CATCHWORDS Courts and Judges - Disqualification for reasonable apprehension of bias - Federal Court of Australia - Personal, professional and financial association between judge and senior counsel for a party - consideration of duty of disclosure and of duty to disqualify - consideration of principles for reasonable apprehension of the "informed" fair-minded observer - consideration of knowledge to be imputed to the observer - whether a cogent and rational link between the association and its capacity to influence the decision - no grounds for reasonable apprehension of bias on grounds relied upon separately or cumulatively. Trustees of Christian Brothers v. Cardone (1995) 130 ALR 345 S. & M. Motor Repairs Pty. Ltd. v. Caltex Oil (Australia) Pty. Ltd. (1988) 12 NSWLR 358 Livesey v. New South Wales Bar Association (1983) 151 CLR 288 Re: Shaw; Ex parte Shaw (1981) 55 ALJR 12; (1980) 32 ALR 47 Webb v. The Queen 181 CLR 41 Fingleton v. Christian Ivanoff Pty. Ltd. (1976) 14 SASR 530 Kennedy and Cahill (1995) FLC 92-505 Najjar v. Haines (1991) 25 NSWLR 224 Eastman v. Somes (No.2) (1992) 107 FLR 86 Bluegate Nominees v. Isaacs and Ors. Supreme Court of Western Australia (F.C.) 16 December 1994 unreported Commonwealth Coatings Corp. v Continental Casualty Co. 393 US 145 Ex parte Blume and Anor.; Re Osborn & Ors. (1958) SR(NSW) 334 Szilard v. Szasz [1955] 1 DLR 370 R v. The Industrial Court & Anor. and Mount Isa Mines Ltd. 1966 QD.R. 245 Morgan v. Morgan (1832) 1 Dowl 611 R v. Barnsley Licensing Justices (1960 2 A.B. 167 Raybos Australia Pty. Ltd. and Anor. v Tectran Corporation Pty. Ltd. and Ors. (1986) 6 NSWLR 272 Bright v. River Plate Construction Company 1900 2 Ch. 835 Precision Fabrication Pty. Ltd. v Roadcon Pty. Ltd. (1991) 104 FLR 260 State of Western Australia v. Watson (1988) Aust. Torts Reports 80-226 R v Judge Russell; Ex parte Reid (1984) 35 SASR 417 R v Anderson; Ex parte Ioppolo (1979) 5 Fam L.R. 305 R Polites and Anor.; Ex parte The Hoyts Corporation Pty. Limited and Ors. (1991) 173 CLR 78 Vakauta v. Kelly (1989 167 CLR 568 Re Finance Union of Australia and Anor.; Ex parte Illaton Pty. Ltd. (1992) 107 ALR 581 AUSSIE AIRLINES PTY. LTD. v. AUSTRALIAN AIRLINES PTY. LTD. and QANTAS AIRLINES LTD. No. VG 608/95 MERKEL J. MELBOURNE 13 MARCH 1996 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION BETWEEN AUSSIE AIRLINES PTY. LTD. (A.C.N. 068 097 905) Applicant - and - AUSTRALIAN AIRLINES PTY. LTD. (A.C.N. 008 642 286) First Respondent - and - QANTAS AIRLINES LTD. (A.C.N. 009 661 901) Second Respondent - and - FEDERAL AIRPORTS CORPORATIONThird Respondent Coram: Merkel J. Place: Melbourne Date: 13 March 1996 REASONS FOR RULING The background facts The applicant issued proceedings in this Court seeking relief against the first and second respondents which conduct the business of Qantas Airlines. The relief claimed is founded upon alleged breaches of the Trade Practices Act (1974) and a claimed entitlement to be treated as a "new entrant to the domestic aviation industry" under certain leases entitling Qantas to occupy substantial portions of the Melbourne, Sydney, Adelaide, Coolangatta and Perth air terminals. The rights and liabilities under the leases are now vested in the first respondent which is controlled by the second respondent. On or about 21 February 1995 the applicant made a request to Qantas that it enter into subleases of third party carrier facilities pursuant to the leases at each of the five airports. In the event that the applicant establishes that it is a "new entrant to the domestic aviation industry" for the purposes of the leases it contends that the first and/or second respondents are obliged to negotiate and enter into sub-leases to the applicant of parts of the air terminals to enable the applicant to conduct an airline business as a third party carrier. No relief was sought against the third respondent although it was joined as a party on the basis that it was the lessor or represented the lessor and was the Federal agency responsible for the leases and their due enforcement. On 15 September 1995 Justice Drummond made orders that the Federal Court decide separately from all other questions the following two questions: 1. Does the applicant have sufficient standing to seek declaratory relief in terms of the declaration referred to in paragraph 2? 2. If the Court determines that the applicant has sufficient standing to seek declaratory relief in the terms of the declaration referred to in its further amended application, was the applicant, in making each of the requests referred to in paragraphs 20 to 22 (inclusive) of the amended statement of claim herein, a "new entrant to the domestic aviation industry" within the meaning of that expression as used in the definition of "third party carrier" in each of the Head Leases referred to in paragraph 8 and 10 of the amended statement of claim? Primarily, the questions involve determination of questions of law although it was suggested by the parties that there may be some disputed issues of fact. After an application by the applicant to the listing Judge for an expedited hearing the hearing of the two questions was listed before me on 5 March 1996 for 3 days. Shortly prior to the hearing I ascertained that senior counsel briefed to appear in the matter for the first and second respondents was a counsel with whom I had had a long-standing personal, professional and financial association. Prior to the hearing commencing on 5 March 1996 disclosures in respect of the association were made by myself and the senior counsel to the parties through their respective counsel. Counsel for the parties were informed that the senior counsel concerned had been authorised by me to provide all of the information which they required concerning the association. A number of memoranda passed between counsel and certain statements were made by counsel in Court correcting or clarifying aspects of the information set out in the memoranda. When the matter came before me on 5 March 1996 senior counsel for the applicant made application to me that I not sit to hear and determine the two questions on the ground that a reasonable apprehension of bias might arise by reason of my association with senior counsel for the first and second respondents. The application was opposed by counsel on behalf of the third respondent on the ground that the facts and circumstances relied upon did not give rise to a reasonable apprehension of bias. Senior counsel for the first and second respondents submitted that the matter was one for the Court to determine. Apart from clarification of certain factual matters senior counsel for those respondents put no submissions on the merits of the application. On 6 March 1996 I stated that I had reached the conclusion that in all the circumstances this was not a case in which the parties or the public might entertain a reasonable apprehension that I, sitting as the trial Judge, might not bring an impartial and unprejudiced mind to the resolution of the questions I had before me in the present matter. I then stated that I proposed to proceed to hear and determine those questions and indicated that in due course I would be delivering detailed reasons for my decision to proceed with the matter. I now give my reasons for that decision. The association with counsel The facts and circumstances relied upon by the applicant were those contained in memoranda passing between counsel (which the parties requested and agreed be marked as confidential exhibits), a written disclosure by me to the parties, and certain statements made in the course of the hearing clarifying certain aspects of the matters disclosed in the memoranda. Senior counsel for the applicant initially