Federal Court of Australia Westpac Banking Corporation v Forum Finance Pty Limited (Apprehended Bias Application) [2022] FCA 981 File number: NSD 616 of 2021 Judgment of: LEE J Date of judgment: 19 August 2022 Date of reasons: 22 August 2022 Catchwords: COURTS AND JUDGES – principles of apprehended bias in the context of interlocutory judgment – where witness cross-examined as to credit – where adverse view formed of reliability as a witness – where there is at least a reasonable possibility that witness will be called at trial – where there is some logic connexion between that matter and the feared departure from the required judicial decision-making process Cases cited: Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 Laird v Tatum, 409 US 824 (1972) R v Watson; Ex parte Armstrong (1976) 136 CLR 248 Re JRL; Ex parte CJL (1986) 161 CLR 342 Southern Equities Corp Ltd (in liq) v Bond [2000] SASC 450; (2000) 78 SASR 339 SZTFQ v Minister for Immigration and Border Protection [2017] FCA 562 Westpac Banking Corporation v Forum Finance Pty Limited (Freezing Order Variation) [2022] FCA 910 Olijnyk A, "Apprehended Bias and Interlocutory Judgments" (2013) 35 Sydney Law Review 761 Beaumont J, "Managing Litigation in the Federal Court" in Opeskin B and Wheeler F (eds), The Australian Federal Judicial System (Melbourne University Press, 2000) 160 Australian Law Reform Commission, Without Fear or Favour: Judicial Impartiality and the Law on Bias (Report No 138, December 2021) Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 27 Date of hearing: 19 August 2022 Counsel for the Applicants: Mr J Giles SC with Ms C Hamilton-Jewell Solicitor for the Applicants: MinterEllison Counsel for the Third Respondent: Mr L Armstrong QC with Mr M O'Haire Solicitor for the Third Respondent: Aptum Legal Counsel for SMBC Leasing & Finance: Mr M Izzo SC with Ms E Beechey Solicitor for SMBC Leasing & Finance: Jones Day Counsel for Societe Generale: Mr S Gray Solicitor for Societe Generale: Ashurst Counsel for the Liquidators: Mr N Kidd Solicitor for the Liquidators: Allens ORDERS NSD 616 of 2021 BETWEEN: WESTPAC BANKING CORPORATION ABN 33 007 457 141 First Applicant WESTPAC NEW ZEALAND LIMITED (COMPANY REGISTRATION NUMBER COMPANY NUMBER 1763882) Second Applicant AND: FORUM FINANCE PTY LIMITED (IN LIQUIDATION) ACN 153 301 172 First Respondent BASILE PAPADIMITRIOU Second Respondent VINCENZO FRANK TESORIERO (and others named in the Schedule) Third Respondent order made by: LEE J DATE OF ORDER: 19 AUGUST 2022 THE COURT ORDERS THAT: 1. The following proceedings be transferred to the National Operations Registrar for the purposes of reallocation to another judge of the Court: (a) Westpac Banking Corporation (ABN 33 007 457 141) & Anor v Forum Finance Pty Limited (ACN 153 301 172) & Ors (NSD 616 of 2021); (b) Societe Generale (ABN 71 092 516 286) v Forum Finance Pty Limited (ACN 152 301 172) (In Liquidation) & Ors (NSD 642 of 2021); (c) SMBC Leasing and Finance, Inc. Sydney Branch (ARBN 602 309 366) v Forum Enviro (Aust) Pty Ltd (in provisional liquidation) (ACN 607 484 364) & Ors (NSD 681 of 2021); and (d) In the matter of the Forum Group of Companies Pty Limited (ACN 151 964 626) (Administrators Appointed) & Ors (NSD 747 of 2021). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT (Delivered ex tempore, revised from the transcript) LEE J: A INTRODUCTION 1 The genesis of the application before the Court can be seen in the concluding remarks of my judgment Westpac Banking Corporation v Forum Finance Pty Limited (Freezing Order Variation) [2022] FCA 910 (at [45]–[46]): 45. Upon reflection, I think I should add a further comment to my above reasons revised following their delivery ex tempore. This comment relates to a matter I referred to briefly at the end of the hearing: T139.32–141.39. Evidence from Mr Tesoriero was adduced on his behalf, and Westpac (for entirely understandable reasons) cross-examined Mr Tesoriero at some length during this interlocutory hearing. Accordingly, it became necessary for me to assess Mr Tesoriero's evidence closely and observe him in the witness box. Although it was unnecessary for me to make general credit findings to dispose of this application, it would leave the parties in a state of incomplete information to fail to record that I necessarily formed opinions as to the reliability of Mr Tesoriero as a witness. Despite this, when I raised this issue, senior counsel for each of the parties did not suggest that my hearing the cross examination caused any ongoing difficulty with me continuing as the docket judge and conducting the final substantive hearing. 