Ebner v Official Trustee in Bankruptcy M37/1999 [1999] HCATrans 618 (9 December 1999)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M37 of 1999

B e t w e e n -

INGRID EBNER

Applicant

and

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

Application for special leave to appeal

McHUGH J

KIRBY J

TRANSCRIPT OF PROCEEDINGS

FROM MELBOURNE BY VIDEO LINK TO CANBERRA

ON THURSDAY, 9 DECEMBER 1999, AT 9.00 AM

Copyright in the High Court of Australia

Office of the Registry

Melbourne No M47 of 1999

B e t w e e n -

CLENAE PTY LTD

First Applicant

CLEMENT REGINALD QUICK (personally and as Executor of the Estate of Clement Martin Quick)

Second Applicant

WESLEY MALCOLM QUICK (personally and as Executor of the Estate of Clement Martin Quick)

Third Applicant

and

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Respondent

Application for special leave to appeal

McHUGH J

KIRBY J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON THURSDAY, 9 DECEMBER 1999, AT 9.00 AM

Copyright in the High Court of Australia

MR G.T. BIGMORE, QC: If the Court pleases, I appear with my learned friend, MR M.N.C. HARVEY, on behalf of the applicant. (instructed by Clayton Utz)

MR M. CLARKE: I appear for the respondent. (instructed by Dunhill Madden Butler)

McHUGH J: Since there is almost a common point with the other case, I might get the appearances in the second matter as well.

MR F.M. DOUGLAS, QC: I appear with MR K.M. CONNOR for the applicant in Clenae Pty Ltd. (instructed by McKean & Park)

MR B.J. SHAW, QC: I appear for the respondent, with my learned friend MR R.L. BERGLUND, QC. (instructed by Blake Dawson Waldron)

McHUGH J: Mr Bigmore, do you still persist in the bankruptcy point?

MR BIGMORE: Your Honour, I have to say that our argument in relation to the bankruptcy point is that the Full Court was wrong but we cannot really press the special grounds.

McHUGH J: No. In that case, we do not want to hear from you any further, at the moment, anyway. Mr Douglas, we would not want to hear from you in the first instance either. So I think we might call on Mr Clarke first of all.

MR CLARKE: If the Court pleases, the respondent submits that the question, at least in Ebner's Case, is really an issue as to whether the Court should review the finding of the Full Court of the Federal Court that the learned trial judge did not have a direct pecuniary interest in the outcome of the litigation.

McHUGH J: I appreciate that and the applicant's case is, on this point, as it appears to me one stage further back, really. It really seems to me to have to rely on an indirect claim. But nevertheless, the two cases do seem to cover the universe, so to speak, and they do seem to raise some very important questions of principle which this Court should settle.

KIRBY J: This issue has been raised recently, within the last few weeks, in South Africa and it has been the subject of a decision in England and in Canada, so that it is, in a sense, the flavour of the month. It may well be that the High Court of Australia should settle the rule for Australia.

McHUGH J: There is the Dovade Case in New South Wales as well. It is coming through the system.

KIRBY J: I know Justice McHugh puts New South Wales in the same category as Canada and South Africa and so on. I was thinking on a larger scale.

MR CLARKE: We have included that case in our bundle of authorities, but can I just simply draw this distinction and limit my submission to this distinction between this case and Clenae's Case. That is if the Court, as it clearly does, wants to seek to review the application of the rule of automatic disqualification for direct pecuniary interest, that is irrelevant for our case because our case - it was found that there was an indirect pecuniary interest - - -

McHUGH J: I appreciate that, but that still raises this question as to whether or not the fact that a judge is a director of a trust which holds the shares in itself is sufficient to raise either reasonable apprehension of bias or, if there is an independent rule about direct pecuniary interest, whether or not there is also one of indirect pecuniary interest. So they are important - - -

MR CLARKE: The Court will note that in respect of the reasonable apprehension of bias my learned friend conceded before the Full Federal Court that if that was the test, they would not succeed. So that that concession has already been made and they relied solely on the issue as to whether the automatic disqualification rule did in fact apply. So that is what they did rely upon. The only cases in which I have found that upheld the - applied the automatic disqualification rule were limited to situations where the judge himself has held shares in a party to the proceeding. That is not the case here. In fact, what we have is a judge as a director of a trustee company of a family discretionary trust which held shares in a creditor of the bankrupt, who transferred his property to the respondent in the proceeding.