reserved his client's right to seek further details in respect of any of the disclosures made but indicated, when making his application, that he was content to do so on the basis of the material referred to above. The relevant facts and circumstances are detailed in that material but for present purposes may be summarised as follows: (a) a close and long standing personal relationship which had involved each being signatories to each others bank accounts and directors of each others family trust companies although those particular matters had been terminated after my judicial appointment; (b) a close and long standing professional relationship which included the sharing of chambers, together with 4 other members of counsel, for 12-13 years; (c) each of the six members of chambers, had a one-sixth interest in the trust administering chambers. The purchase of my interest was in the process of being finalised with the new incoming member of chambers who had taken over my chambers and my interest in the trust; (d) each had interests, together with others, in a number of tenanted investment properties; (e) each had a one-eighth interest in a hotel freehold and business. The interest was not held personally. Agreement had been reached to sell each of the interests to the holder of a 25% interest in the hotel at a figure to be determined by an independent valuer with settlement in 30 days. The type of valuer to be appointed was the only unresolved matter; (f) none of the investments involved any active day to day role or decision making and neither had any role in the conduct of the hotel business or freehold; (g) each had made and had the capacity to continue to make all necessary or expected contributions to the financing and servicing of all obligations in respect of the investments out of his own assets and independently of the other. I should add that generally, for the purposes of the disclosure, no distinction was made between the holding of an interest personally or through a family entity. Senior counsel for the applicant submitted that the cumulative effect of all of the relevant facts and circumstances, rather than any particular one or other of them, gave rise to the reasonable apprehension of bias. It was not suggested that there was actual bias or that there was anything untoward about the relationships. In substance counsel said that the "proximity" disclosed by those facts made it inappropriate for me to sit. In effect it was put that such matters involve questions of degree but the nature, extent and duration of the association meant that the line had been crossed in the present case. The fair minded and objective bystander may see it as somewhat anomalous that such applications as the present, by their nature, must always be determined, at least in the first instance, by the judge or tribunal said to be the subject of the apprehension. However, when it is appreciated that the enquiry is entirely objective, any anomaly in that judge or tribunal making the decision, disappears. The law - apprehended bias As some of the cases suggest, problems such as that presently arising are often avoided by decisions not to sit being made by judges or tribunals without the parties being aware that that has occurred or that a problem had arisen.[1] However, in Re: J.R.L.; Ex parte C.J.L Mason J (as he then was) said: Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.[2] Accordingly the issue once raised for decision, as it certainly has in the present case, requires the judge or tribunal concerned to determine whether the duty in the particular circumstances is to sit or not to sit. The test to be applied can be simply stated although the answer to it cannot. The principle "is that a Judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the question involved in it."[3] As was said by Aickin J in Re Shaw Ex parte Shaw: It is a test which is not always easy to apply for it may involve questions of degree and particular circumstances may strike different minds in different ways.[4] There can be few better examples of the observation of Aickin J. than in the difference between the majority (Priestly & Clark JJA) and the minority (Kirby P) in S. & M. Motor Repairs Pty. Ltd. v. Caltex on the dialogue of citizens.[5] In Webb v. The Queen Deane J. summarised the main categories of cases arising in this area as follows: The first is disqualification by interest, that is to say, cases where some direct or indirect interest in the proceedings, whether pecuniary or otherwise, gives rise to a reasonable apprehension of prejudice, partiality or prejudgment. The second is disqualification by conduct, including published statements. That category consists of cases in which conduct, either in the course of, or outside, the proceedings, gives rise to such an apprehension of bias. The third category is disqualification by association. It will often overlap the first and consists of cases where the apprehension of prejudgment or other bias results from some direct or indirect relationship, experience or contact with a person or persons interested in, or otherwise involved in, the proceedings. The fourth is disqualification by extraneous information. It will commonly overlap the third and consists of cases where knowledge of some prejudicial but inadmissible fact or circumstance gives rise to the apprehension of bias.[6] Surprisingly, counsel could not refer to a case where the precise question arising in the present case has been considered by the Courts. The present case was submitted by the applicant to be in the third category - disqualification by association between the judicial officer or tribunal and a person interested in or otherwise involved in the proceedings i.e. senior counsel representing Qantas. This third category has usually been confined to a "family, financial or professional relationship with one of the parties."[7] However, there have been cases where the disqualifying relationship has involved the judicial officer or tribunal and a legal representative.[8] Although both of those cases are exceptional it is obvious that the resolution of the issue now arising is likely to arise again. For so long as judicial appointment in Australia is made primarily from the senior ranks of the legal profession the circumstances of an appearance before a judicial appointee of a fellow member of, for example the Bar, who is a longstanding friend, possibly from the same Chambers, sharing in some common long term investments with continuing financial obligations in respect of those investments, will be far from unusual. That is not to suggest that that fact is critical to the issue of whether disqualification should occur - it is not. However it does demonstrate the importance of establishing with precision and clarity the underlying principles which should govern disqualification by association as well as the rationale for them. The duty of disclosure It may not be an unnatural reaction of a client to think that as a judge has disclosed an association with counsel the judge must be concerned about it. Indeed one of the memoranda between counsel in the present case mistakenly referred to the "concerns raised by His Honour".