46. It is presently unclear as to whether Mr Tesoriero will be called and whether it will be necessary to hear him give evidence again. In fairness, however, I think I should record my view that the general impressions I formed of the evidence of Mr Tesoriero were unfavourable as to his reliability as a witness. Although I believe that I can fairly proceed to hear and determine the issues at the final hearing, I am well aware that this is not the test. I record these remarks to provide full transparency to the parties. The parties have been apprised of all relevant facts. I note that I will continue to proceed on the basis that I will hear the case, unless an application is made that I disqualify myself from doing so. 2 At the pages of the transcript I referenced above, senior counsel then appearing on behalf of Mr Vincenzo Tesoriero did not consider there was any difficulty with me continuing to hear the trial of this case, notwithstanding he accepted that I would have formed impressions from hearing and observing Mr Tesoriero's evidence under cross-examination. 3 I added these additional comments to my revised reasons because, although an entitlement to seek the disqualification of a judge on the grounds of apprehended bias can be the subject of an express waiver, any such waiver should occur on the basis of the person making the election having been apprised of all relevant facts. 4 When publishing my revised reasons on 4 August 2022, I drew the attention of the parties to my comments in the judgment (at [45]–[46]) and on 12 August, I directed my Associate to write to the parties in the following terms: Dear Practitioners … Unless his Honour hears from those acting for Mr Tesoriero to the contrary by close of business on 16 August 2022, and subject to any submissions to the contrary, his Honour's preliminary view will be that there has been an express waiver of any contention that his Honour should not be able to continue to hear the matter on the grounds of apprehended bias. … 5 Mr Tesoriero, who has recently instructed new solicitors and new senior counsel, now applies to have this proceeding transferred to the docket of another judge. The application was brought in circumstances in which I have been the docket judge in this proceeding, as well as in related proceedings, since they were initially commenced. Those proceedings are currently listed for a hearing commencing in October 2022 (a hearing I consider will take approximately two weeks, possibly less). 6 The application has been opposed by the applicants, Westpac Banking Corporation (WBC) and Westpac New Zealand Limited (WNZL) (together, Westpac). As senior counsel for Westpac emphasised, this opposition is not based on some misguided notion of having a preference for one judge over any other judge. Rather, the opposition is informed by Westpac having a real interest, given the proximity of the current trial date, in having the case determined with celerity. Westpac is concerned that if the trial dates are lost, costs will increase and assets known to be available to meet its claim (which are sufficient only to meet a small fraction of the loss it is said to have suffered) will at best remain static, or otherwise be further diminished. In these circumstances, Westpac's opposition to the application is understandable. B RELEVANT PRINCIPLES 7 This application brings into focus an issue which, at the margins, can have some complexity: that is, how one deals with apprehended bias in the context of interlocutory judgments. 8 As is well known, in its original jurisdiction, this Court follows a "docket system". The principle is that a matter is allocated to the docket of a particular judge at or about the time of its commencement, with the intention that, subject to any necessary reallocation, the proceeding will remain with that judge for the purposes of case management, determining any interlocutory applications, and eventual final disposition. 