In my submission, nothing is more indirect and the cases in which this issue has arisen, or an issue of the automatic disqualification rule in which the judge was not disqualified, includes The Crown v Industrial Court, the Queensland case, in which the judge's wife held shares in the respondent to the proceeding; The Bank Nationalisation Case, where the same thing occurred, as well as another judge - - -

KIRBY J: What years were these?

McHUGH J: The Bank Nationalisation Case is 1947, is it not?

MR CLARKE: Yes, that is true.

KIRBY J: That is a long while ago. The common law moulds itself to the time and we live in a time where people are not so unquestioning of institutions as they were in 1947 and why ought it not to be the common law? Why is it not the common law that a judge should have no interest, N-O, in any matter that is before the judge or if the judge has any interest the judge must disclose that to the parties. In 99 per cent of cases the parties, having been informed, will say, "Well, that cannot affect a few shillings" as the Scottish judge said, "will not affect the judge" but why ought in this day and age the rule not to be so rigorous?

MR CLARKE: One ought to disclose one's interest, as a judge, in order for the application of the reasonable apprehension of bias principle and that was done in this particular instance and my learned friend has conceded before the Full Federal Court that that was the appropriate test which flows from the disclosure by the judge of his interest, then they would not succeed.

KIRBY J: But, that is a different issue.

MR CLARKE: Yes. In terms of the direct pecuniary interest in the limitation ought to be placed on the automatic disqualification rule, that has been expressed by his Honour Justice Deane in Webb's Case and he adopted what Lord Goff said in Gough's Case and what Lord Woolf said in Gough's Case, that is, that the automatic disqualification law should be limited and because of its impact it ought to be limited and ought to be limited to where there is a direct pecuniary interest. That is an issue or a principle that I am not aware has been challenged.

McHUGH J: But that in itself is an important question which has not been authoritatively determined and that being so seems to ground a special leave application.

MR CLARKE: In my submission it has not been authority determined by the High Court, save and except that Justice Deane did express that view that ought to be limited to direct pecuniary interest. He adopted that view on the basis of what has been said in England and there has been, in my submission, nothing said to the contrary that ought to apply not just to direct pecuniary interest but ought to apply to any pecuniary interest. That has not been, in my submission, the view expressed in any case. What we have in this particular instance is a question as to whether what we do have before you is a direct or indirect interest and the principle that has been assumed by the Full Federal Court is that it is limited to the situation where there is a direct pecuniary interest.

Clenae's Case tackles that head on because what they had in that particular instance was a direct pecuniary interest and the question there was whether the automatic disqualification test ought to apply in that instance but that is not what we have before you in Ebner's Case. In Ebner's Case it is indirect and falls outside the purview of that issue.

McHUGH J: But there are other problems - well, not problems, but there are other questions that arise in your case because the Full Court took the view that the relevant matter in which the judge must have a pecuniary interest for the rule to operate was in the outcome of the litigation and it may be that that needs some qualification.

MR CLARKE: The expression "interest in the outcome" has been used interchangeably with two other expressions, "interest in the cause", "interest in the subject matter" and they are words that have been used interchangeably by Justice Deane in Webb's Case and also by Lord Goff in both Pinochet's Case and Gough's Case and also by Lord Woolf in Gough's Case and Lord Browne-Wilkinson in Pinochet's Case, so, that expression has been used interchangeably and invariably - - -

McHUGH J: I appreciate that but they are simply statements of judges They bind nobody. The rule is stare decisis not stare dictus.

MR CLARKE: No, but the expression and example that is being used for each of those expressions is the instance of Dimes' Case in which the Lord Chancellor had an interest by way of shareholding in a party to the proceeding.

McHUGH J: I appreciate that, but if you at least at one of the Thellusson Cases back in the last century the judges saw no problem about sitting on an appeal in which they had been counsel at an earlier stage of the proceedings. Times change and as Justice Kirby put to you what may have passed muster in 1947 does not necessary does not necessarily pass muster in the last year, or the second last year, on one view, of the 20th century.

MR CLARKE: The Court has been referred to Dovade's Case. That was another instance where they found although the rule of automatic disqualification was limited to a direct interest, and in that particular instance the fact that the judge's wife had an interest in Westpac, which was a party to the proceeding, was an indirect interest, however close the relationship may be amongst family members to the judge, and therefore the test did not apply. So we have even more recent authority together with the authorities that my learned friend has referred to in his outline, that is the two cases I have referred to, the two New South Wales cases from the last century, and as well as the two cases that I have included, one of which is a recent unreported decision in which Ebner is referred to in England, as well as Clenae's Case.

