FEDERAL COURT OF AUSTRALIA Radic v Henley Properties (NSW) Pty Ltd [2000] FCA 1292 COURTS AND JUDGES – disqualification – apprehended bias – whether expression of preliminary views on transfer of proceedings grounds for disqualification. Trade Practices Act 1974 (Cth), s 86A. Johnson v Johnson [2000] HCA 48, applied. Re JRL; Ex parte CJL (1986) 161 CLR 342, cited. Galea v Galea (1994) 19 NSWLR 263, cited. SACKVILLE J 12 SEPTEMBER 2000 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 624 OF 2000 BETWEEN: SINISA RADIC FIRST APPLICANT BORKA RADIC SECOND APPLICANT AND: HENLEY PROPERTIES (NSW) PTY LTD RESPONDENT JUDGE: SACKVILLE J DATE OF ORDER: 12 SEPTEMBER 2000 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. Paragraph 4 of the motion filed in court on 1 September 2000 be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY N 624 OF 2000 BETWEEN: SINISA RADIC FIRST APPLICANT BORKA RADIC SECOND APPLICANT AND: HENLEY PROPERTIES (NSW) PTY LTD RESPONDENT JUDGE: SACKVILLE J DATE: 12 SEPTEMBER 2000 PLACE: SYDNEY REASONS FOR JUDGMENT 1 On 1 September 2000, the applicants filed a motion in Court seeking orders, inter alia, that I disqualify myself from further participation in the present proceedings. I gave the applicants leave to make the motion returnable instanter. The basis of the application is that the applicants have a reasonable apprehension that I have prejudged the case and am incapable of approaching it with an open mind. the proceedings 2 The dispute between the parties arises out of a building contract entered into between the applicants and the respondent on or about 16 April 1998 ("the Contract"). The Contract, so it appears, provided for the respondent, which is a builder, to erect a brick house on the applicants' land at Barden Ridge. 3 The proceedings in this Court were commenced by an application and statement of claim filed on 14 June 2000. The applicants sought declarations that the respondent had engaged in conduct which contravened ss 51AA(1) and 52(1) of the Trade Practices Act 1974 (Cth) ("TP Act"). The applicants also sought declarations that they had "properly terminated" the Contract. In addition, the applicants sought damages. 4 Prior to the proceedings being instituted in this Court, the respondent had commenced proceedings in the Local Court at Sydney against the applicants. It appears that in those proceedings, which were instituted by way of a statement of liquidated claim, the respondent claimed $29,151 allegedly due under the terms of the Contract. The Local Court proceedings have not yet been resolved. 5 The applicants were also given leave on 1 September 2000 to file an amended statement of claim in this court. That leave was granted without prejudice to any motion the respondent might wish to file to strike out the amended statement of claim. 6 In order to understand the nature and course of the proceedings, it is necessary to refer to the original statement of claim filed on behalf of the applicants. That document pleads that in or about early 1998 the applicants had discussions with representatives of the respondent with a view to having a brick house erected upon their property at Barden Ridge. It then pleads that on 16 April 1998, the applicants entered into the Contract. Work on the house commenced under the Contract, so it is alleged, on or about 19 August 1998 and was due to be completed on or before 19 March 1999. 7 The statement of claim alleges that, prior to the date of the Contract, the respondent represented to the applicants, inter alia, that it had a good reputation; that it had the skills to build a house; and that it would complete the construction of the house on schedule. It is then said that the applicants relied on the representations when they signed the agreement, believing the representations to be "true and reliable". 8 It is next pleaded that the representations were misleading or deceptive in a number of respects. It is alleged, for example, that the respondent had frequently been late in completing work and that it had received many complaints about the quality of its work. It is also said that the staff employed by the respondent was "generally uncooperative, inexperienced and inefficient". 9 The statement of claim alleges that as a result of the representations having been made in contravention of the TP Act, and by reason of the applicant's reliance thereon, they suffered loss and damage "within the meaning of and for the purposes of [ss 82 and 87 of the TP Act]". The particulars of damage, which are said to be estimated to the date of the statement of claim only and continuing, are as follows: "(a) Costs of Repairing defects as per Reports of C S Barrett Building Consultants, including removing and rectifying the brick work, in excess of $100,000. (b) Liquidated Damages (to be advised). (c) General Damages including loss of new home for in excess of twelve months and expenses related thereto. (d) Inconvenience associated in the schooling of the [applicants'] two children." 