FEDERAL COURT OF AUSTRALIA Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (In Liquidation) (No 2) [2011] FCA 1013 Citation: Australian Competition and Consumer Commission v Sensaslim Australia Pty Ltd (In Liquidation) (No 2) [2011] FCA 1013 Parties: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133, PETER CLARENCE FOSTER, PETER LESLIE O'BRIEN, ADAM TROY ADAMS and MICHAEL ANTHONY BOYLE File number(s): NSD 1163 of 2011 Judge: YATES J Date of judgment: 31 August 2011 Catchwords: COURTS AND JUDGES – application for disqualification for reasonable apprehension of bias – whether reasonable apprehension of bias in the form of pre-judgment by making an order ex parte for service involving a particular email address Cases cited: Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 Johnson v Johnson (2000) 201 CLR 488 Reece v Webber (2011) 192 FCR 254 Date of hearing: 17 August 2011 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 26 Counsel for the Applicant: Mr S White SC Solicitor for the Applicant: Corrs Chambers Westgarth Counsel for the Second Respondent: Mr J Young Solicitor for the Second Respondent: Fisher Dore Lawyers IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1163 of 2011 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133 First Respondent PETER CLARENCE FOSTER Second Respondent PETER LESLIE O'BRIEN Third Respondent ADAM TROY ADAMS Fourth Respondent MICHAEL ANTHONY BOYLE Fifth Respondent JUDGE: YATES J DATE OF ORDER: 31 AUGUST 2011 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The second respondent's application for disqualification brought by notice of motion dated 5 August 2011 be dismissed. 2. The second respondent is to pay the applicant's costs of and incidental to that application. Note: Settlement and entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1163 of 2011 BETWEEN: AUSTRALIAN COMPETITION AND CONSUMER COMMISSION Applicant AND: SENSASLIM AUSTRALIA PTY LTD (IN LIQUIDATION) ACN 140 333 133 First Respondent PETER CLARENCE FOSTER Second Respondent PETER LESLIE O'BRIEN Third Respondent ADAM TROY ADAMS Fourth Respondent MICHAEL ANTHONY BOYLE Fifth Respondent JUDGE: YATES J DATE: 31 AUGUST 2011 PLACE: SYDNEY REASONS FOR JUDGMENT 1 The second respondent, Peter Clarence Foster, seeks an order that I disqualify myself from the further conduct of this proceeding by reason of reasonable apprehension of bias. 2 The applicant neither consents to, nor opposes, the application. In adopting this position the applicant submits that "it is for the Court to determine the approach it wants to take and that it is entitled to take a robust approach in considering the issue". The applicant has directed my attention to relevant legal principles and aspects of the evidence. 3 The second respondent's application arises from order 6(b) that I made ex parte on 15 July 2011. The order was in the following terms: Leave be granted to the Applicant to serve the Application, the Supporting Affidavits and these orders, in the first instance, in the manner described herein, by 7pm on Friday 15 July 2011 on: … (b) the Second Respondent by sending a copy of the documents by email to peter@fosterworldwide.com and pobrien@sensaslim.com.au; … 4 The reasonable apprehension of bias is said to arise from that part of the order that specifies the second email address. As would be apparent, that email address includes, as an integer, the name "P O'Brien". Peter Leslie O'Brien is the third respondent in the proceeding. 5 In order to understand the setting in which the present application is made, it is necessary to give some background to the primary proceeding and the nature of the application before me on 15 July 2011 leading to the making of order 6(b). Background to the principal proceeding 6 The applicant alleges that the first respondent and certain individuals (the second to fifth respondents) have engaged in conduct in contravention of the Competition and Consumer Act 2010 (Cth) (the Act) and the Australian Consumer Law in connection with the promotion and supply of Sensaslim Spray and of business opportunities (by way of franchise) in relation to that product. Sensaslim Spray is promoted as an intra-oral solution that is an aid to weight loss. 7 A central allegation made by the applicant in the proceeding is that Sensaslim Spray has been promoted by reference to a clinical trial that was never conducted and by reference to a report on that clinical trial that is, accordingly, bogus. 8 The particular conduct alleged against the second respondent is that he contravened the Act and the Australian Consumer Law by: representing that he was Mr O'Brien (the third respondent) in telephone conversations with franchisees of the first respondent (which is responsible for the distribution of the Sensaslim Spray and granting franchises in relation to the supply of the product); failing to disclose his involvement or interest in the first respondent's business; representing to a franchisee in a telephone conversation (in which it is alleged that he assumed the identity of Mr O'Brien) that he had travelled to Switzerland and had seen the research facility that conducted clinical trials of Sensaslim Spray; and being knowingly concerned in or party to contraventions of the Act and the Australian Consumer Law by the first respondent or by aiding and abetting, counselling or procuring the first respondent's alleged contraventions. 