Smits & Anor v Roach

[2005] HCATrans 553

[2005] HCATrans 553

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S290 of 2004

B e t w e e n -

LEONARDUS GERARDUS SMITS

First Applicant

JOHN ANTHONY LESLIE

Second Applicant

PLANTOY PTY LIMITED

Third Applicant

and

WALTER EDWARD ROACH

First Respondent

VALERIE ANNE ROACH

Second Respondent

WINNOTE PTY LIMITED (IN LIQUIDATION)

Third Respondent

SYDTECH PTY LIMITED (IN LIQUIDATION)

Fourth Respondent

Application for special leave to appeal

GLEESON CJ
McHUGH J
HEYDON J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 5 AUGUST 2005, AT 10.32 AM

Copyright in the High Court of Australia

__________________

MR J.M. IRELAND, QC:   If the Court pleases, I appear with my learned friend, MR H. ALTAN, on behalf of the applicants.  (instructed by Moloney Lawyers)

MR T.G.R. PARKER:   If it please the Court, I appear for the respondents.  (instructed by Maurice Blackburn Cashman)

GLEESON CJ:   Yes, Mr Ireland.

MR IRELAND:   Your Honours, this case raises for consideration a significant matter with important ramifications for the conduct of all litigation in which parties are represented by counsel.  At the trial held in the Supreme Court of New South Wales, where the applicants were the plaintiffs, they were unaware of a family relationship that existed between the trial judge and the chairman of partners of a Sydney firm of solicitors which was connected with the litigation.

GLEESON CJ:   What was the connection exactly?

MR IRELAND:   The connection was this, your Honour.  The plaintiffs at trial, the applicants here, acted as solicitors for the respondents in a claim against Freehills, a firm of solicitors.  The plaintiffs’ claim at trial was for costs which had been incurred by the clients in the action, the solicitors having ceased down the track to act for the plaintiffs.  If the plaintiffs succeeded in the trial here, it meant that the partners of the firm were likely ‑ ‑ ‑

GLEESON CJ:   If the plaintiffs, Mr Smits and the others, succeeded against the Roaches, what would happen?

MR IRELAND:   That would mean that there would be an increased burden of costs at least likely, or possibly recoverable, by the Roaches against Freehills in the litigation, which the Court of Appeal recognised ‑ ‑ ‑

GLEESON CJ:   I just want to understand that a little better than I do at the moment.

MR IRELAND:   Yes, your Honour.  The claim here was for fees, fees which the clients, the Roaches, had incurred in the course of their litigation then pending against Freehills.  The solicitors had, as it were, ceased to be solicitors in the action before that came to trial, but nevertheless if these fees were recovered against the Roaches the likelihood was, as the Court of Appeal accepted, that there would be an increase in the burden of costs likely to be ordered against Freehills per force of this decision.  So the solicitor’s claim for $750,000 for their costs succeeded at this trial.  That liability had the likelihood to be passed on in an adverse order for costs against Freehills.

GLEESON CJ:   In other proceedings?

MR IRELAND:   In the proceedings where the solicitors had ceased to act and other solicitors had stepped in.

McHUGH J:   Was this the result of the retainer agreement?

MR IRELAND:   Yes.

McHUGH J:   Now, prima facie you seem to have quite a considerable argument insofar as it is said that Mr Lindsay’s knowledge per se bound your client in cases like Tate v Hyslop and so on are in your favour on that.  But what do you say about the passage at 192 in the Court of Appeal’s judgment at paragraph 43, line 21:

As counsel, Mr Lindsay was bound to disclose to his clients that McClellan J’s brother was a partner at Freehills.  Indeed, according to his evidence, Mr Lindsay may well have done so.

MR IRELAND:   What happened was this, your Honour.  I think it is better made clear if I could refer your Honour to application book 178, lines 30 to 33.  Does your Honour see it?  At paragraph 23:

The following matters are established and not in dispute.  His Honour’s brother was on the date of judgment a partner and the chairman of Freehills.  It is assumed that he had been both from the time the proceedings began before McClellan J.  Neither of the plaintiff solicitors –

that is Smits and Leslie –

nor junior counsel, Mr Haffenden, was aware of this before the trial Judge’s announcement on 17 June 2002.