McHUGH J: Yes, I appreciate that, and you have much authority in your favour, but the respondent, in the Burnie Port Case, might have thought that Rylands v Fletcher was a strong authority in its favour, that being a decision of the House of Lords followed on numerous occasions and applied in this Court. This Court overruled it.

MR CLARKE: If the Court pleases, I cannot take that matter any further.

McHUGH J: Thank you.

KIRBY J: Could I just clarify, Mr Clarke, is your proposition that the interest, direct or indirect, is simply an illustration of the more fundamental conceptual issue of bias, actual or imputed, and that therefore the concept is one of whether the judge is biased in the sense of lacking in neutrality and independence, or would appear to a reasonable bystander to be such, and that questions of interest are not separate concepts, but merely illustrations of the fundamental flaw that disqualifies a person from performing judicial functions. Is that your submission? If the matter comes to the Court I think it is very important that we should be looking at the concept and not simply at what judges in Scotland have said in earlier times.

MR CLARKE: We say the principle is that the test to be applied where there is pecuniary interest is one of reasonable apprehension of bias with one special exception. The special exception is whether there is a - this is put at its highest. The special exception is where there is a direct pecuniary interest, and where that applies, and it is found to be a direct pecuniary interest, then the test of a reasonable apprehension of bias no longer applies, and what you have is an automatic disqualification, and the automatic disqualification does not have regard - - -

KIRBY J: Can I ask you to pause there because, I just speak for myself, that sounds a very unstable principle to have a fundamental rule and then say there is this tiny little exception because in a particular case a judge in Scotland said this and we have followed that ever since; you have really got to look at the concept, why is the interest, direct or indirect, such that courts of the common law say that judges cannot in such a case sit in disposition of the matter. It is really unstable to say there is this great principle and we have just tacked this little exception on. That is very unstable.

MR CLARKE: The exception has its origin in the principle that a judge should not be a judge in his own cause. So the judge should not be a party and a judge should also not be a shareholder in a party to the proceedings, so therefore by virtue of his shareholding he has a direct pecuniary interest in the outcome and it is as if he is a judge in his own cause by reason of his shareholding. That is why there is an exception - - -

KIRBY J: But there is a question behind that: why is a judge not permitted to be a judge in his own cause? Is the answer to that because that would offend the conception of what it is to be a judge, or would offend the public confidence in the judicial institution. I mean, if this matter comes here, speaking for myself, it is just not going to be good enough for people to come up here and read what Scottish or English or other judges or judges of this Court have said. It has to be looked at as a matter of fundamental principle, and it has to get back to fundamental questions, and not simply little exceptions that have been thought appropriate to solve a particular case. I only speak for myself, but I will be looking for a concept if it comes to the Court.

MR CLARKE: I understand that, your Honour.

KIRBY J: I think I mentioned Canada and South Africa. I have had communication with judges of the final courts in those countries and I do not know whether they have been handed down but I do know that this issue is before the Supreme Court of Canada and I think the Constitutional Court of South Africa, so that if the case is given special leave I would expect counsel to familiarise themselves not just with the jurisprudence in England and Scotland, but also in other courts of the common law and perhaps civil law countries as well. It is an important contemporary issue.

MR CLARKE: I understand that, your Honour. If the Court pleases.

McHUGH J: Yes, thank you, Mr Clarke. Yes, Mr Shaw, we might hear from you.

MR SHAW: If the Court pleases. Your Honour said that our case involved an important question. So it does but, in our submission, that by itself is not sufficient to entitle an appellant to leave and, what is more, it is submitted that the interests of litigants, the litigants involved, remain paramount in this Court as in every other court and are not to be subjected to the interests of the nation, as it were, in an unsuitable case.

McHUGH J: Yes.

MR SHAW: Accordingly, it is submitted that one has to see that this is a suitable case and that there are sufficient prospects of success to warrant leave.

McHUGH J: The point is in your case though, is it not, that if there is an absolute rule that a judge should not hold shares in a company which is a litigant before him or her, you would have to set aside the verdict, would you not?

MR SHAW: The answer to that is, it is submitted, no. The case was decided below by Justice Callaway on the ground of necessity and the other two members of the court agreed.