[9] In the light of those matters it is desirable, at the outset, to state and distinguish between, the circumstances which may give rise to a duty of disclosure and those which give rise to a duty to disqualify. A number of reasons can be identified for the existence of the duty to disclose. First, it cannot be expected that the parties will be aware of, let alone enquire into, potentially disqualifying circumstances concerning a Judge or a Tribunal. Kirby P. said in respect of non-disclosure by a court appointed referee, who at the time was a director of a company which was a party to and negotiating large commercial contracts with a government department which was in effect a litigant in the reference:- I do not believe that it is reasonable to expect that a litigant should be put on an inquiry as to the interests and connections of a referee. Indeed, I do not think it desirable that such should be an obligation. The litigant is entitled to expect that there is no relevant interest unless it is declared. Nor does the evidence in this case show that this was a trivial, remote or indirect interest such as could not reasonably be thought to carry the risk of influencing (however unconsciously) the attitudes of the referee and so excuse non-disclosure.[10] Clarke JA, in the same case said:- In my view a party is entitled to propose, or join in, the appointment of a particular arbitrator or referee upon the assumption that any facts which are likely to raise a reasonable apprehension in the minds of the parties that the arbitrator or referee may be unable to bring an impartial mind to the resolution of the dispute will be disclosed to all parties by the arbitrator or referee. There simply is no obligation upon the parties to pry into that person's private affairs. They may assume, at least until they learn of the existence of facts suggesting the possibility that the arbitrator may not be impartial, that an unbiased mind will be brought to the consideration of the dispute.[11] It was not suggested nor would it be correct to conclude, that the principle is any different with respect to disclosure by a judge. In the usual course, the parties are entirely reliant upon disclosure in order to consider whether an issue of disqualification may arise, and if so whether an application to disqualify is to be made.[12] Second, the failure to disclose, of itself, can be one of the circumstances which together with others may give rise to a reasonable apprehension of bias.[13] A party or the public may well be left with the impression that there was intentional concealment or non-disclosure, or that something was "wrong about it all". 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. Third, disclosure of itself, necessarily assists in securing the object that justice is "seen" to have been done.[14] That is particularly so where the duty to disclose may arise in respect of circumstances known to the tribunal and possibly some, but not all, of the parties or their legal representatives. In such circumstances the duty to disclose may be a duty owed by both the tribunal and the parties aware of the relevant circumstances.[15] The duty, has been said to arise in respect of facts or circumstances that may be or are potentially disqualifying i.e. disclosure of "any dealings which might create an impression of possible bias".[16] Gallop J. has described the duty as one for a Judge "to disclose a fact if it seems to him that it may be thought to have a bearing on his neutrality".[17] It is important to emphasise that, however the duty may be formulated, the facts to be disclosed are those that might found or warrant a bona fide application for disqualification. It would defeat the purpose of the disclosure if it was only in respect of or perceived to be in respect of facts warranting disqualification. Whether the facts disclosed warrant disqualification is the issue arising after the duty of disclosure is duly discharged. Accordingly the fact of disclosure, as opposed to non-disclosure, cannot constitute a circumstance in favour of disqualification. Association between adjudicator and litigant Almost all of the cases on disqualification by reason of association are based on the relationship between adjudicator and party being such that a reasonable apprehension of bias might arise. Those cases fall into a number of different categories. Bias can arise outside the hearing by some attribute or relationship of the decision maker which brings to the hearing a reasonable suspicion of bias. Possible causes of this bias are financial and business dealings, employment, family connections or personal and political views. These can raise the possibility or suspicion that for love or money the decision maker was biased.[18] The cases may not appear to be altogether consistent. However, as they often involve questions of degree and impression consistency may be an elusive concept. Personal acquaintanceship was considered in Ex parte Blume Re Osborn, [19] financial and business dealings in Szilard v. Szasz,[20] shareholdings in a litigant by a judge's spouse in R v. The Industrial Court and Anor. and Mount Isa Mines Ltd.[21] indebtedness in Morgan v. Morgan [22] and hopes of personal advancement in R v. Barnsley Licensing Justices.[23] In such cases the question is not whether the mere existence of the association in question was disqualifying but whether its nature and extent in the circumstances of the particular case resulted in the line being crossed. 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 the adjudicator might not bring an impartial and unprejudiced mind to the resolution of the case. There must be something in the nature or the 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. Prior professional relationships between adjudicator and litigant have been considered on a number of occasions. The very system of judicial appointment from the senior ranks of the profession means that such prior associations are inevitable. The courts have tended to be somewhat robust in their approach to them. Priestly JA (with whom Hope JA and Glass AJA agreed) said of such associations:- That method of appointment means that built into the legal system is public knowledge and long acceptance of the fact that judges will often know to a greater or less degree the counsel and solicitors who appear before them. Also when, as not infrequently happens,members of the legal profession are parties to litigation, it is inevitable that their cases will be decided by other members of the legal profession. It has long been accepted that a judge should not sit on a case involving a person with whom he has a connection which might in fact or in appearance affect his impartiality; when the judge's connection is less than that there is no reason why he should not sit.[24] Relationships considered not to be disqualifying include the following. A close and continuing professional relationship between solicitors charged with misconduct and a barrister named as arbitrator in the reference.[25] The prior appearance by a trial judge as counsel against a litigant later to come before him.[26] English counsel appointed and acting as arbitrator in matters in which counsel appeared from the same chambers in respect of which they shared the costs of premises and services.[27] A number of cases have upheld a refusal to disqualify by reason of a past professional association between adjudicator and client.[28] However, that such matters can be a question of degree is demonstrated by the clear division of viewpoint between majority and minority in S. & M. Motor Repairs[29] on whether the judge who had acted extensively for Caltex should sit to hear a matter involving Caltex. The majority expressed a strong view against disqualification on the basis that the fair minded bystander would accept that mere representation by counsel in other matters for a client would not associate counsel, who was now the judge, with the client in the particular matter. On the other hand the dissent of Kirby P was based upon his view that: To the reasonable observer, even one knowledgeable about our system of appointing judges, the duration, variety, intensity and proximity of his Honour's connection with the "Caltex interests" would, I believe, raise a reasonable apprehension of bias on the basis that his Honour had been the "Caltex barrister".