What Mr Lindsay said in his affidavit, your Honour, was that he thought he had raised the matter with the clients but he could not be sure.

GLEESON CJ:   Yes, but just a moment.  The reference on paragraph 23 is to the plaintiffs’ solicitors and junior counsel.  The reference in paragraph 43 is to the clients.

MR IRELAND:   The plaintiffs are the solicitors.  It is plaintiff solicitors, not plaintiffs’ solicitors.  I misread that as well.

McHUGH J:   Yes.

MR IRELAND:   It is Smits and Leslie acted for themselves in this action.

McHUGH J:   Yes.

MR IRELAND:   So that neither of them knew of this secret fact.  Haffenden, junior counsel, did not know.  Mr Lindsay knew because he had done his articles at Freehills and he had encountered Mr Geoffrey McClellan there.

GLEESON CJ:   Well, there is something curiously conditional about the expressions in paragraph 43.

MR IRELAND:   I accept that, your Honour.

GLEESON CJ:  

If the appellants did not act on that information at that time, or if Mr Lindsay did not inform them, they waived their right ‑ ‑ ‑

MR IRELAND:   I think he is saying as a matter of principle either thing would operate, but the facts of this case are, as the judge says in the passage I have indicated, not contentious.

McHUGH J:   Your criticism is that the error is in the second alternative, “or if Mr Lindsay did not inform them”.

MR IRELAND:   Yes.  That was the factual basis upon which Justice Sheller proceeded.  It was not suggested and Mr Lindsay put on an affidavit which was not contested in which he said, “Look, I knew all about this association.  I didn’t get myself involved in the detail.  I thought I may have told them but I can’t be sure”.  That was what it came to.

McHUGH J:   Have you looked at Tate v Hyslop?

MR IRELAND:   Yes, your Honour.

McHUGH J:   It seems to support you, does it not?

MR IRELAND:   Yes, your Honour, but this would be of enormous consequence.  When something happens in court, counsel respond to it, sometimes very quickly, sometimes without taking instructions, they deal with it.  Your Honour said this in Re Birks in the criminal context.  There are a multitude of decisions that are taken forensically in the courtroom where the litigant is bound by counsel’s decisions and tactics.  We all know that.  But where you have something which the barrister knows but from another world or another context which is never communicated to the clients which the judge, the Court of Appeal finds, ought to have been raised for consideration ‑ ‑ ‑

McHUGH J:   Well, that is why I referred you to Tate v Hyslop.  That was a case where disclosure had been to an underwriter’s solicitor but it was held it did not constitute knowledge on the part of the underwriter because the solicitor did not receive it in the course ‑ ‑ ‑

MR IRELAND:   The scope of his agency.

McHUGH J:   ‑ ‑ ‑ the scope of his agency.

MR IRELAND:   Yes, that is what we have put in our written submissions, your Honour.  I have not referred to the case, but that is consonant, that decision, with it.  Justice Sheller relied on the insurance broker cases.  This is where it seems to have come up before.

McHUGH J:   Yes.

MR IRELAND:   But it is an important matter in the public administration of litigation because there are two aspects.  The first is the client is visited in the way that these clients have been visited with a consequence which is prima facie surprising, but the second thing of course is that it attracts a whole new attention to what counsels’ duties are.  In this case the Court of Appeal said some rather extraordinary things about the extent of Mr Lindsay’s duty to ‑ ‑ ‑

McHUGH J:   In Blackburn, on which the Court of Appeal relied, the court actually drew an inference that it had been communicated, did they not?

MR IRELAND:   Yes, they did.

McHUGH J:   So it did not lay down a rule of law.

MR IRELAND:   No, it was a factual question.

McHUGH J:   Yes.  That is consistent with what Lord Hoffmann said in El Ajou v Dollar Holdings plc, that you may be able to draw an inference about ‑ ‑ ‑

MR IRELAND:   But that is a factual question.  This is presented as a rule of law, in the case before you, and it has quite sharp consequences both for this litigation and generally.

GLEESON CJ:   How many partners are there in Freehill Hollingdale & Page?

