Trombone Investments Pty Ltd v TBT (Victoria) Pty Ltd

[2016] VSCA 108

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI  2016 0010

TROMBONE INVESTMENTS PTY LTD (ACN 142 192 845)

Applicant

v

TBT (VICTORIA) PTY LTD
(ACN 006 325 873)

and

ANDY B PTY LTD

(ACN 132 838 487)

First Respondent

Second Respondent

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JUDGES:	ASHLEY, REDLICH and TATE JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 May 2016
DATE OF JUDGMENT:	16 May 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 108
JUDGMENT APPEALED FROM:	Trombone Investments Pty Ltd v TBT (Victoria) Pty Ltd [2016] VCAT 12 (Judge Jenkins)

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JUDICIAL REVIEW – Application for leave to appeal from a decision of VCAT refusing to reconstitute the Tribunal on the basis of apprehended bias – Test incorrectly applied – Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 – Victorian Civil and Administrative Tribunal Act 1998, s 108(1)(a) – Leave to appeal granted – Appeal allowed.

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APPEARANCES:	Counsel	Solicitors
For the Applicant and the Second Respondent	Mr L A Warren (solicitor)	Russell Kennedy
For the First Respondent	No appearance	Kalus Kenny Intelex

THE COURT:

1. The applicant, Trombone Investments Pty Ltd (‘Trombone’), seeks leave to appeal from an order of the Victorian Civil and Administrative Tribunal (‘the Tribunal’), constituted by her Honour Judge Jenkins sitting as the Acting President, which dismissed an application by Trombone for reconstitution of the Tribunal pursuant to s 108(1)(a) of the Victorian Civil and Administrative Tribunal Act 1998 (‘the VCAT Act’) in respect of a tenancy dispute between Trombone, as tenant, and TBT (Victoria) Pty Ltd (‘TBT’), as landlord.[1]  TBT is the first respondent to the application for leave to appeal.  The application for reconstitution was an application that Senior Member Riegler be disqualified from hearing the tenancy dispute on the ground that there was a reasonable apprehension that he might not bring an impartial or unprejudiced mind to the resolution of the matters to be dealt with at the hearing.  The determination of an application for reconstitution on the ground of apprehended bias is informed by considerations of fairness, and the perception of fairness.   

   [1]Trombone Investments Pty Ltd v TBT (Victoria) Pty Ltd [2016] VCAT 12 (‘VCAT Reasons’). The relevant order is paragraph 4 of the Orders made 9 December 2015.

1. For the reasons that follow we would grant leave to appeal and we would allow the appeal.

Senior Member Riegler and the quashing of summonses for production of documents  

1. The tenancy dispute arises from circumstances in which Trombone had sought the consent of TBT to transfer its lease for premises in Meyers Place in the city of Melbourne to Andy B Pty Ltd (‘Andy B’), a company controlled by Andrea Borazio, the daughter of Jerome Borazio, who is a director of Trombone. Ms Borazio is also a director of Trombone. Andy B is the second respondent to the application for leave to appeal. TBT served Trombone with a default notice under s 146 of the Property Law Act 1958 alleging a breach of the lease on the basis that Trombone had given up possession or was sharing the premises with Andy B without TBT’s consent.  TBT contests that a valid lease currently exists.

1. Before the Tribunal Trombone seeks to have the s 146 Notice declared void and seeks relief against forfeiture. It relies upon an alleged course of unconscionable conduct by TBT, namely a campaign by TBT to oust Trombone motivated by considerations other than breach of the lease. By way of an interlocutory application, Trombone sought production of documents by means of three summonses issued by the Principal Registrar of the Tribunal. The summonses were directed against TBT, Hannah Fong (a director of TBT) and Bill Romanovski (a private building surveyor who was named as ‘the Intervenor’ before the Tribunal). The categories of documents sought included planning permits, building permits, correspondence and other documents concerning building work undertaken at the Meyers Place premises. TBT and the Intervenor applied to quash the summonses. The application was heard by Senior Member Riegler. In resisting the application, Trombone submitted that the documents were relevant to the allegation in the pleading that TBT had acted unconscionably in its dealings with Trombone, such that it would be unconscionable for it to rely on a default notice, given under s 146 of the Property Law Act, as the basis for it to terminate the lease between it and Trombone.  The particulars of unconscionability in part concerned conduct which predated the issuing of the default notice including allegations relating to the habitability of the premises and improvements made by Trombone and a former tenant. 