10 The statement of claim includes additional allegations that the respondent engaged in unconscionable conduct, in contravention of s 51AA of the TP Act. This claim is based on what are said to be misrepresentations by the respondent in the course of the building work, together with unjustified demands by the respondent for payment under the Contract. The statement of claim also alleges that the respondent refused to grant the applicants access to the building site in order to enable an expert to advise them, although the pleading appears to concede that the respondent agreed to an inspection "just before the Notice of Motion was due to be heard in the Local Court". THE HEARING OF 27 JULY 2000 11 The first directions hearing in this Court was held on 27 July 2000. On that occasion, the applicants were represented by Mr De Robillard of counsel. At that hearing, I raised directly with Mr De Robillard the question of whether the proceedings in this Court were not in substance a contractual dispute between the applicants and the respondent that was appropriate to be heard by the District Court of New South Wales. I did so, as the transcript shows, because I was contemplating transferring the matter to the District Court pursuant to s 86A(1) of the TP Act. 12 Section 86A of the TP Act provides as follows: "(1) Where – (a) a civil proceeding instituted (whether before or after the commencement of this section) by a person other than the Minister or the Commission is pending in the Federal Court; and (b) a matter for determination in the proceeding arose under Part IVA, IVB or Division 1, 1A or 1AA of Part V; the Federal Court may, subject to sub-section (2), upon the application of a party or of the Federal Court's own motion, transfer to a court of a State or Territory the matter referred to in paragraph (b) and may also transfer to that court any other matter for determination in the proceeding. (2) The Federal Court shall not transfer a matter to another court under sub-section (1) unless the other court has power to grant the remedies sought before the Federal Court in the matter and it appears to the Federal Court that – (a) the matter arises out of or is related to a proceeding that is pending in the other court; or (b) it is otherwise in the interests of justice that the matter be determined by the other court." It is of some importance to note that s 86A(1) confers power on the Federal Court, on its own motion, to transfer the relevant matter to a court of a State. 13 It is fair to say that at the first directions hearing I questioned Mr De Robillard quite closely on several issues: · First, I pressed Mr De Robillard on the nature of the claim made by the applicants under the TP Act, bearing in mind the absence in the pleadings of any reference to what the applicants claimed that they would have done but for the alleged misrepresentations made by the respondent. I asked Mr De Robillard on several occasions how the applicants proposed to establish a damages claim under the TP Act, as distinct from a claim in contract, in relation to what appeared to be expectation rather than reliance damages. · Secondly, I asked Mr De Robillard whether the applicants intended to allege breach of contract. I did so because the declaratory relief claimed by the applicants, in so far as it related to the termination of the Contract, appeared to me to rest on contractual principles, albeit that a contractual claim was not pleaded. Mr De Robillard disputed that this was so. In answer to a question, however, Mr De Robillard indicated that the applicants did indeed intend to rely upon a breach of contract going beyond the scope of the statement of claim as it then stood. · Thirdly, I asked Mr De Robillard whether this was not in substance simply a dispute about a building contract with perhaps elements of a claim under the TP Act added. I made the point that, if this was essentially a building case, my immediate reaction was that it was better dealt with in the District Court. 14 After having received an affirmative response from Mr De Robillard to the question as to whether the applicants intended to rely upon breaches of contract going beyond the then current statement of claim, I made the following observations: "It looks to me, I must say, it has the appearance of this being got together to get it out of the local court into this court. What I'm concerned about is the substantial justice of the matter and where the case is most conveniently determined having regard to the fairness to the parties, the role of this court, the role of other courts. Now, if this is in truth essentially a fight about a building contract with maybe elements of trade practices there that would need to be properly developed, because they're not properly developed at the moment in the pleadings, then my immediate reaction is this is better dealt with in say the District Court of New South Wales. They deal with building cases all the time, do they not, they have a building list in the District Court. Your primary contention is that the builder, as I understand it, has failed to comply with its obligations under the building contract. Now, I'm not in a position to know whether your allegations are good or bad but I just want to know what the allegations