9 In my view, there are substantial advantages to the docket system over other systems of case allocation. It allows a single judge to case manage a dispute effectively and consistently with modern case management imperatives. It also allows a judge to acquire a familiarity with the underlying issues, which allows for the efficient identification and narrowing of the real issues required to be decided in order to quell the controversy: see Beaumont J, "Managing Litigation in the Federal Court" in Opeskin B and Wheeler F (eds), The Australian Federal Judicial System (Melbourne University Press, 2000) 160 (at 168). 10 Despite this, the docket system does have at least some potential disadvantages (even though these disadvantages are substantially outweighed by the advantages). There is always a risk that a judge who decides an interlocutory matter may appear to have prejudged issues or have been exposed to extraneous information in a way that may create an apprehension of bias, and therefore disqualifies the judge from further hearing the case. There is also a further risk that a judge who is intensely involved in the management of the case may lose the appearance of detachment traditionally associated with the judicial role, although, at least in my experience of the docket system, this might be regarded as a fairly remote and academic risk. A useful discussion of apprehended bias in the context of interlocutory judgments is provided by Ms Anna Olijnyk in "Apprehended Bias and Interlocutory Judgments" (2013) 35 Sydney Law Review 761, in which Ms Olijnyk draws attention to these risks (at 766). 11 One reason why the present difficulty does not often arise is that, in the vast bulk of cases, the resolution of interlocutory applications does not give rise to making factual findings following evidence challenged by cross-examination. As Bleby J explained in Southern Equities Corp Ltd (in liq) v Bond [2000] SASC 450; (2000) 78 SASR 339 (at 368 [129]): [I]t should not be assumed that, merely because a judge has been responsible for the pre-trial case management of a particular case and will obviously have made decisions adversely affecting one party or another, the judge is necessarily precluded from conducting the trial. Indeed, there would be few interlocutory applications, a decision on which would be likely to give rise to a reasonable apprehension of bias. This is particularly so because most contested applications are decided on affidavit evidence where either the facts are not in dispute or where, as in the case of an interlocutory injunction, the judge merely has to be satisfied that the facts deposed to raise a serious question to be tried. Usually, findings on such issues will be cast in language which could not possibly found a successful submission of apprehension of bias. 12 But there will sometimes be cases, such as the present, where cross-examination, even relatively lengthy cross-examination, is appropriate to determine a contested issue. This is merely a particular instance of the more general notion that any discussion of apprehended bias requires close attention to the precise context and there is danger in generalising as to the application of principle. Every case must be considered by reference to its individual circumstances. 13 Recently, in the Australian Law Reform Commission's final report Without Fear or Favour: Judicial Impartiality and the Law on Bias (Report No 138, December 2021), the following was said in relation to allegations of pre-judgment arising from interim rulings (at [10.72], [10.77]): 10.72 The ALRC Case Review and comments to the ALRC Survey of Judges highlighted interim decisions against a party as the catalyst for a significant number of requests for disqualification. These objections are usually dismissed on the grounds that a judge deciding an issue against a party does not, without more, give rise to an apprehension of bias. 10.77 … given the prevalence of applications for disqualification related to interim rulings and interlocutory orders this would be an important area to consider addressing in each trial court's guidelines In this area, at least three key