[30] In Re Polites Ex parte The Hoyts Corporation a Deputy President of the Australian Industrial Relations Commission was the subject of a writ of mandamus directing him to sit and hear and determine a matter although he, as solicitor for the client, had given advice some years earlier to the client on aspects of it. The court said: In the light of these considerations and the fact that appointees to the Commission will often have had a close association with parties before, or with issues to be determined by, the Commission, it would not be open to the parties or to a member of the public to entertain a reasonable apprehension that, by reason of the advice given in the quite different circumstances of 1986, Mr. Deputy President Polites might not bring an impartial and unprejudiced mind to the assessment of the prosecutors' conduct in 1988 or to the determination of appropriate wages and conditions, whether they be determined retrospectively to 1988 or otherwise, for employees in Hoyts theatres.[31] In my view, as with the cases considering personal, family and financial interests the decision in the cases dealing with professional association between adjudicator and litigant demonstrate that the courts do not take a hypothetical or unrealistic view of an association relied upon in a disqualification application. In particular they appear to accept that the reasonable bystander would expect that members of the judiciary will have had extensive professional associations with clients but that something more than the mere fact of association is required before concluding that the adjudicator might be influenced in his or her resolution of the particular case by reason of the association. Although the test is one of appearance it is an appearance that requires a cogent and rational link between the association and its capacity to influence the decision to be made in the particular case. In the absence of such a link it is difficult to see how the test for disqualification as stated in Livesey can be satisfied. Association between adjudicator and counsel for the litigant Few cases have considered this problem. In Kennedy and Cahill[32] the Full Court of the Family Court concluded that an undisclosed, serious and close personal relationship which was intended to continue between a Family Court judge and a solicitor for one of the parties in the matter being resolved by her, gave rise to a reasonable apprehension of bias. As it was conceded that the relationship, whether disclosed or not, was disqualifying there was no discussion as to why that was necessarily so. It is likely that that conclusion was arrived at on the basis that the close and serious relationship would be perceived to involve an emotional or relational inter-dependence which might reasonably be perceived to have a capacity to influence how the judge might approach the resolution of the matter to be decided. In that regard that case may be analogous to cases where it might be perceived to be inappropriate for persons in marital or analogous relationships to appear before their partner as an adjudicator. The other case was Fingleton v. Christian Ivanoff Pty. Ltd.[33] In that case a special magistrate was held to be disqualified from hearing a complaint by reason of the fact that in consequence of the amalgamation of several public service departments both the magistrate and the solicitor appearing to prosecute in the matter before him became members of the same department and subject to the same departmental head. At the time of the hearing the solicitor was acting as head of the Department. In considering the tripartite relationship to be a disqualifying one, Bray CJ said: I can find no direct aid from any of the authorities and little indirect aid. The relationship said to constitute bias is not a relationship between judge..and party, as it has been in most of the cases, but between judge and counsel and their common departmental superior. The researches of counsel were unable to discover any authority where bias because of relationship or common interest or other connection between judge and counsel, as opposed to judge and party, has been considered; nor have I. We were referred to the etiquette of the English bar with particular reference to the rules about counsel appearing before a judge who is his father or other near relative: Boulton, Conduct and Etiquette of the Bar, at p.29. These are salutary rules of professional discipline, but there is nothing to suggest that their breach would necessarily lead to disqualification of the judge or the invalidity of his decision. Nevertheless it seems to me that there must be cases where a judge would be disqualified because of his connection with one of the counsel appearing before him. I should think, for example, that he or she would be disqualified if his or her wife or husband sought to conduct a case before him. I should think he would be disqualified if he were an employee of the counsel. In the Queensland case of Peppin v. R. Grayson & Co. Ltd., (1910 Q.S.R. 383) to which we were referred by Mr. Russell, for the defendant, the complainant in proceedings before Justices was one of two partners and one of the Justices was in the employ of the partnership and the father of the other partner. It was held by the Full Court of Queensland that he was disqualified. Let us adapt that case. Suppose a justice of the peace who was employed on a salary as a clerk by a firm of solicitors. I think he would be disqualified from sitting on a case in which a member of the firm appeared for one of the parties. He would not be disqualified for pecuniary interest. Any connection between the continuation of his salary and the profits of the firm would be too speculative or remote for this purpose: Shaw v. Furze, Reg. v. Burton; Ex parte Young, per Collins J. at p. 474. but I think that the fair-minded person looking on would say: "He ought not to sit, he would be biased because he would not want to affect his employment", cf. Metropolitan Properties Co. (F.G.C.) Ltd. v. Lannon". per Lord Denning M.R. at p.310. Suppose the case were taken not by the principal himself but by a salaried solicitor in the principle's employ. I think the reaction of the fair-minded person would be the same.[34] The Chief Justice concluded that the apprehension that, consciously or unconsciously, there may be bias was reasonable. In particular he found that in the "tripartite" relationship the perceived conflict between interest and duty, however unfounded in the particular case, was disqualifying.[35] Wells and Sangster JJ said: But what may arise from the circumstances existing in this case is far more subtle, and, for that reason, insidious. It cannot be denied that the Permanent Head has powers that, according to a literal construction of the provisions by which they are created and conferred, could be exercised in such a way as to harm the career of any officer within his department........Apart from those explicit powers, it would take little thought to conclude, and, in our view, conclude correctly, that the Head of Department has the power, in the administrative sphere, to control or affect a number of aspects of the Magistrate's daily life as a Public Service officer........ Every temporal power may be seen to exercise an influence on the minds of men in two ways - through its appearance and scope, and through its actual exercise. In this case, it is the first of these that is important, for it is what the fair-minded man reasonably apprehends from the appearance of power that is, in our judgment, of paramount importance.