9 The third respondent is said to be one of two founding directors of the first respondent. The other founding director is said to be the fifth respondent, Michael Anthony Boyle. 10 Thus one significant factual issue in the proceeding is whether the second respondent, on occasion, has posed as the third respondent in relation to the conduct of the first respondent's business. The application on 15 July 2011 11 On 15 July 2011 the applicant applied, amongst other things, for orders abridging time for the service of the application commencing the principal proceeding and for interim injunctions. 12 At that time I granted an interim injunction restraining the second, third and fourth respondents from taking further steps to make certain representations regarding the efficacy of Sensaslim Solution. I also abridged the time for personal service of the application and supporting affidavits and certain documents on each of the first, second, fourth and fifth respondents to 4.00 pm on Monday 18 July 2011 and, in the case of the third respondent, to 6.00 pm on that day. 13 I also made a number of orders that were designed to give earlier notice to all respondents of the commencement of the principal proceeding and of the fact that ex parte orders had been made. One of those orders was contained in order 6(b). 14 It is not necessary for me to detail all the evidence that was before me on 15 July 2011. Relevantly for present purposes, there was evidence of the following matters: The third respondent departed Australia on 20 May 2011 for Fiji and, as at 15 July 2011, had not returned to Australia. An email sent to the third respondent at the address pobrien@sensaslim.com.au on 7 June 2011 by Stephen Smith, an employee of the applicant, resulted in an "out of office reply" being sent to Mr Smith by return. The reply stated that the third respondent was away from Australia until 1 July 2011 and that he would not have access to his emails. The header information in the email sent as an "out of office reply" showed that it was sent from a computer with a particular IP address. Further investigation of the IP address showed that the "out of office reply" email was sent from a computer located at a particular residential address in Queensland and that the account holder for the IP address was Jill Louise Foster, the second respondent's sister. The second respondent, Ms Foster, and their mother, all resided at the residential address in Queensland. There was, however, no other evidence linking Ms Foster or the second respondent's mother with any business concerning Sensaslim Spray. There was other evidence suggesting that the second respondent was linked to the operation of the first respondent's business. Email communications sent to the email address pobrien@sensaslim.com.au on 2 June 2011 and 15 June 2011, at a time when, on the evidence, the third respondent was outside Australia, elicited detailed responses, not an "out of office" reply, even though the "out of office" reply referred to above had stated that the third respondent would not have access to his emails until 1 July 2011. 15 Thus the evidence showed that, as at 15 July 2011, the email address pobrien@sensaslim.com.au was one directly associated with the sending of an email from a computer located at the second respondent's residential address. An inference available from the evidence as at 15 July 2011 was that some person or persons, other than the third respondent, had access, by means of that computer at that residential address, to emails sent to pobrien@sensaslim.com.au. The evidence therefore indicated one possible means by which advance notice could be brought to the second respondent's attention of the fact that proceedings had been commenced and orders made, including orders against him personally. The second respondent's submissions 16 None of the evidence to which I have referred has been challenged by the second respondent. 17 The second respondent submitted, however, that the making of an order for advance service on him, through an email address bearing the third respondent's name in association with the name Sensaslim, involved an appearance of pre-judgment by me that there was such a close association between the second and third respondents and the second and first respondents, that the second respondent could be served at that email address. He submitted that implicit in such a decision was an assumption that the second respondent was involved in the first respondent's business and had a relationship with the third respondent in that business. The second respondent submitted that this was a critical issue in the case. 18 The second respondent submitted, therefore, that a fair-minded lay observer might reasonably apprehend that, by making order 6(b) on 15 July 2011, I might not bring an impartial mind to the resolution of questions that I would be called on to decide in the proceeding concerning the second respondent's alleged relationship with the first respondent and with the third respondent. Relevant principles 19 There was no dispute between the parties about the relevant principles to be applied. The second respondent drew particular attention to the decisions in Johnson v Johnson (2000) 201 CLR 488 and Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337. 