are. If you are going to pursue a case against the builder you will need to have particulars of the breaches of contract that are set out, the ordinary things that you find in a building dispute. Now, again I'm not denigrating the importance of the case to the parties it obviously is very important to the parties. I am only trying to work out what is the best way of going about dealing with a case of this kind." 15 Mr Davie, who appeared for the respondent, submitted that the proceedings were an "archetypal building claim". He pointed out that proceedings were already on foot in the Local Court arising out of the Contract. He informed the Court that the respondent would agree that the proceedings be remitted to the District Court or to the Local Court, subject to any question of jurisdictional limits. 16 I dealt with the matter in the following way on 27 July 2000: "I will give you [Mr De Robillard] a chance to develop these things because at the moment it has all the hallmarks, I must say, of a case that has been hurriedly got together to get it into this court and away from the Local Court. Now, that may be a little unfair to you, I don't know, I'm not making a final judgment about it but it has that appearance because the contract claim is not properly pleaded, the Trade Practices Act claim is not properly pleaded, whether or not the respondent takes any point about it. What I will do is give you a chance to replead your claim so that I can understand exactly what it is that you say precisely what your contractual claim is. I'll give you a chance to specify the amount that you claim and the justification for the amount that you claim. In other words it won't carry matters very far if you come along and say we want $300,000 and just assert it without explaining how you actually get to that figure because I need to know what it is that you're claiming, and if you wish to file some affidavits about it now that I've expressed the concerns about where this case ought to be, then you may do that as well. I will stand this matter over until 17 August at 9.30 am. I will direct the applicant to file and serve any amended statement of claim on or before 10 August. On 17 August I will address the question as to whether orders are made under section 86A of the Trade Practices Act sending this matter to the District Court of New South Wales." 17 I then made directions for evidence and submissions. I added the following: "I will be in a position to make a decision and give you a chance to say whatever else you want but at the moment I must say my impression is that this is a building dispute, that building disputes ordinarily ought to be dealt with by the relevant State Court. It looks like a District Court case. If however there are real Trade Practices issues and the amount in dispute is such that it is appropriate for this court to deal with them well then obviously I'll give that careful consideration but some of the issues that I have raised I think need to be addressed before you get to that point." the hearing on 17 august 2000 18 The proceedings came before the Court for a further directions hearing on 17 August 2000. Again, Mr De Robillard represented the applicants. The applicants filed two affidavits, one of which, by the first applicant, included references to what was said to have occurred at the first directions hearing. The transcript was not annexed to the affidavit. 19 The applicants did not comply with the direction made on 27 July 2000 that they file and serve any amended statement of claim on or before 10 August 2000. Nor did Mr De Robillard seek leave to file an amended statement of claim in Court. Neither of the affidavits filed on behalf of the applicants explained the failure to comply with the Court's directions. Mr De Robillard, however, handed up written submissions which addressed the question of a possible transfer of the proceedings pursuant to s 86A of the TP Act. 20 The written submissions asserted that there had been "no time to formulate the issue by formal pleadings as directed" on 27 July 2000. It was also submitted that it would be wasteful of costs to file amended pleadings within a tight time-frame which might have needed further amendment "in the near future once the full extent of the damages is established". 21 In the course of the discussion on 17 August 2000, I asked Mr De Robillard as to the substance of the amendments the applicants proposed to put forward. His response was that some of the amendments would go towards strengthening the claim under the TP Act. In response to the question whether there might be a contract claim, he replied that there might be such a claim but that, at that stage, on his instructions, the answer was in the negative. 22 In the result, Mr De Robillard sought further time in order to plead the claim under the TP Act in more detail and to "plead other counts depending upon what we find to be the extent of the work which would have to be done". Orders were made standing the matter over for a further fourteen days in order to give the applicants an additional opportunity to file an amended statement of claim. 