[36] I have set out the passages at some length as they show that it was the capacity to exert power by the departmental head (being the prosecutor at the time) over the magistrate that created the reasonable apprehension of bias. In a real sense it was that capacity that may reasonably be perceived as undermining the independence of the judicial officer in the matter before him. Put another way that capacity undermined the perception that the magistrate will act without fear or favour. In my view the two cases again demonstrate the requirement for a cogent and rational link between the association and its capacity to influence the decision to be made in the particular case. It is the capacity of the association to influence the decision rather than the association as such that is disqualifying. Knowledge to be imputed to the fair minded observer As the resolution of the issue requires one to ask how the matter would appear, viewed reasonably, to the public and the parties, it is idle to start such an enquiry stating that the Court is confident that the Judge will act impartially.[37] Likewise, as was emphasised in the present case, the fact that senior counsel for the applicant is not contending that I will act impartially, is also irrelevant. The courts have viewed the apprehension through the eyes of the hypothetical reasonable and fair minded but "informed" observer. The observer must be treated as fully informed of the facts and circumstances constituting the association relied upon.[38] When it comes to the observer's knowledge of the law, its processes and his or her understanding of the role of counsel and of an independent bar the issue is more difficult. A number of recent statements are helpful. The reasonable observer is to be presumed to approach the matter on the basis that ordinarily a Judge will so act as to ensure both the appearance and the substance of fairness and impartiality. But the reasonable observer is not presumed to reject the possibility of prejudgment or bias; nor is the reasonable observer presumed to have any personal knowledge of the character or ability of the members of the relevant court.[39] In Vakauta v. Kelly Toohey J. said: I accept the observation of McHugh JA in the instant case that "in the case of a professional judge whose training, tradition and oath or affirmation require him to discard the irrelevant, the immaterial and the prejudicial, a conclusion that there is a reasonable apprehension that he is biased should not be drawn lightly". In effect, that is what this Court said in Livesey. And it is true, as Clarke JA pointed out, that it is a "reasonable apprehension" with which the court is concerned. And, if it adds anything, it is such an apprehension in "a fair-minded observer": Livesey. But, in this regard, the public perception of the judiciary is not advanced by attributing to the reasonable or fair-minded observer a knowledge of the law and an awareness of the judicial process that ordinary experience suggests not to be the case.[40] When it comes to applying such observations in practice difficulties are inevitable. The classic conflict on the issue and one particularly pertinent to the present case, is that between Kirby P in dissent and Priestley and Clark JJA in S. & M. Motor Repairs on the dialogue of the citizens. The majority said: The question is whether that observer would reasonably apprehend possible partiality. Would it be reasonable for an observer, of average intelligence and having, let it be supposed, little knowledge of the legal system, on hearing what the judge said about having often worked for Caltex when he was a barrister, to say at once that he apprehended the judge might therefore favour Caltex in the litigation, consciously or unconsciously? We think we can succinctly cover the main considerations involved in this question by supposing that another observer, with some knowledge of the way solicitors and barristers work, is sitting next to the first citizen, and that they start to talk after hearing the judge's reasons for not regarding himself as disqualified.[41] After setting out the dialogue between the two citizens their Honours concluded: ........For the apprehension of the parties or the public to be reasonable, we think it must arise upon an understanding of the actual circumstances in which the claim of possible bias is made. In the present case, a reasonable person knowing nothing of the way in which barristers do their work might, on first thought, in fact apprehend possible bias. We do not think such a judgment would be reasonable, because founded on insufficient knowledge for arriving at such a judgment. The reasonable observer would, in our opinion, need to inform himself of the circumstances in which the judge had done legal work for Caltex, before being able to form a reasonable judgment on the question of possible bias. Once he understood, in general outline, the way in which barristers carry out the work they do, upon the instructions of solicitors, for clients, and upon understanding, again in a general way, the difference between a large business organisation and the people who work for it, it seems to us that it would no longer be reasonable to apprehend possible bias on the judge's part. ........We have left the dialogue in that state to emphasise that in this case the court must choose between the apprehension of the average (and relatively uninformed) citizen and that of the ordinary citizen with sufficient knowledge of the subject to make a reasonable judgment. In other words, justice must be seen to be done, but by what observers? We think, in a case such as the present, where some particular knowledge is needed for a sensible opinion to be formed, the only apprehension of possible bias worth considering is that of the moderately informed observer rather than an observer at first uninformed, and when informed unable to explain adherence to his or her first opinion. ........The basis of the criticism of Bryson J was his connection with Caltex. When that is looked at in concrete rather than abstract terms we do not think the appeal should succeed on the ground of reasonably apprehended possibility of bias. In the present case senior counsel for the applicant accepted as correct the observations of the majority (in the first paragraph of the quoted passages) as to the way barristers act upon instructions of solicitors and the general role of a barrister. In arriving at the opposite conclusion, Kirby P said in respect of the dialogue: I would only observe that the second citizen to whose fictional conversation their Honours refer, has had imputed to him (or her) a sophistication and knowledge about the law and its ways which I believe to be quite atypical of the general community. The dialogue, with every respect, strikes me as more reminiscent of the hushed tones and cloistered atmosphere of a Bar common room or judicial luncheon table than the robust discussion between ordinary reasonable citizens on the Emu Plains omnibus. ........ The fast-talking second citizen may not be nearby. Instead, there may be reasonable but anxious citizens who, faced with such a situation, are likely to conclude: "We just don't like it. Here is a small trader. There is a large petrol company seeking to exert its commercial will and using contempt proceedings. The judge has had a long and recent connection with the company. So he would know the way the petrol company operates. Maybe he even advised them on these sorts of franchise agreements. It's just not fair. The traders may be in contempt. But it's a very serious charge, after all. they may even go to gaol for it. That makes it very important that the judge should have disclosed his long connection with the petrol company at the beginning. They were at least entitled to that. We just don't feel easy about it. Better have it done again. At least that way justice will be seen to be done. Didn't someone once say that about our system?"