FEDERAL COURT OF AUSTRALIA Temwell Pty Ltd v DKGR Holdings Pty Ltd [2003] FCA 345 COURTS AND JUDGES – apprehended bias – association between judge and a solicitor who may be called as a witness Fried v National Australia Bank Ltd [2000] FCA 787 - cited Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 65 FCR 215 - cited Bienstein v Bienstein (2003) 195 ALR 225 - cited Jones v Dunkel (1959) 101 CLR 298 - cited TEMWELL PTY LTD v DKGR HOLDINGS PTY LTD (formerly known as DYNAMIC DATA SYSTEMS PTY LTD) (ACN 062 778 616) (in liquidation), mCOM SOLUTIONS INC, DRAGON VENTURES.COM INC, mCOM SOLUTIONS AUSTRALIA PTY LTD (ACN 091 375 950) (in liquidation), DAVID HAINS, ROBERT VAN ZANTEN, DRAGONVENTURES.COM LIMITED, RICHARD CHARLES HAINS, IAN KIEFEL V 663 OF 2000 MERKEL J 17 APRIL 2003 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V663 OF 2000 BETWEEN: TEMWELL PTY LTD (ACN 082 656 157) APPLICANT AND: DKGR HOLDINGS PTY LTD (formerly known as DYNAMIC DATA SYSTEMS PTY LTD) (ACN 062 778 616) (in liquidation) FIRST RESPONDENT mCOM SOLUTIONS INC. SECOND RESPONDENT DRAGON VENTURES.COM INC THIRD RESPONDENT mCOM SOLUTIONS AUSTRALIA PTY LTD (ACN 091 375 950) (in liquidation) FOURTH RESPONDENT DAVID HAINS FIFTH RESPONDENT ROBERT VAN ZANTEN SIXTH RESPONDENT DRAGONVENTURES.COM LIMITED SEVENTH RESPONDENT RICHARD CHARLES HAINS EIGHTH RESPONDENT IAN MORRIS KIEFEL NINTH RESPONDENT JUDGE: MERKEL J DATE OF ORDER: 17 APRIL 2003 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. The order that the trial of the proceedings commence on 23 April 2003 be vacated. 2. The trial commence before another judge of the Federal Court of Australia as soon as is reasonably practicable. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V663 OF 2000 BETWEEN: TEMWELL PTY LTD (ACN 082 656 157) APPLICANT AND: DKGR HOLDINGS PTY LTD (formerly known as DYNAMIC DATA SYSTEMS PTY LTD ) (ACN 062 778 616) (in liquidation) FIRST RESPONDENT mCOM SOLUTIONS INC. SECOND RESPONDENT DRAGON VENTURES.COM INC THIRD RESPONDENT mCOM SOLUTIONS AUSTRALIA PTY LTD (ACN 091 375 950) (in liquidation) FOURTH RESPONDENT DAVID HAINS FIFTH RESPONDENT ROBERT VAN ZANTEN SIXTH RESPONDENT DRAGONVENTURES.COM LIMITED SEVENTH RESPONDENT RICHARD CHARLES HAINS EIGHTH RESPONDENT IAN KIEFEL NINTH RESPONDENT JUDGE: MERKEL J DATE: 17 APRIL 2003 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The trial of this proceeding was scheduled to commence before me on 23 April 2003, to proceed for twelve sitting days in April and May and then to be adjourned to resume for a further hearing of four weeks in September 2003. The proceeding involves claims and cross-claims in relation to the copyright in certain software. The parties have filed and served the affidavits upon which they intend to rely and the trial is ready to commence. 2 On 15 November 2002 the defence and cross-claim was amended to include a claim that the issue and maintenance of the proceeding by the applicant "on the instructions of Fraid and/or Tauber is an abuse of process". Messrs Fraid and Tauber are and were at all material times directors of the applicant. 3 The abuse of process alleged is that the applicant and Messrs Fraid and Tauber issued and maintained the proceeding with the predominant purpose of "coercing" one or other of the respondents to "buy out" the applicant in relation to the software the subject of the proceeding and not with the predominant purpose of obtaining the relief sought in the proceeding. 4 At all material times the solicitors acting on behalf of the applicant were Meerkin and Apel. A principal of that firm, Mr Isaac Apel acting in his professional capacity as a solicitor, appears to have advised the applicant and its directors from time to time in relation to the proceeding. In 1991 Mr Apel acted as solicitor in advising and preparing my mother's will. Under the will my mother appointed Mr Apel to be a co-executor together with myself. The beneficiaries under the will are family members. As a result of my mother's recent death I became a co-executor of my mother's estate with Mr Apel and on 4 April 2003 notified the parties of that fact. 5 On 14 April senior and junior counsel for the applicant and for the second, fifth, sixth, seventh, eighth and ninth respondents ("the respondents") requested that I see them in my chambers. The first, third and fourth respondents were not represented and are not likely to appear at the trial. I was informed by senior counsel for the respondents that, although no affidavit had been sworn or filed by Mr Apel and no intention had been stated on the part of the applicant to call him as a witness in the proceeding, the abuse of process claims were likely to involve him as he acted as solicitor for the clients against whom the abuse of process was being alleged. It was indicated by senior counsel for the respondents that in those circumstances there was a real prospect that Mr Apel might be called as a witness and that his integrity in relation to the abuse of process claim would in all likelihood become an issue in the proceeding. I indicated that because of a long standing personal relationship with Mr Apel I would probably not hear the case if his integrity or credit was in issue. The meeting concluded on the basis that the parties would consider their respective positions and that any party may make such application as it deemed appropriate in open court. 6 On 15 April 2003 the respondents made application in open court that I disqualify myself on the basis that a reasonable, fair minded but informed observer might well entertain an apprehension that, in dealing with the evidence concerning abuse of process, I might not bring to the task of assessing that evidence an impartial and unprejudiced mind by reason of Mr Apel's alleged involvement in that aspect of the case: see Fried v National Australia Bank Ltd [2000] FCA 787 ("Fried v National Australia Bank") at [60]. 