MR IRELAND:   A lot – 60, was it?  I am guessing, about 60.

GLEESON CJ:   I am just wondering what was the extent of Justice McClellan’s brother’s maximum possible financial interest in this issue?

MR IRELAND:   The claim was $750,000.  He would have been jointly and severally liable for whatever taxable part of that – subject to any question of insurance.  But, your Honour, there was no ‑ ‑ ‑

GLEESON CJ:   What are we talking about, $5,000 or $50,000, or does it not matter?

MR IRELAND:   It does not matter.

GLEESON CJ:   Well, $5 would not matter?

MR IRELAND:   Well, it is $750,000 because it is a joint and several liability.

HEYDON J:   There are hundreds, are there not, of partners at Freehills?  It is a national firm.

MR IRELAND:   I am not sure.  This was in 1996, the events which led to – that is why I would hesitate, your Honour.  I just remember seeing the writ and there were about 60 in the schedule.  I think it was the Sydney partnership at that time.

GLEESON CJ:   Where is the part of the Court of Appeal’s reasoning where they find that subject to waiver your point would have been right?

MR IRELAND:   Page 188.

HEYDON J:   The bottom of 187 ‑ ‑ ‑

MR IRELAND:   Yes, it starts at the bottom of 187.  At the top of the page:

The trial Judge should have disclosed to the parties that his brother was a partner or chairman of Freehills when the proceedings began.  His failure to do so is explained by the fact that, when considering whether they might object to McClellan J sitting, the parties were directing their minds to social relationships apparently enjoyed by the plaintiffs –

Distractingly what had happened, the judge had played golf with the solicitors at some stage.  He communicated before the trial the question whether the fact that he knew the plaintiffs was a matter that was going to cause embarrassment or ought to be raised.  His Honour raised that matter.  The parties decided consciously, in light of the fact that they were also known in a general sense to the judges – one of the plaintiffs had been a Registrar in Equity, so he was quite well known to a lot of the judges.  They said, and it was discussed, that the fact that they had had some social contact with the judge should not be a problem.  What they ‑ ‑ ‑

McHUGH J:   The Court of Appeal did not put it on the basis of pecuniary interests on the part of the brother; they put it on ‑ ‑ ‑

MR IRELAND:   No, association.

McHUGH J:   ‑ ‑ ‑ a social relationship.

MR IRELAND:   Yes, association.  Justice Deane called it association.  That is said to be something that of course one has to know.  As I say, if something happens in court, you react to it.   Vakauta v Kelly is the prime example.  The Court says you do not stand by and see how you go in the case and then take the point.  But if you just do not know this deep fact, the question must then become one of agency and scope of agency, whether a barrister in this circumstance, learning something externally and tangentially and doing nothing to communicate it, which is the assumption upon which the court proceeded, nevertheless waives the point.

GLEESON CJ:   Do I take it there was no finding about whether the belief of Mr Lindsay referred to on line 20 of page 188 was correct?

MR IRELAND:   No finding.  Your Honour, the affidavit of Mr Lindsay is reproduced in the application book.  Page 180 is what he said in his affidavit, so it does not need to be evaluated by cross‑examination:

10.      At the time I made that announcement I believed that each of the Plaintiffs knew that his Honour was the brother –

So he starts off with a belief and then he says, “I may have told them”.  That is across the page on 181 at line 39:

f.         I believe, but I may be mistaken, that in the course of those conversations I referred to –

So he starts off by believing they know the point.  He thinks he has referred to it.  But Haffenden, the junior, and it was accepted, said he did not know, and it was also accepted both by the judge in the disqualification application and in the Court of Appeal that Mr Lindsay was in fact mistaken.

GLEESON CJ:   Did Mr Leslie give evidence about this?

MR IRELAND:   There was an affidavit before the judge.  It was accepted, as I say – that is why I sought to refer to that passage where it says – I am sorry, the passage in the judgment of Justice Sheller at 178 that I have already referred to, “The following matters are established” ‑ ‑ ‑

GLEESON CJ:   I would just like to lay my eyes on that part of the Court of Appeal’s reasoning where they said what was the connection between the fact of Mr McClellan’s membership of the firm of Freehills and the apparent bias.