[42] Although this dissent was relied upon by the applicant it can be seen to be yet another demonstration of the basic principles which I have described. In my view, having regard to all the circumstances, including non-disclosure, Kirby P concluded that the reasonable bystander would perceive a cogent and rational link between the association and its capacity to influence the decision to be made. An example of the difficulties that can arise in this regard albeit in a different context, arose in Laws v. Australian Broadcasting Tribunal.[43] In that case the court had to consider the reasonable apprehension of the public in respect of a defence filed on behalf of the Tribunal in an action by John Laws that he had been defamed by the public statement by a Tribunal member that he had breached the Tribunal's program standards. The defence pleaded, inter alia, that what had been said was of substantial truth which related to a matter of public interest. One issue was whether the defence founded a reasonable apprehension that the Tribunal, excluding members who participated in an earlier decision against Laws in respect of the standards, may not bring an unprejudiced and impartial mind to the determination of whether Laws had breached those standards. Mason CJ and Brennan J in rejecting the claim of a reasonable apprehension of bias said: In assessing what the hypothetical reaction of a fair-minded observer would be, we must attribute to him or her knowledge of the actual circumstances of the case. In other words, the observer would take account of the circumstances which led to the bringing of the defamation action and the filing of the defences. While it would not be proper to attribute to the fair-minded observer the understanding that a lawyer would have of the capacity of the members of the Tribunal to make an independent decision uninfluenced by previously expressed opinions and conflicting interests (see Vakauta v. Kelly), such an observer must be taken to appreciate that the defences filed by the Tribunal do not amount to assertions of belief or admissions. Consequently, there is no sufficient reason for an observer to conclude that the defences amount to a prejudgment of the issues to be determined in an inquiry under s.17c into the alleged contraventions of R.P.S.3. He or she would understand that the corporate action of the Tribunal in filing defences to the action brought by the appellant did not involve a judgment of the issues in the action by the individual members of the Tribunal. Moreover, the action is not brought to enforce any personal liability on the part of Tribunal members as individuals. Although the action, if successful, would result in a verdict against the Tribunal in its corporate capacity, it is scarcely likely that government would fail to ensure that the Tribunal had available to it funds to meet the amount of any verdict. In the result, there is no reason for the observer to suppose that any of those members who participate in the inquiry would have any material interest, direct or indirect, which would induce him or her to bring other than an impartial and unprejudiced mind to bear on the resolution of the relevant issues.[44] Gaudron and McHugh JJ said: In the present case, the most that can be said against those members of the Tribunal who were parties to the filing of the defamation defences is that they believed that, upon the evidence then known to them, the assertions in the defences were true and that on that evidence they would probably have decided the s.17c issues adversely to the appellant. But to attribute that belief and that decision to them does not give rise to a reasonable fear that they would not fairly consider any evidence or arguments presented by the appellant at the s.17c inquiry or that they would not be prepared to change their views about the issues. When the defamation proceedings against the Tribunal were commenced, the members of the Tribunal were required to file the Tribunal's defence on the evidence that they then had in their possession and without the benefit of evidence or argument from the appellant. When all the evidence is heard and the case argued, it may become apparent to them that the defences which the Tribunal filed cannot succeed. However, there is no suggestion that the filing of the defences was itself an abuse of process or the product of prejudice. To the contrary, the hypothesis is that the members of the Tribunal believed that the assertions in the defences were true. But neither logic nor the evidence makes it reasonable to fear that, because of that belief, the members of the Tribunal will not decide the case impartially when they hear the evidence and arguments for the appellant at the s.17c inquiry.[45] Deane J dissented. His Honour said: Following upon them, the appellant instituted defamation proceedings in the Supreme Court of New South Wales against the Tribunal as a corporate entity. The Tribunal filed a defence containing a number of grounds, including justification. The effect of those defences is that the Tribunal, as a corporate entity, has asserted, and presumably will seek to prove as a basis for avoiding liability, that the appellant is guilty of the alleged contravention of R.P.S. 3 into which it proposes to hold an inquiry. On the hearing of the present proceedings in the Federal Court, the Tribunal did not call evidence to establish whether, or the extent to which, individual members of the Tribunal had authorised, ratified or been involved in the Tribunal's public assertion (through Ms. Paramore) of the appellant's guilt of the contraventions of R.P.S. 3 or in the Tribunal's defence of the defamation proceedings. Those matters, like the composition of the Tribunal when it made its vitiated decision on 27 November 1987, have been kept concealed beyond the Tribunal's institutional or corporate veil. In these circumstances, it appears to me that the question whether the Tribunal, as a whole, is affected by an appearance of bias in relation to its proposed inquiry must be answered in the affirmative. The standard by reference to which that question must be answered is that of the reasonable and fair-minded lay observer. It must be presumed that such an observer has knowledge of the material objective facts.