23 An application was made by the respondents for the costs of the directions hearing of 17 August 2000. After hearing the parties, I ordered the applicants to pay those costs. I gave as the principal reason for doing so the fact that the directions hearing had largely been wasted by reason of the applicants' non-compliance with the orders made on 27 July 2000. 24 In the course of the directions hearing on 17 August 2000, I observed that, because the applicants had made a claim for declaratory relief, there might be a difficulty in transferring the proceedings to the District Court of New South Wales. As I indicated to the parties (neither of whom had adverted to the issue), the difficulty arises because s 86A(2) of the TP Act provides that the Federal Court is not to transfer a matter to another court under s 86A(1) unless the other court has the power to grant the remedies sought before the Federal Court. I pointed out that the District Court does not appear to have power to grant declarations. It followed that, if the matter were to be transferred to a State court, the only order that could be made was one transferring the matter to the Supreme Court of New South Wales. the hearing on 1 september 2000 25 The proceedings were again before the Court on 1 September 2000. On that occasion, as I have indicated, the applicants were granted leave to file a notice of motion and to make it returnable instanter. The motion sought a number of orders. The motion that I disqualify myself on the ground of apprehended bias was supported by an affidavit sworn by the first applicant. Portions of this affidavit were rejected and other paragraphs were read subject to relevance. The transcripts of the two previous directions hearings were admitted into evidence. 26 Before addressing any of the other matters raised by the motion, I asked Mr De Robillard to address me on the question of the disqualification application. Mr Davie, who again appeared for the respondent, made brief submissions in opposition to the application. At the conclusion of the argument I indicated that I did not propose to disqualify myself. I said I would provide written reasons. This judgment contains those reasons. 27 I should add that, as I have already indicated, the applicants were granted leave at the hearing held on 1 September 2000 to file an amended statement of claim. I gave the parties a further opportunity to file written submissions on the question of the possible transfer of the matter under s 86A of the TP Act. I provided that opportunity particularly in the light of the filing of the amended statement of claim and the need for both parties to address the significance of the declaratory relief sought by the applicants. It follows that the question of a transfer of the matter has not yet been finalised. the principles 28 The principles governing disqualification on the ground of apprehended bias are well established. The test in Australia is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide: Johnson v Johnson [2000] HCA 48, at [11], per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ. 29 In Johnson v Johnson, the joint judgment explained the rationale for and operation of the test as follows (at [12]-[13]): "That test has been adopted, in preference to a differently expressed test that has been applied in England [cf Locabail (UK) Ltd v Bayfield Properties [2000] QB 451], for the reason that it gives due recognition to the fundamental principle that justice must both be done, and be seen to be done [cf R v Sussex Justices; Ex parte McCarthy [1924] 1 KB 256 at 259 per Lord Hewart CJ]. It is based upon the need for public confidence in the administration of justice. "If fair-minded people reasonably apprehend or suspect that the tribunal has prejudged the case, they cannot have confidence in the decision." [R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 263 per Barwick CJ, Gibbs, Stephen and Mason JJ]. The hypothetical reasonable observer of the judge's conduct is postulated in order to emphasise that the test is objective, is founded in the need for public confidence in the judiciary, and is not based purely upon the assessment by some judges of the capacity or performance of their colleagues. At the same time, two things need to be remembered: the observer is taken to be reasonable; and the person being observed is "a professional judge whose training, tradition and oath or affirmation require [the judge] to discard the irrelevant, the immaterial and the prejudicial" [Vakauta v Kelly (1988) 13 NSWLR 502 at 527 per McHugh JA, adopted in (1989) 167 CLR 568 at 584-585 per Toohey J]. Whilst the fictional observer, by reference to whom the test is formulated, is not to be assumed to have a detailed knowledge of the law, or of the character or ability of a particular judge [Webb v The Queen (1994) 181 CLR 41 at 73 per Deane J], the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. The rules and conventions governing such practice are not frozen in time. They develop to take account of the exigencies of modern litigation. At the trial level, modern judges, responding to a need for more active