MR IRELAND:   Yes, your Honour.

GLEESON CJ:   Remember this Court in Ebner said, with some emphasis I think, it is not enough just to allege a fact and say that gives rise to a reasonable apprehension of bias.  You have to explain why that gives rise to a reasonable apprehension of bias, what is the process of reasoning that would lead a reasonable person to conclude that by reason of the fact the judge might not be impartial.

MR IRELAND:   I am sorry, I just want to give your Honour the passage in the judgment of the Court of Appeal which ‑ ‑ ‑

HEYDON J:   Paragraph 35 on page 187?

MR IRELAND:   I think there is also an earlier bit that I was looking for, your Honour, but Justice Sheller says in the middle of 187, at about line 30, after referring to Ebner:

It is not whether there was a “real likelihood of bias” but whether a fair minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question in hand.  Against that test has to be weighed the nature of the interest of the Judge’s brother in the outcome of the litigation and the relationship between the Judge and his brother which, in the absence of any other information, might reasonably be regarded as close.  If the trial Judge had had a pecuniary interest such as shares in a private company which stood in the same litigation relationship to the respondents as Freehills did, even if automatic disqualification did not follow, the appellants ‑ ‑ ‑

GLEESON CJ:   So it seems to be a combination of two factors:  pecuniary interest and blood relationship.

MR IRELAND:   Yes.  I think it falls into a ‑ ‑ ‑

GLEESON CJ:   Assumed to be close in personal terms.

MR IRELAND:   Yes.  Justice Deane said sometimes there is an overlap between apprehended bias by virtue of pecuniary interest and by association, and this is an example of that.

GLEESON CJ:   So it was both things.

MR IRELAND:   Your Honour, I think it is the association is really the key to it, because there was no financial dependence shown between the brothers but there was a – I suppose there the judge is concerned about his brother’s financial predicament, or financial situation.  That seemed to be accepted as well.

GLEESON CJ:   Well, that is what I am interested to know.  What was the extent revealed by the evidence of the brother’s potential financial predicament, as you describe it?

MR IRELAND:   That is why your Honour asked me the question about how many partners.  I remember answering that in the Court of Appeal by saying you cannot treat it that way because it is, and it seemed to be accepted, a joint and several obligation.  You cannot say it is $5,000 each, if it was that.  That is not really the right way to approach it, because the creditor does not have to sue them all or execute against them all.  So, your Honour, I do not think it was really in debate in the Court of Appeal that this was the sort of interest that gave rise to a reason to disclose.

HEYDON J:   It is in debate now though.

MR IRELAND:   Yes.

HEYDON J:   The respondent is taking the point now, from which I infer that the respondent took the point in the Court of Appeal.  Do you say that is ‑ ‑ ‑

MR IRELAND:   Well, your Honour, the ‑ ‑ ‑

GLEESON CJ:   You have just been telling us about all the questions you were asked about this in the Court of Appeal.

MR IRELAND:   Your Honour, I am just looking for one other passage on this so that I have given your Honour the complete reference.  I think it is only the passage I have referred to, your Honour.  I have a feeling that there was some slight remark of Justice Sheller about the depth of the relationship that must be assumed between the judge and his brother and one should not treat that lightly.

GLEESON CJ:   Some of these apprehended bias arguments have to be looked at fairly carefully because the consequences are visited on the other party to the litigation.

MR IRELAND:   It can be enormous.  That is what was emphasised by this Court in Alley’s Case, where the waiver was upheld – not technically upheld but where prerogative relief was refused – that is No 3 in the bundle which we sent over – even though there was a late established ground because the party in knowledge of the ground for the application for disqualification had just continued on for days and days without taking the point.

GLEESON CJ:   I am just wondering what, if any, role the assumption that Justice McClellan’s brother had a significant financial interest in the outcome of the litigation with which we are concerned played a part in the reasoning of the Court of Appeal.  I am not very clear about it at the moment.

MR IRELAND:   As I read the judgment, and it is not clear, the thing that was fundamental was the association, because this was not an Ebner case ‑ ‑ ‑

GLEESON CJ:   So the result would have been the same if it had appeared from evidence that Mr McClellan had an indemnity from somebody or had no financial interest, did not matter a row of beans to him financially what the outcome of this case was going to be.

