parte Armstrong (1976) 136 CLR 248: Livesey v New South Wales Bar Association (1983) 151 CLR 288). Anyone aware that the Magistrate had learned of the pre‑trial conference negotiation and of the "without prejudice" negotiations would apprehend that that information could taint the Magistrate and lead to her being unable to bring an impartial mind to the resolution of the matter.
In her reasons for refusing an application by the defendant to disqualify herself the learned Magistrate said that the practice direction required her to perform a role with which she was uncomfortable. She has clearly in my view misunderstood the practice direction. While it is appropriate for the trial Magistrate to enquire "as to the settlement or likelihood of a settlement" that would never require the details of pre‑trial conference negotiations or without prejudice negotiations being brought to the trial Magistrate's attention. The practice direction is directed to determining whether the matter may settle so that the trial dates could be vacated. Courts are very aware that settlement up to the very doorstep of the Court can take place and it is appropriate that the Magistrate enquire as to the settlement or likelihood of a settlement. It is completely wrong, and counsel for the plaintiff should have realised it would have been wrong, for the details of these matters to have been brought to the attention of the trial Magistrate.
Alleged predisposition against the defendant
The defendant also alleges an apprehension of bias based on comments made by the learned Magistrate in the course of the first trial date hearing. The learned Magistrate very strongly propounded the view throughout the hearing that there was no defence raised by the defendant on the pleadings. She put this directly to the defendant's counsel and said "I really don't see what the defence is at this point in time but I'm yet to be persuaded there is a defence Mr Geddingby, what is it?" Mr Geddingby then replied:
"Your Worship you're quite right about the agreed facts. As I see it most of the facts between the parties are agreed. It essentially comes down to a legal issue I think as to whether or not the defendant breached any duties as a bailee or any duties in negligence. The defence is simply that they didn't. Given that they returned the diamonds in the same way, there was a course of dealings between the parties, it was the only appropriate way, given the nature of the business arrangements between the parties to return them. I think there's questions about this duty of care or the standard of care that they owe to the plaintiff."
A perusal of the pleadings as they stood at the time of the first trial date supports defence counsel's submissions. A denial of negligence and an explanation for that was fully pleaded in what stood at that time as the "Defence to Substitute Statement of Claim" dated 17 March 1999. The learned Magistrate then proceeded to draw to the attention of the defendant's counsel the High Court's decision in Perre v Apand Pty Ltd (1999) 164 ALR 606 and the Full Court's decision in Ilievska‑Dieva v SGIO Insurance Ltd [2000] WASCA 161. She informed counsel that:
"the principles of that (Perre v Apand) will be what will be applied to this case because this is a case of pure economic loss, not occasioned upon physical injury, and that's what it will be decided upon."
The learned Magistrate then went on to say:
"I think you should read that case, because that really takes the law one step further."
And later said:
"Well go and really look at the law and advise your client in relation to that law and also advise your client that if she is or if they are unsuccessful it would mean a substantial legal bill."
Later in his submissions counsel for the plaintiff put a claim for unjust enrichment in that the defendant benefited from not paying out of its own purse $5,000 to its insurer for an excess claim pursuant to an insurance policy. He concluded with reference to the defendant's statement that there was no unjust enrichment because the insurance company deducted the excess from the value of the claim against the insurance policy:
"Now that's, in my submission an unsatisfactory answer and doesn't whatsoever respond to the detriment the plaintiff has suffered and the benefit the defendant has suffered by not paying $5,000 to its insurer pursuant to a separate contract."
To that submission the learned Magistrate responded "Yes, that's a good claim."
The matter came on for a further hearing before the learned Magistrate on 20 September 2000. On that occasion her Worship continued with her previous statement of the position:
"I can't see a defence on the merits. I have read all the materials on the file. I've read the summary judgment application affidavits, because they are evidence before the Court. I've looked at the pleadings and I did that. This is how I look at all my pleadings. Go to the claim, go to the defence, and I read them like that…I can't see your defence, and if there is, it's just a denial."
The learned Magistrate then went on to confirm again that the law on this point is in terms of pure economic loss and there are cases that she referred to that needed to be read. Later on 20 September 2000 at the hearing her Worship said:
"There's no elements of defence in terms its just the denial. So what are the elements of defence where there is a denial, simply putting the plaintiff to proof? She's simply denying it, that she owes the amount, and doesn't in any way affirmatively state what her actual reason for denying is. That is what I call a defence; stating the reason that you are denying the plaintiff's claim."