[46] The differences of viewpoint expressed in the passages I have set out demonstrate the difficulties in imputing knowledge of the processes of the law to the hypothetical observer. The majority judgments in S. & M. Motor Repairs and Laws appear to impute a more detailed awareness of such matters than the two dissenting judgments in those cases. However, the differences relate more to the extent of the knowledge to be imputed than any underlying difference as to the principles to be applied in determining apprehension of bias. The awareness of the observer of the role of counsel In seeking to approach the matter on the basis of the principles established in the cases I have referred to, the "informed" observer, when examining the association in the present case, can be assumed to do so with the presumed general knowledge that: (a) when barristers act on a client's behalf they do so in a professional capacity as their client's legal advocate selected to act in the case for that purpose. Any barrister so selected could have been briefed to fulfil the same task for the opposite side; (b) in accepting a brief to act for a client in a particular commercial case, the barrister does not become part of or identified with the client and has no direct or indirect financial interest in the outcome of the case; (c) the barrister acts as such as a member of an independent bar. The barrister is instructed by a solicitor or a firm of solicitors to present the client's case and in doing so is bound by a professional code of ethics ensuring that the barrister's conduct is in accordance with his or her professional standards; (d) it is common place for barristers who are close associates, or friends and who may even be from the same set of chambers, to fight on opposite sides of a case without compromising their professional duties to act in the interests of their clients; (e) as judges are usually appointed from the senior ranks of the profession, particularly the bar, it is likely that they will be well acquainted, and have formed close associations, with senior counsel appearing before them. It is also likely that they will have personal and professional associations with many of the counsel appearing before them. The hypothetical observer when informed of the close association relied upon in the present case may initially approach the matter by saying: "I'm not sure about all this - wouldn't it be better if another judge who was not so closely associated with the senior counsel heard the case?" Although that may be the start of the process of enquiry the issue is whether that observer upon being informed of the kind of matters set out above concludes, not whether it would be better for another judge to hear the matter, but whether the judge sitting to hear the matter might not bring an impartial and unprejudiced mind to the resolution of the 2 questions for decision. Is the association a disqualifying one? I turn to consider the different aspects of the association relied upon. First, the longstanding and close personal friendship. Counsel for the applicant conceded that that alone is insufficient to disqualify. Yet such a friendship can well be a disqualifying factor if existing between litigant and party. The reason for the concession, which in my view was correctly made, must be that the fair minded observer is aware of the importance and substance of the distinction between a close friendship between adjudicator and litigant and adjudicator and counsel. In the former situation there may, by reason of the perceived prospect of favour, be a cogent and rational link between the association and its capacity to influence the decision to be made. In the latter situation there is no such link as the observer must be taken to have understood the professional role of counsel which I have described in general terms above. Once that is appreciated there is no cogent or rational link between the association and any capacity it has to influence the decision in the case. In my view the same conclusion must follow from a longstanding professional association which involved the sharing of chambers with 4 other counsel. In a sense that may be a concomitant of the personal friendship. It is to be expected that when chambers are shared, particularly for such a long period, that those doing so will have had, or will have established, close personal associations which had not influenced or affected the capacity of those barristers to contest cases against each other. In my view no different perception arises in respect of the capacity of one of those barristers who has been appointed as a judge to impartially and fairly adjudicate in cases in which one of the former occupants of chambers appears. I turn next to consider whether that conclusion is affected by the fact that my interest in the trust administering chambers is being acquired by the new incoming member of chambers who has taken over that interest. Whilst, in a technical or indirect sense it may be contended that the other four members of chambers, including senior counsel for the first and second respondents, may have a role in that process, the reality is that the interest is to be acquired and paid for by the incoming member who had already taken over that interest. Whilst that may raise a question about that member of counsel appearing before me whilst that matter is not finalised, it is difficult to see how there could be any cogent link between any role that other members of chambers, including the senior counsel concerned, may have in the matter and the capacity of that role to influence my decision in the present case. Although it was not put as such it appears that the real issue raised related more to the substantial financial association that exists in relation to a number of common investments. Such an objection may well have substance if the association was such that the judge was for some reason "beholden" to counsel or if there was a situation of fear, favour or some capacity to exercise power in relation to the association. Such situations may arise if for example, a judge is indebted to counsel, or has otherwise been financially assisted by counsel, in respect of significant sums payable at call. Examples of the circumstances justifying disqualification were considered in Kennedy and Cahill and Fingleton. However, such cases are to be approached by reference to the realities rather than niceties or remote or hypothetical possibilities. The unchallenged evidence was that there was nothing untoward about the investments and certainly nothing that could directly or indirectly lead to any suggestion that the circumstances in relation to them created a situation of fear, favour or any other aspect of power in relation to the association. In that regard I refer back to paragraphs (d) to (g) in the summary of the financial association set out earlier in these reasons. Whilst it can be said that some liabilities of the various investors in respect of the investments are joint and several there is no suggestion in the evidence that there is any risk that any of those liabilities will not or are not able to be fully met by each out of his own resources. Further there is no ongoing day to day role or indeed any other activity in relation to the investments requiring regular and recurring meetings or decision making on an ongoing basis. The investments, although substantial, were passive in that they do not involve any activity other than that inherent in the holding of any fixed investment returning income. The only arguable difference was in respect of the hotel freehold and business, in which the interests (which had been agreed to be sold) were not held personally. Neither had any personal role in relation to the conduct of that investment. In these circumstances there is in my view again no cogent or rational link between the association relied upon and its capacity to influence the decision to be made in the present case. Accordingly whether the fair minded and informed observer examines each form of association relied upon separately or all cumulatively it is my view that he or she will arrive at the same conclusion namely, given his or her understanding of the role of counsel in a case, there is no proper basis for concluding that I might not bring an impartial and unprejudiced mind to the resolution of the two questions I have before me. I should add that as, in my view, each of the separate aspects of the association relied upon failed to meet the requisite test, it is difficult to see how the cumulative effect of all of them could. Although counsel for the applicant relied on the concept of a question of degree in my view that concept is to be applied in accordance with the underlying principle that there be a cogent and rational link between the association and its capacity to influence the decision. Absent such a link the matter is not advanced by accumulating aspects of an association each of which does not have the requisite link. I am fortified in my view by the fact that in recent times the High Court has taken a realistic rather than a hypothetical view of the issue of apprehended bias. Brennan, Deane and Gaudron JJ in Vakauta v. Kelly said: "The requirement of the reality and the appearance of impartial justice in the administration of the law by the courts is one which must be observed in the real world of actual litigation."