MR IRELAND:   The result of the obligation to disclose would be the same because of the private and tangential context in which that arose.  It was up to the judge to state it.  Your Honours did it this morning when you came onto the Bench, announced a shareholding in the company.

GLEESON CJ:   Yes.

MR IRELAND:   Judges do this daily to overcome this problem.  They bring it out into the open.

GLEESON CJ:   It may be that because the Court of Appeal decided this case on the ground of waiver they did not have to be too precise about what the reasons for their views might have been on the anterior question.

MR IRELAND:   I understand what your Honour is saying, but nevertheless it cannot be said that the Court of Appeal did not hold that the occasion for disclosure, and hence the ground – could I just add to that, in the bundle, your Honour, under tab 1 there was a supplementary judgment on costs where the Court of Appeal, Justice Sheller again, said at paragraph 19:

This Court was of opinion that the trial Judge should have revealed at the outset that his brother was a partner at Freehills and a defendant in the proceedings by the Roach interests against Frehills.  On this ground of appeal the Roach interests succeeded because of waiver.

So there was no doubt that that was the way in which – that is paragraph 19.

GLEESON CJ:   Would it have made a difference if instead of being a partner in Freehills his brother had been an employee of Freehills?

MR IRELAND:   Yes, because the employee would not have been liable for the costs order.

GLEESON CJ:   So the interest is connected with it.

MR IRELAND:   Your Honour, I am not seeking to uphold a case that simply because the judge had a brother who had an interest in the litigation in other than a financial sense that would have been supported.  The fact that there was a financial relationship between the judge’s brother and these costs upon which the judge was adjudicating was a key matter and was not ignored by the Court of Appeal.  Your Honour, those are my submissions.

GLEESON CJ:   Thank you, Mr Ireland.  Yes, Mr Parker.

MR PARKER:   I will deal first with the matter which your Honour the Chief Justice raised about the nature of the interest.  The reasoning seemed to go along these lines.  The judge is close to his brother.  The judge will wish to save his brother financial burdens.  If the applicants here succeed against their former clients and the former clients succeed against Freehills – and skipping over questions of insurance and the like – then the brother will face an additional costs burden above that which he would otherwise face as a losing litigant in those other proceedings.

Now, one only has to state that to see what a long chain of reasoning it is and how many unstated elements there are in it, or unexplored elements there are in it; questions of, first of all, insurance; secondly, the claim against Freehills was framed as one for $900 million, so that if that claim had succeeded, arguing about an extra $500,000 in costs would seem to be just of complete irrelevance.  Now, none of those matters were explored because what was simply being put was, as your Honour has heard it, the brother had a financial interest so-called, therefore, his brother has a sort of interest by association.

The other point I want to make about that chain of reasoning is that there is an element of equivocality about it.  If one wants to assume that the judge is trying to spare his brother the burden of costs – and that is the thing that the reasonable observer thinks is going to cause him to deviate from what he ought to do – why would he not decide the case the other way?  Why would he not decide the case in favour of the solicitors against the clients on the basis that that would then put the clients under a lot more financial pressure and make it harder for them to sue Freehills?

Now, what all that indicates, in our submission, is that this was not a case where it could be clearly articulated why it was that the particular relationship would impel the judge to decide the case in a particular way.  That is why the question of waiver ultimately would not even arise, because there really was not any sufficiently close connection between the judge and his brother’s position in the Freehills litigation to lead the reasonable observer to think that the judge would decide the case in a particular way, that is the case before him.

The other matter which I wish to raise is the question of the factual basis for this application.  It was determined in an unsatisfactory way.  That is not necessarily the fault of the applicants here.  What happened was there was an affidavit put on from Mr Leslie at first instance – he was one of the plaintiffs – in which he said, “I didn’t know; Mr Smits, the other plaintiff didn’t know; Mr Haffenden, junior counsel, didn’t know and Mr Lindsay didn’t know”.  The judge then called him forward in the course of the hearing and said, “Well, that can’t be right, Mr Lindsay must know”, and at that point Mr Leslie said from the well of the court, “Well, that part of my affidavit isn’t right.”  The case was then dealt with on that basis.