principles are well established and often repeated in the case law: • The fact that an order has been made against a party is not in itself a disqualifying ground [see Piepkorn v Caroma Industries Ltd [2000] FCA 1230 (at [10] per Wilcox J); Cavar v Greengate Management Services Pty Ltd [2016] FCA 961 (at [31] per Bromwich J); Callas v Callas [2018] FCCA 4 (at [148] per Judge Altobelli)]. • The expression of a tentative view by a judicial officer in the course of a hearing, in particular, a directions hearing, does not necessarily indicate that the judge has closed their mind [see Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 299 CLR 577 (at 610–611 [112]–[114] per Kirby and Crennan JJ); Johnson v Johnson [2000] HCA 48; (2000) 201 CLR 488 (at 493 [13] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). See further GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Ltd [2013] FCAFC 150 (at [43] per Allsop CJ, Middleton and Katzmann JJ)]. • A previous decision of the same fact or expression of clear views about the credit of a relevant witness, whether in the same proceedings or different proceedings, will amount to a disqualifying ground [see, for example, Jess v Jess (2021) 63 Fam LR 545 (at [396] per Alstergren CJ, Strickland and Kent JJ); Bob Jane Corporation Pty Ltd v ACN 149 801 141 Pty Ltd [2015] FCA 1343 (at [20]–[22] per Besanko J); British American Tobacco Australia Services Ltd v Laurie [2011] HCA 2; (2011) 242 CLR 283 (at 333 [145] per Heydon, Kiefel and Bell JJ); Livesey v New South Wales Bar Association (1983) 151 CLR 288 (at 300 per Mason, Murphy, Brennan, Deane and Dawson JJ); R v Watson; Ex parte Armstrong (1976) 136 CLR 248 (at 264 per Barwick CJ, Gibbs, Stephen and Mason JJ)]. (Citations omitted). 14 There is no need for me to rehearse the authorities concerning the principles of apprehended bias at length. It seems to me that what is outlined above (at [10.77]), with reference to the authorities cited, is a useful summary of the current state of the law as to these principles as they apply to interlocutory matters. 15 It suffices to note that the general proposition is that the issue is to be determined by asking whether "a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide": Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 (at 344 [6] per Gleeson CJ, McHugh, Gummow and Hayne JJ). 16 The only additional point I will make about the authorities is that there is an obvious tension, particularly evident in the present circumstances, between the duty to sit, which has been described "as equally strong as the duty to not sit where disqualified", and the concern about the cost, delay, reputational damage and inconvenience of an appellate court taking a different view from a primary judge as to whether they ought to have disqualified himself or herself: see Without Fear or Favour: Judicial Impartiality and the Law on Bias (at [7.20]); Laird v Tatum, 409 US 824 (1972) (at 837 per Rehnquist J). 17 Although a judge should not readily accede to an application for disqualification, the High Court has also said that there may be cases where the objection is substantial and it may be appropriate for the judge to disqualify himself or herself in a case of real doubt: Re JRL; Ex parte CJL (1986) 161 CLR 342 (at 352 per Mason J); Ebner (at 348 per Gleeson CJ, McHugh, Gummow and Hayne JJ). C CONSIDERATION 18 I do not consider this to be a case at the margins. 19 I am conscious that there is a real prospect that, in the event that I disqualify myself, the hearing will not be able to take place on the dates currently listed in October 2022. This has been explained to the parties. This will no doubt cause some cost and inconvenience, and may result in there being a degree of prejudice to the parties other than Mr Tesoriero. However, the question that I must address does not involve the exercise of a discretion or an evaluation informed by expediency: it is a fundamental one going to the constitution of the Court in the exercise of the judicial power of the Commonwealth and the cardinal requirement that the Court be constituted free of bias, either actual or apprehended. 