1. Senior Member Riegler quashed each of the three summonses.[2] In doing so, he acknowledged that he did not accept as a general proposition that conduct which predates the issuing of a s 146 notice cannot be relevant to the validity of the notice. He held, however, that ‘[i]n the present case, the acts or omissions alleged against the Landlord do not directly touch upon the allegations of breach contained in the s 146 notice.’[3]  He rejected the view that the relationship between the former tenant and Trombone meant that acts visited upon the former tenant could be taken into account in assessing TBT’s conduct with respect to Trombone.[4]  He went on to express views about the soundness of the allegations of unconscionable conduct made in the pleadings, and their force and effect, even if made out.  He said:

In my view, the allegations of unconscionable conduct on the part of the Landlord are too remote to affect the validity of the s 146 notice. This is not a situation where the allegations of breach have any direct connection to the alleged unconscionable conduct, such that it could be said that it would be unconscionable for the Landlord to rely upon the s 146 notice. Even if it were proved that the Landlord had engineered a campaign to oust the Tenant, that alone would not deprive the Landlord of being able to rely upon its rights under the Lease upon there being a breach by the Tenant, unless it could be shown that the Landlord’s conduct in some way, either directly or indirectly, caused the breach.

I reject the submission that a finding of unconscionable conduct on the part of the Landlord, without any connection to the breach itself, invalidates or impugns the s 146 notice. More needs to be shown in order to establish the nexus between the unconscionable conduct and the breach. The substantial allegations set forth in paragraph 15B and 15C of the Further Amended Points of Claim and the particulars subjoined to those paragraphs do not establish that nexus. In my view, the matters set forth in paragraph 15B of the Further Amended Points of Claim and the particulars subjoined to that paragraph are largely irrelevant to the legitimate issues for determination.[5]   

[2]Trombone Investments Pty Ltd v TBT (Victoria) Pty Ltd [2015] VCAT 289 (‘SM Riegler Reasons’).

[3]Ibid [14].

[4]The former tenant, Sobel Investments Pty Ltd, was an associated company to Trombone, having common directors and shareholders, all members of the Borazio family.

[5]SM Riegler Reasons [2015] VCAT 289 [17]–[18].

Appeal to Daly AsJ

1. Trombone appealed to the Supreme Court from the orders made by Senior Member Riegler.  The appeal was allowed by Daly AsJ[6] on the ground that Senior Member Riegler had taken an unduly restrictive approach to the identification of issues that might be relevant in the proceeding, especially with respect to matters that might be relevant to the relief against forfeiture which Trombone seeks.  Having granted leave to appeal, her Honour said:

I would also allow the appeal, on the basis that the Senior Member’s findings regarding the relevance of the documents sought by the subpoena to any issue which might legitimately arise in the proceeding arose out of an unduly restrictive approach to what facts and matters might be ventilated in support of Trombone’s claim for relief in the VCAT proceeding. It is correct to say, and Trombone seems to accept, that when determining whether to grant relief against forfeiture, the focus of a court or tribunal is largely directed at the conduct of the tenant. However, it must be remembered that the remedy of relief against forfeiture has its origins in equity, and one must be careful [not] to stifle developments in the law in that regard. Certainly the language of s 146(2) of the Property Law Act 1958, which provides that the Court may grant or refuse relief ‘as the Court, having regard to the proceedings and conduct of the parties under the foregoing provisions of this section, and to all the other circumstances thinks fit’ seems to be sufficiently wide to encompass an examination of the conduct of each of the parties.[7]  

[6]Trombone Investments Pty Ltd v TBT (Victoria) Pty Ltd [2015] VSC 517 (‘Daly AsJ Reasons’).