7 Senior counsel for the applicant neither consented to nor opposed the application that I disqualify myself from hearing the matter. However, senior counsel pointed out that the matters relied upon to contend that there was an abuse of process were hotly contested and that the main witnesses upon whom the applicant would rely in contesting that allegation were Messrs Tauber and Fraid. Senior counsel for the applicant also pointed out that Mr Apel had not sworn an affidavit in the proceeding and that at the present time there was no intention to waive legal privilege or for him to swear an affidavit, although senior counsel accepted that the possibility of Mr Apel being called as a witness could not be discounted. 8 In Aussie Airlines Pty Ltd v Australian Airlines Pty Ltd (1996) 65 FCR 215 ("Aussie Airlines") I considered the criteria for disqualification where the relationship relied upon was between the judge hearing the case and legal representatives acting in the proceedings in that capacity. However, the basis for disqualification being put forward in the present case is not my personal relationship with Mr Apel in his capacity as a solicitor for a party but, rather, the personal relationship between myself and Mr Apel as a person involved in the proceeding: see Bienstein v Bienstein (2003) 195 ALR 225 at 232. 9 The involvement arises in the following way. A difficulty is likely to arise if Mr Apel is, or is not, called. If he is called, as I made clear to the parties, my personal relationship with him is such that it would probably be inappropriate for me to hear the matter if his evidence raised issues concerning his integrity or credit. However, if Mr Apel is not called then senior counsel for the respondents stated he would be inviting an inference of a kind contemplated in Jones v Dunkel (1959) 101 CLR 298 ("Jones v Dunkel") to be drawn against the applicant andMr Apel in relation to the applicant's motives for bringing and maintaining the proceeding. 10 There is an additional problem. The case involves complex issues of hotly disputed fact and will proceed over a substantial period of time. Although the applicant has indicated there is no present intention to call Mr Apel it is clear that the ultimate decision of whether he will or will not be called is one that in all likelihood will only be made in the course of the hearing, and probably only after the cross-examination of Messrs Fraid and Tauber has concluded. At that stage the applicant will be confronted with a dilemma. If Mr Apel is to be called I have given a clear indication that I would probably not regard it as appropriate that I continue to hear the case. The situation that would arise would be analogous to that which confronted the trial judge in Fried v National Australia Bank. However, if the trial were to be aborted in the present case on the basis that Mr Apel is to be called, senior counsel for the respondent has stated that that could have serious cost consequences for the applicant. Thus, there is a real risk that any decision on the part of the applicant as to whether to call, or not to call, Mr Apel may be influenced by extraneous considerations unrelated to the proper conduct and adjudication of the case namely, my likely disqualification and the potential costs liabilities that might result from it. That risk may be an incident of Mr Apel's alleged involvement in an issue to be decided as well as an independent basis for me not hearing the trial of the proceeding. 11 If the allegation that Mr Apel is involved personally in an issue arising in the proceeding were fanciful or not realistic it would be inappropriate for me to disqualify myself from hearing the matter at this stage. However, the correspondence passing between the parties indicates that Mr Apel has acted as solicitor for the applicant and, in that capacity, it is likely that from time to time he has advised the applicant and its directors in relation to the issue and maintenance of the proceeding. Thus, there is a real possibility that Mr Apel might be called as a witness by the applicant and, if not, that a Jones v Dunkell challenge may be made in respect of his role in the proceeding. 12 There are two further matters. The first is the co-executorship between myself and Mr Apel of my mother's estate. While it is not suggested that the estate involves any contentious issues, nonetheless it does involve Mr Apel in an on-going relationship concerning financial matters involving myself and members of my family: cf Aussie Airlines at 232. Further, the present case is one in which issues of fact and credit will be hotly contested between the parties and therefore differs from a case where the issue for determination involves a question of law to be decided on undisputed factual issues: cf Aussie Airlines at 233. 13 In the circumstances outlined above I agree with the submission by senior counsel for the respondents that the reasonable and fair minded observer might well entertain an apprehension that, in dealing with the evidence concerning the abuse of process allegation, I might not bring to the task of assessing that evidence an impartial and unprejudiced mind by reason of Mr Apel's alleged involvement in that aspect of the matter and that, in those circumstances, it is appropriate that I disqualify myself from hearing the trial of the proceeding. I would add that, to the extent the problems referred to at [10] are not strictly related to apprehension of bias, the need to prevent such problems from arising affords an additional basis for me not to conduct the trial of the proceeding. 14 Accordingly, for the above reasons I propose to vacate the hearing dates scheduled for the hearing of the present matter and take steps to have the hearing commence as soon as is reasonably practicable before another judge of the Court. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel. Associate: Dated: 17 April 2003 Counsel for the Applicant: Mr C Golvan SC with Dr S Ricketson Solicitor for the Applicant: Meerkin & Apel Counsel for the Respondent: Mr J Sher QC with Mr J Delany Solicitor for the Respondent: Minter Ellison Date of Hearing: 15 April 2003 Date of Judgment: 17 April 2003