McHUGH J: That raises another point about necessity in those circumstances.

MR SHAW: It does raise another point, your Honour.

McHUGH J: You just seem to be making the case for the grant of special leave even stronger, Mr Shaw.

MR SHAW: I was merely seeking, maybe by shooting myself in the foot, to demonstrate that what your Honour said was not right. There are the two points.

McHUGH J: But you do not reach necessity until you deal with the first point.

MR SHAW: That is true, your Honour, but the second point is there. If I could perhaps direct your Honours' attention to the application book at page 147 and direct your Honours to grounds 2, 3, 4 and 5 and direct your Honours' attention to page 150, ground 1, and the reason I am doing that, your Honour, is because the point that I have just addressed your Honour on is not there.

McHUGH J: What do you mean it is not there?

MR SHAW: What I mean, your Honour, is that there is nothing said about the necessity point.

KIRBY J: Well, that is not the necessity defence of yours. They say the order is flawed and therefore must be set aside. You have to say, do you not, that it is not set aside because it was necessary for the judge to dispose of it?

MR SHAW: Yes, on the assumption that they are right about the rule.

KIRBY J: Yes.

MR SHAW: But that is the first reason we say this is an unsuitable case. The second reason we say it is an unsuitable case is that it is perfectly true that, as times change, the law may change. That would, it would seem, cast some doubt on the current relevance of the 19th century cases that my learned friend relies on rather than assist him, and the fact of the matter is that Clenae has been approved in the Court of Appeal in New South Wales and in the Court of Appeal in the United Kingdom in Localbail v Bayfield, judgment in which was delivered just the other day, and I think your Honours have been provided with copies of that, but in case your Honours have not - - -

McHUGH J: Well, they may have come; I have not read it.

MR SHAW: It is a case of Localbail v Bayfield, it was a Court of Appeal - I do not know how many copies - - -

KIRBY J: This is the English Court of Appeal, is it?

MR SHAW: Yes.

KIRBY J: Yes, I have seen that. I did not see it in connection with this case; I saw it off the Internet.

MR SHAW: I think that is where this came from too, your Honour.

MR SHAW: But that was a Court of Appeal which was specially constituted to deal with five separate appeals which involved this point. The Court of Appeal was constituted by the Lord Chief Justice, the Master of the Rolls and the Vice-Chancellor, and in paragraphs 8 and 9 the court agreed with Clenae.

McHUGH J: Yes, they said the correct approach was - that is stated in the authority.

MR SHAW: And it is submitted that the fact being, as is stated by his Honour Justice Charles at page 108, that there was a concession made and he decided at lines 12 to 25 that there was a concession made and he decided that the judge's interest could not be affected by the decision. There was a concession which is referred to at page 129, bottom line, going over to the top of the next page:

that the appellant could not establish a reasonable apprehension of bias -

If one asks what the principle of the rule is, as your Honour Justice Kirby has inquired, it is submitted that underlying the principles is an apprehension that a judge should be and should be seen to be impartial and to be unaffected in deciding a particular case by his own interests, and there is obvious sense in that. It is perfectly plain in this case that that underlying principle could not be affected by this decision.

KIRBY J: Well that is why it is quite important, in my thinking, to get clear whether we are talking about this little special rule of interest or whether it is, itself, merely an illustration of the larger rule, if you talk in international covenant terms, that the judge must be independent, neutral and professional. They are fundamental human rights. If you focus then on independent and neutral then you are really not thinking in terms of this special rule about interest. It is simply an illustration of a disqualifying phenomenon that is more fundamental.

MR SHAW: Exactly, your Honour. It is submitted that in the light of that, the prospects of the appellant being successful on that point here are very slight. That being so, it is submitted that it would be wrong for the Court to grant special leave because it would affect our client in a way from which there will be no recovery in the sense - what I mean is, if there is an appeal everything is held up, time goes by, you do not get all your costs, all that sort of thing. So that it is submitted that the Court should be satisfied that there really are sufficient prospects of success to justify special leave here, although, as I say, I have to agree it is an important point.

KIRBY J: Would you explain to me the significance of the death of the witness. I do not quite understand how that is important in the actual litigation between these parties.

MR SHAW: He had been one of the principal witnesses on behalf of the Bank and in his absence he could not give a personal account to the judge of what certain conversations, and what was said and so on.

KIRBY J: His evidence would be available in a second trial, of course.