20 In my earlier judgment (at [27]), I commented on the remarkable disparity revealed in the course of cross-examination as to the values ascribed to certain assets. A review of the transcript reveals that Mr Tesoriero's evidence on that point was somewhat inconsistent, and my finding on this issue did involve a rejection of suggestions in Mr Tesoriero's evidence that he was not apprised of the fact that his broker had provided to proposed incoming mortgagees indicative valuations of various assets (which were vastly different to the estimates Mr Tesoriero had given in his sworn evidence to this court). 21 Westpac is right to point to the fact that neither this finding, nor my general remarks as to credit, are likely directly relevant to a fact in issue that I need to decide in determining this case. However, this is too narrow a focus. I do not propose to expand on what was previously said, other than to state that I formed an adverse view of Mr Tesoriero's reliability as a witness. Senior counsel for Westpac accepts, correctly, that, although there is no guarantee that Mr Tesoriero will be called at trial, given the nature of the case advanced against him, there is at least a real possibility that he will be called and his credit will be in issue. 22 As I said in SZTFQ v Minister for Immigration and Border Protection [2017] FCA 562 (at [44]–[45]), it is unrealistic to put various aspects of the evidence of a witness into hermetically sealed boxes. The assessment of credibility is necessarily an impressionistic one, and an unfavourable view taken upon an otherwise minor issue may have consequences for the balance. Further, to be too confident that emphatic disbelief on one issue does not inform, even subconsciously, the approach taken to weighing other evidence of the person disbelieved is to underplay the complexity of the human process of decision-making. With the best will in the world, it is very hard for a judge to put out of their mind adverse impressions as to reliability of witness in considering all aspects of the evidence of a witness, including evidence given on a later occasion. 23 Of course, as Westpac correctly submits, the question is whether there is some logical connexion between the general impression I formed as to Mr Tesoriero and any feared departure from my obligation, if I were to be the trial judge, to decide the factual contest solely on the basis of the evidence at trial: see Ebner (at 345 [6] per Gleeson CJ, McHugh, Gummow and Hayne JJ). But there is a logical connexion. As Barwick CJ, Gibbs, Stephen and Mason JJ stated in R v Watson; Ex parte Armstrong (1976) 136 CLR 248 (at 264): As the cases show, there are some matters on which a judge may have preconceived opinions, and yet be qualified to sit, but speaking generally the credit of an essential witness, where the case may turn on credibility, is not one of them. 24 If Mr Tesoriero were to give evidence at trial (and such a result is more likely than not) he will be cross-examined on the reliability of his evidence and any finding I might be required to make would, of course, only be on the basis of the evidence submitted at the trial. However, I consider a reasonable observer would form the impression that my decision making would involve an element of prejudgment, in that the adverse impressions I have already formed would be part of the context in which I judged his evidence given at trial (and perhaps also the way I understand other evidence). 25 Sometimes one might subjectively disagree with impressions attributed (or which might be attributed) to an ordinary bystander, but this is a case in which I think that impression would likely be an accurate one. D CONCLUSION AND ORDERS 26 Absent express waiver, I must disqualify myself. I will make an order to transfer the Westpac proceeding to the National Operations Registrar for reallocation to another judge. There are related proceedings that are to be heard at the same time. Each of the parties in those proceedings, sensibly, does not consider it efficient or appropriate that those proceedings be heard at any other time or by another judge, given that there will be overlapping evidence. Accordingly, those related proceedings should also be allocated to the same judge. The parties will be contacted by the Associate of the judge to whom the matter is allocated, and I will do what I can, through my Chambers, to facilitate the least disruptive transfer of the matters. 