In looking at this matter I can first say that I see no relevance to the case before her of the decision in Perre v Apand (supra) or its application in the Ilievska‑Dieva (supra) case in our Full Court. Those were both cases dealing with the question of whether a duty of care existed in the particular circumstances. It is clear on the pleadings in this case that the plaintiff is relying on the duty of care owed by a bailee under a contract of bailment. It is implied in every contract of bailment that the bailee will take reasonable care of the goods. (Davis v Pearce Parking Station Pty Ltd (1954) 91 CLR 642 at 648). (Cheshire & Fifoot: Law of Contract 7th Aust ed at 10.43). The defendant in this case has pleaded a defence denying that it breached its duty of care. The Magistrate has adopted a position in terms of the law and as she says being unable to see a defence "on the merits" has gone well past what is appropriate when the trial Magistrate discusses the pleadings with parties to litigation prior to trial. The learned Magistrate has stated a finding as to matters of law and fact which did not arise from any submissions by either party and in those circumstances it would seem to me that the defendant would entertain a reasonable apprehension that she might not bring an impartial and unprejudiced mind to the resolution of the issues at trial. (R v Watson: ex parte Armstrong (supra) at 258‑263).
The law applicable is not in doubt. In Webb v The Queen (1994) 181 CLR 41 at 47 Mason CJ and McHugh J said:
"When it is alleged that a judge has been or might be actuated by bias, this Court has held that the proper test is whether fair minded people might reasonably apprehend or suspect that the judge has prejudged or might prejudge the case."
In Laws v Australian Broadcasting Tribunal (1990) 170 CLR 60 at 100 Gaudron and McHugh JJ said:
"When suspected prejudgment of an issue is relied upon to ground the disqualification of the decision maker, what must be firmly established is a reasonable fear that the decision maker's mind is so prejudiced in favour of a conclusion already formed that he or she will not alter that conclusion irrespective of the evidence or arguments presented to him or her."
These principles were discussed recently in the High Court in RPS v The Queen [2000] HCA 3 at par 95 and par 96 in the judgment of Callinan J:
"The whole rationale behind the apprehended bias rule is the need for public confidence in the judicial system: it is of 'fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.' (R v Sussex Justices: Ex parte McCarthy [1924] 1 KB 256 at 259). Or, as Deane J stated in Webb v The Queen (1999) 181 CLR 41.
'It is of fundamental importance that the parties to litigation and the general public have full confidence in the integrity, including the impartiality, of those entrusted with the administration of justice'. …
Justice must be seen to be done: otherwise justice will not in fact be done. As Lord Denning MR said (Metropolitan Properties Co (FGC) Ltd v Lannon [1969] 1 QB 577 at 599).
'The reason is plain enough. Justice must be rooted in confidence: and confidence is destroyed when right‑minded people go away thinking: 'The judge was biased'."
I am mindful that a court must be careful not to exaggerate the significance of what was said in the course of proceedings. A judicial officer hearing a matter often must engage in argument and put propositions that are not conclusions but require testing by the parties. Such matters are "tentative and exploratory" and would not ground an application for disqualification. (In Re L Ex parte L (1986) 161 CLR 342 at 359‑360 per Wilson J).
In the very recent decision in Johnson v Johnson [2000] HCA 48 the High Court discussed the governing principles when considering apprehension of bias:
“It has been established by a series of decisions of this Court that the test to be applied in Australia in determining whether a Judge is disqualified by reason of the appearance of bias … is whether a fair minded lay observer might reasonably apprehend that the Judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.” (per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ at par 11).
The Court went on to say that:
“The hypothetical reasonable observer of the judge’s conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues.” (par 12).