MR SHAW: In the sense that - - -

KIRBY J: I assume that the Evidence Act of Victorian would permit the tender of the evidence of a deceased deponent in an earlier trial.

MR SHAW: Your Honour, I am not sure what the answer to that is, but that fact is he would not be there.

KIRBY J: No.

MR SHAW: And personal impressions were important in this case. So I have to agree, or concede, whatever is the right word, it is an important point. But it is submitted that, be that as it may, it is inappropriate in this case to grant special leave. If the Court pleases.

McHUGH J: Thank you Mr Shaw. Mr Douglas, we would like to hear you on the question of prejudice by reason of the death of this witness.

MR DOUGLAS: There are just two other matters I would wish to mention. There seem to be a suggestion in what Mr Shaw said that we had conceded there was no reasonable apprehension of bias. That is not a concession made by us. That is a recounting of what was said in the Federal Court case. The other matter is this question of necessity which your Honour - - -

KIRBY J: Do you say that was said in the Federal Court by your predecessors in title?

MR DOUGLAS: I think it is a recounting of a concession which was made in the Ebner Case, not a concession made by us. The concession which was made by us was that - it is recorded - - -

McHUGH J: That you could not have - - -

MR DOUGLAS: I could not have established that it "would have had any impact at all on the value of the judge's shares". So that is at paragraph 29 of a judgment at page 108 of the appeal book.

McHUGH J: Yes.

MR DOUGLAS: So far as the other question is concerned, the question of necessity, it does seem to us that in circumstances where the evidence would be available at a second trial, as your Honour Justice Kirby has pointed out, it really comes down to a question of whether the judge hearing the matter again would have available to him the demeanour of a witness. Now, that seems to us to be a very small basis on which to justify the application of a doctrine of necessity in cases in which it has been considered which I referred to in the - - -

KIRBY J: I assumed that the transcript would be available in the second trial. I am not familiar with the evidence law of Victoria and Victoria is not a jurisdiction in which the uniform Evidence Act applies. Have you examined this question, or would you tell the Court that if a second trial were conducted, your client would raise no objection to the tender of the transcript of the evidence of the witness who is dead?

MR DOUGLAS: Yes, your Honour, at the hearing of the matter in the Victorian Court of Appeal we made such a concession and it is my recollection, and I have instructions to give such a concession on this occasion as well. Having said that, one then goes to cases like Laws' Case and there is a decision of your Honour's, I think, in the Spedley litigation which is also referred to in the judgment under appeal, and it does seem to us that to take the doctrine of necessity to the level which Mr Shaw would wish to take it to in this case, and to the level which Mr Justice Callaway and Mr Justice Winneke took it in the Victorian Court of Appeal, is taking it beyond where it has been before, and we would say that decision is wrong. We have not raised that specifically in our grounds of appeal because we had - - -

McHUGH J: Why not?

MR DOUGLAS: Well, I think we had taken a view, wrongly, it may appear, if Mr Shaw is correct in his reading of the grounds of appeal, that it was subsumed in the larger point, but if it be necessary to amend our grounds of appeal and our application for special leave so as to make it clear that we are raising the point - - -

McHUGH J: Well, I think you should.

MR DOUGLAS: Yes. So, on that basis, we would say it is of itself a matter which alone would justify special leave, quite apart from the other issue which is before the Court. If it please the Court.

Could I just raise one other matter, your Honour, which is of interest, just on a general issue. It may not have escaped your Honours' attention, but there is some assistance in relation to these issues in section 44 of the Constitution which refers to a:

person who -

(v) Has any direct or indirect pecuniary interest in any agreement with the Public Service of the Commonwealth otherwise than as a member and in common with the other members of an incorporated company consisting of more than twenty-five persons -

McHUGH J: Yes, but that can be traced back to the Place Act back in the 18th century.

MR DOUGLAS: Yes.

McHUGH J: We need not trouble you, Mr Bigmore.

In the matter of Ebner v The Official Trustee in Bankruptcy there will be a grant of special leave limited to the disqualification point.

In the matter of Clenae there will be a grant of special leave but, Mr Douglas, that is conditional upon you amending your notice of appeal within 28 days to raise the necessity point in your notice of appeal.

KIRBY J: The Court has noted on the transcript the undertaking that you have given in relation to any future trial.

MR DOUGLAS: Yes.

McHUGH J: Adjourn the Court.

AT 9.32 AM THE MATTERS WERE CONCLUDED