[7]Ibid [30] (citation omitted).

1. Her Honour accepted that ‘it is more probable than not that Trombone’s claim for relief against forfeiture, to the extent it seeks to rely upon TBT’s conduct unconnected with the breach specified in the s 146 Notice, might be unlikely to succeed on that basis alone’,[8] but held that the position regarding the relief sought by Trombone based on unconscionable conduct was ‘far from clear cut’.[9]  She went on to conclude that the observations made by Senior Member Riegler in his reasons, including those extracted above,[10] ‘reflect, in my view, an overly restrictive approach to what might be unconscionable conduct on the part of a landlord, such that [the Senior Member’s] conclusion that what documents might be relevant to an issue which may legitimately arise in the proceeding was infected by that unduly narrow approach’.[11]

   [8]Ibid [31].

   [9]Ibid.

   [10]See [5] above.

   [11]Daly AsJ Reasons [41].

1. The summonses were reinstated and the matter was remitted to the Tribunal.  No leave was sought to appeal from the decision of Daly AsJ.

Directions Hearing – application for reconstitution

1. When the proceeding returned to the Tribunal, a directions hearing took place before her Honour Judge Jenkins. Her Honour was faced with three applications: (1) an application pursuant to s 134(2) of the VCAT Act to apprehend the proper officer of TBT and Hannah Fong whom Trombone alleged had failed to produce documents in accordance with a summons; (2) an application pursuant to s 123 of the VCAT Act for an injunction to restrain the law firm Kalus Kenny Intelex from continuing to act for TBT; and (3) the application for reconstitution of the Tribunal.

1. The first application was dealt with by consent with Ms Fong agreeing to produce documents and answer questions.  Her Honour dismissed the second application.  In dismissing the application for reconstitution, Judge Jenkins observed that ‘SM Riegler took a more restrictive view about what could be relevant than the Supreme Court’.[12]  She then set out, correctly, the general test for disqualification on the ground of apprehended bias, quoting from Ebner v Official Trustee in Bankruptcy[13] as follows:

… a judge is disqualified if a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide.[14]

[12]VCAT Reasons [48].

[13](2000) 205 CLR 337, 344.

[14]VCAT Reasons [49] (emphasis added).

1. The test involves a hypothetical consideration of circumstances in which it is necessary to consider whether a fair-minded lay observer might reasonably apprehend that the decision-maker might not be impartial.  The assessment must be made by reference to a double ‘might’.  

1. Her Honour then purported to apply the test to the facts and circumstances of the case.  In approaching the question of application, her Honour re-stated the test in a manner that departed from that endorsed in Ebner.  She said:

The question for the Tribunal now is whether or not a fair minded lay observer might reasonably consider SM Riegler to be so committed to the conclusion that the documents are not relevant to any legitimate issue, that he would be incapable of altering his view about the relevance of those summonsed documents, whatever the contents of those documents turn out to be, and whatever the evidence and arguments presented with respect to those documents turn out to be?[15]   

[15]Ibid [53] (emphasis added).

1. It is apparent that in her application of the test Judge Jenkins shifted from the test based upon the double ‘might’ to a test of greater stringency, namely, whether a fair-minded lay observer might reasonably consider that Senior Member Riegler would be incapable of bringing an impartial mind to the matter.  Given the stringency of the test, it is unsurprising that her Honour found it was not satisfied. 

1. In expressing her final conclusions, her Honour expressed the test in a manner that further departed from that endorsed in Ebner in that she expressed the test in a manner that required an assessment of what the lay observer ‘would’ reasonably conclude with respect to whether the decision maker ‘would’ be incapable of impartial assessment.  The stringency of the test was erroneously increased further.