The High Court referred to the need to make the judgment in the context of ordinary judicial practice the rules of which are not frozen in time. The Court went on to refer to the need for greater flexibility now that case management principles are applied by Judges. The Court said:
“Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a Judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx … Judges are not expected to wait until the end of the case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters at issue, and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them.” (par 13)
It is also important in considering the issue of bias to recall that Australia is a party to the International Covenant on Civil and Political Rights and that Article 14.1 of the Covenant states that “Everyone shall be entitled to a fair and public hearing by a competent independent and impartial tribunal established by law.” Kirby J in the High Court of Australia in Johnson’s case quoted the United Nations Human Rights Committee conclusion as to the meaning of “impartiality of a court” and went on to note that:
“In expressing the common law of Australia, it is legitimate, at least in the case of any uncertainty, to take into account the exposition of an international human rights law where the law states principles of universal application. The ultimate foundation of the principle of the common law rests, relevantly, on the presupposition that a court deciding a matter between parties will be independent and impartial. The fundamental requirements of independence and impartiality do not imply that adjudicators must be absolutely neutral, in the sense of having 'no sympathies or opinions'. But they do require that adjudicators that 'strive to ensure that no word or action during the course of the trial or in delivering judgment' leaves an impression of prejudgment of a point in issue.” (Johnson v Johnson at para 40 per Kirby J).
These matters were considered in Western Australia in the Full Court in Ruffles v Chilman (1997) 17 WAR 1. In that case a District Court Judge in the course of the trial in a personal injuries matter had referred the parties back to the Deputy Registrar for further mediation. The Judge spoke with the Deputy Registrar in Chambers and in the course of the mediation the Deputy Registrar indicated he had spoken to the trial Judge and that he had formed the opinion that the trial Judge had formed a negative view of the appellant's credit. In that case the Full Court after reviewing the authorities considered that the appellant would have been left with a reasonable apprehension of bias. He was given no reassurance when the subject was raised by counsel. In those circumstances the Full Court quashed the decision of the trial Judge and ordered a re‑trial.
In this case I am satisfied, based on reading the transcript, that fair minded people might reasonably apprehend or suspect that the Magistrate has pre‑judged or might pre‑judge this case. She has been outspoken in her view that there was no defence on the merits. It has been firmly established in my view that there is a reasonable fear that the decision maker's mind is so prejudiced in favour of the conclusion that the defendant has no defence that she will not alter that conclusion irrespective of the evidence or arguments presented to her. This was not a case where the learned Magistrate merely formed a tentative opinion to assist counsel by hearing those opinions and being given an opportunity to deal with them (Johnson’s case). The repetition and strong assertion by the learned Magistrate clearly in my view leaves an impression of prejudgment of the defendant’s case. It has gone well beyond what is legitimately the role of the learned Magistrate as part of case management. For these reasons I consider that the appellant would have been left with a reasonable apprehension of bias. It is for that reason that I granted leave and allowed the appeal.
The amended particulars of defence
During the hearing on the first trial date on 26 July 2000 the plaintiff's counsel raised with the Magistrate a further defence involving a compromise that had been discussed at the pre‑trial conference. The Magistrate's comments about that were:
"The problem with that is if the plaintiff didn't accept it as a full and final settlement and communicated that to the defendant well then you would have to know you're just wasting your time in terms of raising it. If it’s a full and final settlement and the plaintiff accepts it as such well then that's a factual issue. If the plaintiff didn't pursue the matter well then there's no estoppel. So you don't want to waste your time chasing legal points that you're not going to be successful on because then you've got the cost of that as well."
Despite that indication by the Magistrate that this defence may be a waste of time counsel for the defendant was given leave to amend its defence to plead the positive defence of compromise. An amended particulars of defence dated 1 August 2000 was filed on behalf of the defendant. In the amended particulars of defence the defendant claimed that:
"It had reached an agreement with the plaintiff to compromise the claim and that the $3,325 was paid in full and final settlement of the plaintiff's claim."
The amendment of the defence pursuant to the discussion during the first trial date hearing is relied on by the plaintiff's counsel as evidence to show that counsel was unprepared at the first trial date and the Magistrate assisted by discussing with him the substantive defence that was the subject of the later amendment. I do not accept that submission by the plaintiff's counsel. It is clear to me from reading the transcript that the defence counsel stated fully the nature of the defence at the time of the first trial date hearing. The fact that the Magistrate considered there was no defence on the merits simply shows a lack of understanding on the part of the learned Magistrate and her continued statement of her belief that there was no defence indicates a pre‑judgment that leads to the inevitable finding of an apprehension of bias.
For these reasons I granted leave to appeal and allowed the appeal.
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