So there was no exploration on the facts of whether the assertions made in the affidavit actually were correct.  There was no discovery or production of documents, as there would ordinarily be if there had been a disputed issue as to fact as to what Mr Leslie in fact did know and, secondly, there was no exploration of whether, had he been told this particular fact, it would have made any difference to the decision not to object.  None of that was dealt with.  As I say, I accept that the applicants are not to blame for that in a sense, but in a sense nor are we.  The case was dealt with on that way and that is why we submit that even if your Honours considered that there was an appropriate issue to be determined here, the problem is that there has not been a set of factual foundations or a set of factual findings which had been made.

Justice McHugh referred earlier to the Blackburn Case and an inference being drawn in fact.  That was after a trial where presumably all the facts were exposed and it was possible to draw an inference one way or another.  This is a case where, because of the way it has proceeded, that material just is not complete and it is not before the Court and the Court would be dealing with this matter in circumstances where it would be approaching the matter on a factual level, having regard to untested statements made in an affidavit, in part conceded to be incorrect.

GLEESON CJ:   If we came to the view that the Court of Appeal was wrong as a matter of principle on the waiver point but that the decision, or provisional decision, that the Court of Appeal made about the apparent bias point was made on an unsatisfactory factual basis, what would be the proper course for us to pursue, to remit it to the Court of Appeal to have a closer look at the facts relating to apprehended bias?

MR PARKER:   No.  If your Honours were not prepared to accept that the application should just be refused because there is an unsatisfactory factual foundation, then it would probably have to go back to first instance for an exploration of that question.  It is difficult to see how the Court of Appeal could deal with that because the problem arises not at the Court of Appeal level but at first instance level.

HEYDON J:   Do you not have an argument that even if Mr Lindsay did not tell Mr Leslie there is still no reasonable apprehension of bias?  Do you not have that argument?

MR PARKER:   On the basis that the observer sitting at the back of the court sees Mr Lindsay get up ‑ ‑ ‑

HEYDON J:   No reasonable observer could, as it were, accept the chain of reasoning you outlined earlier.

MR PARKER:   Yes, your Honour.

HEYDON J:   An unreasonable one might.

MR PARKER:   Yes, your Honour.

GLEESON CJ:   There is one issue that has been emphasised I think in some recent cases, including decisions of this Court, and that is that to ask whether a judge should make a disclosure is not the same question as asking whether there is a case of apprehended bias if the judge does not make the disclosure.

MR PARKER:   Your Honours were very clear about that in Ebner.

GLEESON CJ:   You might give an affirmative answer to the question whether a judge ought to make a disclosure on the basis of covering all the bases and prudence.  On the other hand, it is sometimes argued that if a disclosure was not made where it obviously should have been made, that is an extra reason for apprehending bias.  But they are two different questions.

MR PARKER:   They are, and your Honours rejected that very clearly in Ebner and made it perfectly plain that the test in Ebner is to articulate the particular relationship between what is said to be the interest and what is said to be the outcome that the judge would reach based on that interest.  That was specifically rejected by your Honours in Ebner that the mere failure to disclose a matter could itself be something which went to establishing apprehended bias.  That test has been clearly laid down and we would submit that the circumstances of this case do not satisfy it.  I have said what I wanted to say about the factual basis and the difficulties of the Court trying to deal with this factually having regard to the matter.

GLEESON CJ:   What do you have to say about the principal point that the applicant wants to argue?  That is, that the Court of Appeal was wrong on the waiver issue because this information did not come to Mr Lindsay in the course of his agency.

MR PARKER:   My argument is that the starting point is there must be a rule which attributes notice from agents to principals in certain circumstances because otherwise the situation would be quite unworkable.  There has to be a rule, and there is a rule, which at least accepts that where the agent gains information in the course of carrying out the task on behalf of the principal, then that knowledge is attributed to the principal whether in fact there is disclosure or not.  Everyone agrees about that. 