case management, intervene in the conduct of cases to an extent that may surprise a person who came to court expecting a judge to remain, until the moment of pronouncement of judgment, as inscrutable as the Sphinx. In Vakauta v Kelly [(1989) 167 CLR 568 at 571], Brennan, Deane and Gaudron JJ, referring both to trial and appellate proceedings, spoke of "the dialogue between Bench and Bar which is so helpful in the identification of real issues and real problems in a particular case." [See also Re Lusink; Ex parte Shaw (1980) 55 ALJR 12 at 15 per Murphy J; 32 ALR 47 at 53]. Judges, at trial or appellate level, who, in exchanges with counsel, express tentative views which reflect a certain tendency of mind, are not on that account alone to be taken to indicate prejudgment. Judges are not expected to wait until the end of a case before they start thinking about the issues, or to sit mute while evidence is advanced and arguments are presented. On the contrary, they will often form tentative opinions on matters in issue, and counsel are usually assisted by hearing those opinions, and being given an opportunity to deal with them." 30 This passage is consistent with the well-known warning given by Mason J in Re JRL; Ex parte CJL (1986) 161 CLR 342, at 352: "It seems that the acceptance by this Court of the test of reasonable apprehension of bias…has lead to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in other proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial officer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party…. 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." REASONING 31 As I followed the argument, it was not contended that I had prejudged the merits of the applicants' case against the respondent. The substance of the applicants' complaint was that I had formed a view that the proceedings should be transferred to the District Court of New South Wales and that I had expressed that view in such terms as to make it clear that I was going to exercise the powers conferred by s 86A(1) of the TP Act. 32 It is clear from the transcript of 27 July 2000 that I put to Mr De Robillard the view that, if the statement of claim remained in its original form, it was appropriate to transfer the proceedings to the District Court. But the view I expressed was a preliminary view. Indeed, in his oral submissions on the disqualification application, Mr De Robillard put his argument on the basis that I "had expressed the preliminary view that, subject to what Mr Davie was going to say, the matter ought to be transferred to the District Court of New South Wales." 33 I do not think it could reasonably be concluded from the transcript that I had formed an immovable or unalterable opinion on the subject. The questioning of Mr De Robillard was intended to elict responses on issues that seemed to me relevant to the exercise of the powers conferred by s 86A(1) of the TP Act. A reasonable observer would see that the very point of providing the parties with an opportunity to make written submissions on the question of transfer was so that they (and especially the applicants) could address the concerns that I had raised. The point of allowing the applicants an opportunity to amend their statement of claim was to permit them, if they were so advised, to clarify the nature of their case and to deal with any omissions in the pleading. 34 Section 86A(1) of the TP Act confers power on the Court, of its own motion, to transfer proceedings if satisfied of the matters specified in s 86A(2). I did not understand Mr De Robillard to dispute the proposition that the Court's power to act of its own motion is material to an assessment of whether fair-minded people would reasonably apprehend bias where the court formed a preliminary view on the question. A reasonable observer would understand that it is difficult for a court to exercise the power conferred by s 86A(1) of the TP Act without forming a preliminary view as to the proper forum for the further conduct of the proceedings. What is critical is that the parties be given a genuine opportunity to address the concerns underlying that preliminary view. That opportunity has been provided. 35 Mr De Robillard submitted that an inference of bias could be drawn from the tone of some exchanges in the course of argument. It is probably fair to say that some of the discussion was robust. But robust exchanges with counsel and even manifestations of what Priestley JA in Galea v Galea (1994) 19 NSWLR 263, at 283, described as "irritation" do not demonstrate to a reasonable observer a closed mind on the part of the judge. 36 In my opinion, the test laid down by the High Court for disqualification on the grounds of apprehended bias has not been satisfied. Accordingly, I declined to disqualify myself. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice SACKVILLE. Associate: Dated: 12 September 2000 Counsel for the Applicants: Mr C R de Robillard Solicitor for the Applicants: Selby Anderson Counsel for the Respondent: Mr T Davie Solicitor for the Respondent: Blake Dawson Waldron Date of Hearing: 1 September 2000 Date of Judgment: 12 September 2000