[47] In R. v. Commonwealth Conciliation and Arbitration Commission Ex parte Angliss Group[48] the High Court in a joint judgment said that the requirements of natural justice - "........are not infringed by a mere lack of nicety but only when it is firmly established that a suspicion may reasonably be engendered in the minds of those who come before the tribunal or in the minds of the public that the tribunal or members of it may not bring to the resolution of the question before the tribunal fair and unprejudiced minds."[49] Although it may be arguable that the requirement that the basis for disqualification be "firmly established" relates to cases of apprehended bias by reason of prejudgment or conduct during proceedings rather than of association, each passage is yet another demonstration of the requirement that this area of the law be governed by the reality of the situation. The recent majority decision of the Full Court of the Federal Court in Trustees of Christian Brothers v. Cardone[50] and more recent decisions of the High Court in Webb v. R,[51] Re: Polites,[52] Re Finance Sector Union of Australia and Anor; Ex parte Illaton Pty. Ltd.[53] and Laws[54] might also be said to be supportive of such an approach. Further, although it has been said that in some areas of the law the sensitivity may be greater by reason of the nature of the case or the jurisdiction,[55] I do not found my decision in the present application on that approach. The present case is not within an area that could be described as having special sensitivity in the sense discussed and therefore does not call for anything other than the application of well established principles to what is essentially a commercial dispute involving the determination of a question of law and possibly some disputed factual issues between parties who have all had extensive experience and a commercial background in the Australian aviation industry. Finally, counsel for the applicant relied on the additional fact that senior counsel had been briefed throughout the matter and not just for the trial. Two letters were tendered which referred to the role of senior counsel early in the matter. However, it was not contended that the earlier role had been in any capacity other than counsel. In my view those additional circumstances do not add anything to the case being put forward on behalf of the applicant. Once it is accepted that senior counsel acted solely as counsel in the matter and no issue is put forward to suggest he acted improperly then the so called additional fact is nothing more than a further manifestation of the role of counsel in one aspect of the matter now before the Court. I certify that this and the preceding 40 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel Associate: Dated: 13 March 1996 Heard: 5 & 6 March 1996 Place: Melbourne Judgment: 13 March 1996 Appearances: Mr. I.G. Sutherland Q.C. with Ms. F. McLeod (instructed by Oakley Thompson & Co.) appeared for the applicant. Mr. A.H. Goldberg Q.C. with Mr. P.J. Booth (instructed by Middletons Moore & Bevins) appeared for the first and second respondents. Mr. C. Maxwell (instructed by Mallesons Stephen Jaques) appeared for the third respondent. [1] See for example Trustees of Christian Brothers v. Cardone (1995) 130 ALR 345, 355, S. & M. Motor Repairs Pty. Ltd. v. Caltex Oil Australia Pty. Ltd. (1988) 12 NSWLR 358, 369, ("S. & M. Motor Repairs"). [2] (1986) 161 CLR 342, 352. [3] Livesey v New South Wales Bar Association (1983) 151 CLR 288, 293-4. [4] (1981) 55 ALJR 12, 16, (1980) 32 ALR 47, 54. [5] (1988) 12 NSWLR 358, 375-6, 378-80. [6] (1993-4) 181 CLR 41, 74. [7] S. & M. Motor Repairs 368 (Kirby P). [8] Fingleton v. Christian Ivanoff Pty. Ltd. (1976) 14 SASR 530, Kennedy and Cahill (1995) FLC 92-505. [9] In his submissions senior counsel for the applicant stated that "your Honour did not express concerns in those terms but what your Honour did indicate was that you felt it was necessary that there be disclosure of those matters". (Transcript p.8). [10] Najjar v. Haines (1991) 25 NSWLR 224, 229-30. See also Eastman v. Somes (No. 2) (1992) 107 FLR 86, 93. [11] Najjar v. Haines p.244. [12] See for example Bluegate Nominees v. Isaacs and Ors. Supreme Court of Western Australia (F.C.) 16 December 1994 (unreported) Owen J. at p.5. [13] Kirby P in S. & M. Motor Repairs p.374. [14] Kirby P in S. & M. Motor Repairs p.369 said "the very practice of prior announcement is a protection of the manifest integrity of the judicial process." [15] In Kennedy and Cahill (1995) FLC 92-505 the Full Court of the Family Court stated that a Judge hearing a matter and the solicitor for a party in that matter were both under a duty to disclose the "serious and close personal relationship" they had and intended to continue to have. [16] Commonwealth Coatings Corp v. Continental Casualty Co. 393 US 145. There is also a helpful discussion of the duty by Rogers AJA in Najjar v. Haines (1991) 25 NSWLR 224, 259-260. [17] Eastman v. Somes (No. 2) 1992 107 FLR 86,93. [18] Judicial Review of Administrative Action Christopher Enright 1985 - para. 17.4.9. [19] (1958) SR (NSW) 334, 338. [20] [1955] 1 DLR 370. [21] (1966) QD.R. 245. [22] (1832) 1 Dowl 611. [23] (1960) 2 Q.B. 167. [24] Re Raybos Australia Pty. Ltd. v. Tectran Corporation (1986) 6 NSWLR 272, 276-7. [25] Bright v. River Plate Construction Company (1900) 2 Ch 835. [26] Precision Fabrication Pty. Ltd. v. Roadcon Pty. Ltd. (1991) 104 FLR 260. [27] See the discussion in Arbitration International Vol. 8 No. 3 Barristers Independence and Disclosure. [28] State of Western Australia v. Watson (1988) Aust. Torts Reports 80-226, R v. Judge Russell; Ex parte Reid (1984) 35 SASR 417, R v. Anderson; Ex parte Ioppolo (1979) 5 Fam LR 305 (W.A. Sup. Ct. FC). [29] (1988) 12 NSWLR 358. [30] Ibid p.374. [31] (1991) 173 CLR 78. [32] (1995) FLC 92-605. [33] (1976) 14 SASR 530. [34] Ibid p.534-5. [35] Ibid p.536. [36] Ibid p.547-8. [37] Re JRL; Ex parte CJL (1986) 161 CLR 342, 356-7 (Mason J). [38] S. & M. Motor Repairs at pp.368-9, 380-1. [39] Livesey p.299 (Mason, Murphy, Brennan, Deane and Dawson JJ). [40] (1989) 167 CLR 568, 584-5. [41] S. & M. Motor Repairs at p.378-9. [42] S. & M. Motor Repairs at p.375-6. [43] (1990) 170 CLR 70. [44] Ibid p.87-8. [45] Ibid p.100-101. [46] Ibid p.94-5. [47] (1989) 167 CLR 568, 570. [48] (1969) 122 CLR 546, 553. [49] See also Re JRL; Ex parte CJL (1986) 161 CLR 342, 352. [50] (1995) 130 ALR 345. In this case a student who was injured whilst at the school sued the Trustees alleging negligence. The trial judge was a former pupil, was chairman of the school board and knew three of the witnesses proposed to be called by the Trustees. The refusal to disqualify was upheld primarily on the basis that in the particular circumstances of the case including the imputed public knowledge that an insurer would be standing behind the school would not leave the objective observer with the requisite apprehension. [51] (1994) 181 CLR 41. [52] (1991) 173 CLR 78. [53] (1992) 107 ALR 581. [54] (1990) 170 CLR 70. [55] Kirby P in S. & M. Motor Repairs at p.370 referred to the Family Court and criminal cases as examples.