Then there is an extension to that rule which says that where the agent’s knowledge – and this is the way it is expressed in Bowstead in the passage that I have cited in my written submissions – where the agent’s general knowledge is material to the retainer, then the general knowledge, even the knowledge which does not come from a particular retainer, is attributed.  That is what the insurance broker cases say.  The submission I make is that that principle has not been challenged here.

McHUGH J:   But what the Court of Appeal seems to have held is that if counsel for a party has knowledge of a matter that would produce a reasonable apprehension of bias on the part of the trial judge, that knowledge of counsel is imputed to the party even though counsel’s knowledge was obtained outside the counsel-party relationship.

MR PARKER:   They have, and that is orthodox, your Honour.  There are cases where that has been done in the insurance broker cases.

McHUGH J:   It seems inconsistent with Tate v Hyslop for a start.

MR PARKER:   Your Honour, I can only deal with the application that has been put against us.  The application that has been against us does not canvass that Bowstead principle that I have cited.  What is said is, “We accept the insurance broker cases as correct”, and those cases held that an insurance broker who had knowledge outside the retainer, that the client was bound by the outside retainer knowledge even where there had not been actual communication.  They accept that as a principle.  They just say it does not apply to senior counsel in a case like this. 

Our answer is, first of all, why not?  You hire an insurance broker because the insurance broker has knowledge of the market.  That is what lies behind these principles.  It is wrong that you should be able to take advantage of the insurance broker’s extra knowledge of the market where it suits you and have the advantage of having the insurance broker’s knowledge and then say ‑ ‑ ‑

McHUGH J:   There is a world of difference between saying you impute the broker’s knowledge of the market to the client and saying that you impute to a party some knowledge that counsel has concerning a judge.

MR PARKER:   The Court of Appeal said it is the same.  Why do you hire counsel?  You hire counsel because counsel can conduct the case better than you can as an individual, and one of the reasons is because counsel has knowledge.

McHUGH J:   You do not hire him because counsel is presumed to know everything about the judge but you hire a broker because he is supposed to know everything about the market.

MR PARKER:   But if counsel does know something about the judge, even if it is something that the counsel has learned outside the retainer, counsel has an obligation to disclose that to you.  The Court of Appeal said that in paragraph 39 of their judgment and, in my submission, they were perfectly accurate in saying it.  It is perfectly orthodox.  It was appropriate.  Mr Lindsay was under an obligation to disclose this, as in fact he believed he had and in fact he may well have.

McHUGH J:   Assume he had an obligation.  It seems a case of visiting the sin of counsel’s omission on the client.

MR PARKER:   That is a consequence.  That is why I started with the proposition that there must be a rule of imputation.  That is a rule that is recognised in a number of areas.  One sees it, for instance, in Barnes v Addy cases where it is a question of imputing knowledge of breach of duty.  There are the dual director cases where one officer’s knowledge is attributed to a company.  Because particularly of the operation of corporate entities, it is essential to have some rule for the attribution of notice that does not depend upon actual notice being communicated because otherwise things would be unworkable, otherwise in a situation like this the client could always say, “Yes, counsel made that statement on my behalf in court.  Counsel said on my behalf in court that there was no objection but I didn’t know that particular fact”.  Where will it end, we ask, your Honours?  All counsel says ‑ ‑ ‑

McHUGH J:   Your argument about corporations has to be read with some qualification, otherwise the Chinese Wall rule would never exist.  If any information was obtained by one partner in the firm, you would attribute it to the rest of the firm.

MR PARKER:   Your Honour, a line has had to be drawn and the line that has been drawn is this.  If there is an obligation to disclose the piece of information, then whether or not it has in fact been disclosed does not matter; it is imputed to the client.  That is the rule that is applied in corporations, that is the rule that is applied in agency generally, that is the rule that the Court of Appeal applied here.

It is unfair in a sense on the principal if the principal does not in fact have the matter disclosed to him, but the law takes the view that that is a matter for the principal to take up with the agent.  In the interests of the other party to the transaction, it is essential that there be some certainty, otherwise the other party to the transaction will never be able to bind the principal because the principal will always say, “There’s an important fact that I wasn’t told by the agent, so when the agent did this on my behalf I didn’t know another important factor.  The agent may have known it but I didn’t know it”. 