20 The applicant and the second respondent both agreed that the question to be decided was whether a fair-minded lay observer might reasonably apprehend that I might not bring an impartial and unprejudiced mind to the resolution of a question I might be required to decide. 21 That question is elucidated in the cases by the following considerations: A fair-minded lay observer, although not a lawyer, is not "a person wholly uninformed and uninstructed about the law in general or the issue to be decided": Johnson at [53]; see also Reece v Webber (2011) 192 FCR 254 at [55]. "Whilst the fictional observer … is not to be assumed to have a detailed knowledge of the law, or the character or ability of a particular judge, the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice": Johnson at [13], Reece at [55]. The application must be based on a substantial ground and the possibility of bias must be real and not remote: Ebner at [7] and [19]. The standard is an objective one and the test is based on possibility, not probability. No prediction is involved about how the particular judge will ultimately handle the matter, nor is there involved any consideration of the actual thought processes of the judge. There must be a logical connection between the matter identified as the reason why the case might not be decided on its legal and factual merits, and the feared deviation from the course of deciding the case on the merits: Ebner at [8]. The state of mind required for bias or an apprehension of bias, in the form of pre-judgment, is "one so committed to a conclusion already formed as to be incapable of alteration, whatever evidence or arguments may be presented": Minister for Immigration and Multicultural Affairs v Jia Legeng (2001) 205 CLR 507 at 532. Consideration 22 I am not satisfied that a fair-minded lay observer might reasonably apprehend that, by making order 6(b) on 15 July 2011, I would not thereafter bring an impartial and unprejudiced mind to the resolution of the questions in this case, specifically as to any question concerning the relationship between the second respondent and the third respondent, and the second respondent and the first respondent. 23 The order that was made was simply a procedural order providing for the giving of advance notice of the commencement of the proceeding and the fact that orders had been made, at an email address which the evidence showed could be accessed by a computer at the second respondent's residential address. The fact that the order was designed to give advance notice only is made clear by the fact that, on the same day, I made orders for abridged personal service on the second respondent, and the fact that order 6(b) was specifically expressed to be "in the first instance". I also made orders for abridged personal service on the third respondent in Fiji. 24 I reached no conclusions and made no findings as to the relationship between the second respondent and the third respondent or the second respondent and the first respondent, other than that, on the face of the evidence then before me, there was an apparent connection, still unchallenged, between the email address pobrien@sensaslim.com.au and a computer operating at a particular IP address from the second respondent's residence. Whether the second respondent, personally, has accessed emails sent to that email address using that computer, I simply do not know. As at 15 July 2011, however, it was within the realms of possibility that he might be able to do so or that an email sent to that email address might be accessed by someone else and brought to the second respondent's attention. Those possibilities were reasonably open on the evidence before me. It does not reasonably follow, however, that, at that time I had, or now have, any concluded view at all about any of the matters that will fall for determination in this proceeding. I was simply dealing with the procedural aspects of an ex parte application of a kind routinely entertained and dealt with in this Court. 25 A fair-minded lay observer could only reasonably conclude that the order was made in an attempt to give advance notice of the kind that I have described, by a means that, as disclosed by the available evidence before me, might be accessible by the second respondent or result in him receiving that notice, and nothing more. Any apprehension that, by making order 6(b) in the circumstances in which it came to be made, I had formed a concluded view on any of the issues to be decided in this case and would not bring an open mind when deciding the case, would be, objectively assessed, unwarranted and unreasonable. 26 For these reasons, I decline to make the order that the second respondent seeks. The second respondent must pay the applicant's costs of and incidental to his application. I certify that the preceding twenty-six (26) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Yates. Associate: Dated: 31 August 2011