1. She said:

In my view, a lay observer would not reasonably conclude that SM Riegler would now be incapable of assessing any documents produced to determine whether they are in fact relevant to any issues at trial.[16]

[16]Ibid [63] (emphasis added).

1. Her Honour based her conclusions on the view that the ‘divergence between the decision of the Supreme Court and SM Riegler [is] relatively minimal’.[17] She said this because, as she observed, Daly AsJ had indicated that Trombone’s claim for relief against forfeiture was unlikely to succeed if it was based solely upon TBT’s conduct unconnected with the breach specified in the s 146 notice.[18]  She also noted that Daly AsJ had made it clear that:  (1) she was not making any prejudgment about the final relevance and admissibility of any documents obtained through the summonses;  and (2) the possibility was left open that the Tribunal may confirm that the documents produced are not relevant, too remote, or that the high threshold required to prove unconscionable conduct had not been met.

   [17]Ibid [54].

   [18]Ibid.

1. In our view, her Honour appears to have reasoned that because Daly AsJ allowed for the possibility that ultimately it may be shown that the documents produced in response to the summons are irrelevant, or the documents do not serve to establish that TBT had engaged in unconscionable conduct, as alleged, that it followed that the test for apprehended bias had not been met.  We consider that the reasons of Judge Jenkins reveal not only a misapprehension of the test for apprehended bias, imposed at a level of stringency beyond that required by the High Court, but also that her Honour failed to focus, as she should have done, upon the errors in the reasoning of Senior Member Riegler, namely, the overly restrictive approach to the proceeding as a whole identified by Daly AsJ, and focused instead upon the fact that the ultimate fate of the documents was as yet undetermined.

1. We consider that had the test from Ebner been properly applied, it would have been satisfied.  We consider that, given the extensive observations made by Senior Member Riegler with respect to the allegation of unconscionability and its potential irrelevance to the legitimate issues for determination, referred to above,[19] that a lay observer might reasonably apprehend that he might not bring an impartial mind to the resolution of the tenancy dispute.

   [19]See [5] above.

1. Furthermore, there was little, if any, consideration given by Judge Jenkins to the need to ensure that justice is not only done, but is seen to be done.  Clearly, a proper way of ensuring that justice was seen to be done in circumstances where Senior Member Riegler had expressed detailed views about claims made in the proceeding, and about the limited scope of that proceeding, was for an order to be made for the reconstitution of the Tribunal.   

1. These concerns are reflected in the grounds of appeal, most particularly in grounds 5 and 10 which provide as follows:

5.The learned Judge erred in not finding that a fair minded lay observer might reasonably apprehend that Senior Member Riegler might not bring an impartial and unprejudiced mind to the resolution of the issues of relevance (that he had determined in dismissing the witness summonses) that he would be required to decide again at trial.

10.The learned Judge erred, in failing to reconstitute the Tribunal, to give effect to the principle that when an appeal is allowed, particularly from a judgment in which a member has expressed extensive, far-reaching, lengthy and/or strong views, that it would be fairer, and justice would in general better be seen to be done if the Tribunal is reconstituted for the purposes of the hearing.

1. We consider that both grounds 5 and 10 should be upheld.  

1. This Court was informed that there was no opposition to the reconstitution of the Tribunal before Judge Jenkins.

1. There was no opposition from either the first or second respondent in this Court to the application for leave to appeal or to the appeal proper. There was no opposition to this Court making an order allowing the appeal or making the substantive order for the reconstitution of the Tribunal pursuant to s 108(1)(a) of the VCAT Act. This Court has the power to make any order on an appeal that the Tribunal could have made in the proceeding, pursuant to s 148(7)(b) of the VCAT Act.

1. In the circumstances we will grant leave to appeal, allow the appeal, set aside paragraph (4) of the orders of her Honour Judge Jenkins made 9 December 2015, and in lieu thereof order, pursuant to s 108(1)(a) of the VCAT Act, that the Tribunal be reconstituted for the purposes of the proceeding.

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