27 In this last regard, I should mention one final matter. Evidence was proposed to be adduced by Mr Tesoriero about various matters which are said to give rise to a real prospect of the current trial dates being the subject of an adjournment application. I only mention this to make two points. First, I rejected the evidence and did not have regard to the prospect of an adjournment in making my decision because, as noted above, the determinative issue on this application relates to the constitution of the Court (and is not to be determined by issues of convenience). Secondly, given my experience as the docket judge, it might be thought I would be best placed to decide the application for an adjournment, particularly given the views I have previously expressed about the filing of expert evidence, my awareness of the fact that Mr Tesoriero has now engaged his third firm of solicitors, and my understanding of the significant opportunities Mr Tesoriero has been afforded by my interlocutory orders to prepare for the hearing. But the application is not presently made, and for the same reason as has prompted my disqualification, it is appropriate that any such application be advanced before the new docket judge. I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Lee. Associate: Dated: 22 August 2022 SCHEDULE OF PARTIES NSD 616 of 2021 Respondents Fourth Respondent: FORUM GROUP FINANCIAL SERVICES PTY LTD (PROVISIONAL Fifth Respondent: FORUM GROUP PTY LTD (RECEIVERS APPOINTED) (IN LIQUIDATION) Sixth Respondent: FORUM ENVIRO PTY LTD (PROVISIONAL LIQUIDATORS APPOINTED) Seventh Respondent: FORUM ENVIRO (AUST) PTY LTD (PROVISIONAL LIQUIDATORS Eighth Respondent: 64-66 BERKELEY ST HAWTHORN PTY LTD ACN 643 838 662 Ninth Respondent: 14 JAMES STREET PTY LTD (IN LIQUIDATION) ACN 638 449 206 Tenth Respondent: 26 EDMONSTONE ROAD PTY LTD (IN LIQUIDATION) ACN 622 944 129 Eleventh Respondent: 5 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 630 982 160 Twelfth Respondent: 6 BULKARA STREET PTY LTD (IN LIQUIDATION) ACN 639 734 473 Thirteenth Respondent: 23 MARGARET STREET PTY LTD ACN 623 715 373 Fourteenth Respondent: 1160 GLEN HUNTLY ROAD PTY LTD ACN 639 447 984 Fifteenth Respondent: 14 KIRWIN ROAD MORWELL PTY LTD ACN 641 402 093 Sixteenth Respondent: CANNER INVESTMENTS PTY LTD ACN 624 176 049 Seventeenth Respondent: 123 HIGH STREET TARADALE PTY LTD ACN 639 872 512 Eighteenth Respondent: 160 MURRAY VALLEY HWY LAKE BOGA PTY LTD ACN 641 392 921 Nineteenth Respondent: 31 ELLERMAN STREET DIMBOOLA PTY LTD ACN 641 392 887 Twentieth Respondent: 4 COWSLIP STREET VIOLET TOWN PTY LTD ACN 639 872 352 Twenty-First Respondent: 55 NOLAN STREET MARYBOROUGH PTY LTD ACN 641 392 912 Twenty-Second Respondent: 89 BETKA ROAD MALLACOOTA PTY LTD ACN 641 393 179 Twenty-Third Respondent: 9 GREGORY STREET OUYEN PTY LTD ACN 641 392 707 Twenty-Fourth Respondent: 9 MAIN STREET DERRINALLUM PTY LTD ACN 639 872 736 Twenty-Fifth Respondent: 286 CARLISLE STREET PTY LIMITED ACN 610 042 343 Twenty-Sixth Respondent: 275 HIGH STREET GOLDEN SQUARE PTY LTD ACN 639 870 545 Twenty-Seventh Respondent: MAZCON INVESTMENTS HELLAS IKE Twenty-Eighth Respondent: PALANTE PTY LTD ACN 135 344 151 Twenty-Ninth Respondent: ANASTASIOS GIAMOURIDIS Thirtieth Respondent: THE FORUM GROUP OF COMPANIES PTY LTD (IN LIQUIDATION) ACN 151 964 626 Thirty-First Respondent: IUGIS PTY LTD (IN LIQUIDATION) ACN 632 882 243 Thirty-Second Respondent: IUGIS (UK) LIMITED Thirty-Third Respondent: IUGIS HOLDINGS LIMITED Thirty-Fourth Respondent: IUGIS GLOBAL FINANCIAL SERVICES LIMITED Thirty-Fifth Respondent: IUGIS FINANCE LIMITED Thirty-Sixth Respondent: SPARTAN CONSULTING GROUP PTY LTD (IN LIQUIDATION) ACN 168 989 544 Thirty-Seventh Respondent: INTRASHIELD PTY LTD (IN LIQUIDATION) ACN 133 426 534 Thirty-Eighth Respondent: TESORIERO INVESTMENT GROUP PTY LTD ACN 161 088 115 Thirty-Ninth Respondent: MANGUSTA (VIC) PTY LTD ACN 631 520 682 Fortieth Respondent: 193 CARLISLE STREET ENTERPRISES PTY LTD ACN 612 615 237 Forty-First Respondent: 8-12 NATALIA AVE OAKLEIGH PTY LTD ACN 643 838 626 Forty-Second Respondent: IUGIS HELLAS IKE Forty-Third Respondent: IUGIS ENERGY SA