That is what is happening here, your Honours.  The principal in this case as against us, the other party to this, is trying to visit its own lack of knowledge on us as a way of getting out of the waiver that had apparently on the face of it from our point of view taken place.  So of course in a sense it has to be hard on one side or another but the rule has been – and I must emphasise this again – there has not been any argument here yet that the rule ought to be reformulated in some way.  The rule is if you have an obligation to disclose it, you ought to disclose it.

The Court of Appeal found in paragraph 39 that Mr Lindsay should have disclosed it.  Therefore, the imputation goes to the principal.  That doctrine of law is not questioned here and we add, even if it were, it is being questioned not as to the nature of the doctrine itself but in its application to particular circumstances.  What is being said is that principle should not apply in the case of senior counsel in relation to a bias application.  As I say, the problem we put is where will this end, because presumably it would not just be the mere fact.  What happens if the client says, “Yes, it was told to me but it wasn’t told in a sufficiently clear way.  It wasn’t brought home to my mind that I could have checked”.  That is why there has to be a rule of imputation which does not depend upon what the principal in fact knows.  That is what I wanted to put on the main part of the case.

There are two other matters I just wish to mention which I have referred to in the submission.  That is the position of these other parties whose claims were conceded to be hopeless.  If your Honours were against me and proposed to grant leave, then we say that the third applicant should not have leave and there should not be leave granted against the second respondent, Mrs Roach, because there is a concession that those claims were hopeless.  I understand from Mr Ireland that he accepts that in those circumstances if there were any grant of special leave, it should be limited to the first, third and fourth respondents and to the first and second applicants.

GLEESON CJ:   Say that again, please.

MR PARKER:   If there were any grant of special leave, it should be limited to the first, third and fourth respondents.

GLEESON CJ:   Grant of special leave to the applicant ‑ ‑ ‑

MR PARKER:   To the first and second applicants only and limited to special leave to appeal against the first, third and fourth respondents only.

GLEESON CJ:   I want to be sure I understand the consequences of that.  How can you appeal against only three of four respondents?

MR PARKER:   I suppose the relief should be limited to the notice of appeal which seeks a new trial.  There should be special leave granted to limit the new trial to a new trial against the first, third and fourth respondents.  I think that is the way it would be done.

GLEESON CJ:   So special leave, if granted, should be granted only to the first and second applicants and it should be leave to appeal in an appeal that seeks a new trial only as against the first, third and fourth respondents?

MR PARKER:   Yes, your Honour.

GLEESON CJ:   I am bound to say that as I sit here I do not know enough about the case to know whether that is a practically workable form of order, but I assume you and Mr Ireland have thought about it and believe that it is.

MR IRELAND:   We agree that that is so.

MR PARKER:   As far as the third applicant is concerned, the application for special leave should be dismissed with costs and it should be dismissed with costs against the second respondent.

GLEESON CJ:   Yes, Mr Ireland.

MR IRELAND:   Your Honour, there is more than just an inter partes consideration here as applies in the analogous cases of companies and an agency such as the broker cases because there is a public interest question about whether or not judges should be dealing with a matter such as this in circumstances where the litigants – the litigants themselves, not just putatively – ought to have a right to know, so there is another dimension to this case.  As I say, the Court of Appeal accepts the basis for disqualification.  All I am appealing against is the outcome on waiver and I focus my argument on that.  If a contention comes on the other side, we will deal with that.

GLEESON CJ:   Thank you.  We will adjourn for a couple of minutes to consider the course we will take.

AT 11.12 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.15 AM:

GLEESON CJ:   In this matter there will be a grant of special leave to appeal.  We have been told by counsel that they have agreed between themselves on what would be the appropriate form of order to make in those circumstances and I will ask counsel to follow the form of the order to see that it reflects their agreement.

In this matter there will be a grant to the first and second applicants of special leave to appeal in order to pursue an appeal against the first, third and fourth respondents.  The application of the third applicant for special leave to appeal should be dismissed with costs.  The application against the second respondent should be dismissed with costs.

We will adjourn for a moment to reconstitute.

AT 11.16 AM THE MATTER WAS CONCLUDED