Clenae Pty Ltd v Quick & Ors M2/2000 [2000] HCATrans 310 (14 June 2000)

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No M131 of 1999

B e t w e e n -

IN THE MATTER OF MAXWELL WILLIAM EBNER (a Bankrupt)

INGRID EBNER

Appellant

and

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

Office of the Registry

Melbourne No M2 of 2000

B e t w e e n -

CLENAE PTY LTD

First Appellant

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

Second Appellant

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

Third Appellant

and

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED

Respondent

GLEESON CJ

GAUDRON J

McHUGH J

GUMMOW J

KIRBY J

HAYNE J

CALLINAN J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 14 JUNE 2000, AT 3.16 PM

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 appellant, Ebner. (instructed by Clayton Utz)

MR J.B.R. BEACH, QC: May it please the Court, I appear with my learned friend, MR M. CLARKE, for the respondent. (instructed by Dunhill Madden Butler)

MR F.M. DOUGLAS, QC: I appear with my learned friends, MR K.M. CONNOR and MR W.D.H. WALSH, for the appellant in Clenae Pty Ltd. (instructed by McKean & Park)

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

GLEESON CJ: These appeals have been listed together on the basis that they appear to raise the same, or very similar, issues. Is it convenient for the parties if we hear them together?

MR BIGMORE: It is, your Honour, yes.

GLEESON CJ: If we hear counsel for the appellants in both cases first and then counsel for the respondents.

MR BIGMORE: Yes, if your Honour pleases.

GLEESON CJ: Yes, Mr Bigmore.

MR BIGMORE: If the Court pleases, we rely upon our written submissions, both original and in reply. All we wish to do in oral address is to take your Honours to the decision of Mr Justice Callaway and his observations in the Clenae Case. It was on our list and, of course, is to be found in the other appeal book beginning at paragraph 87.

KIRBY J: Is this reported yet?

MR BIGMORE: Not to my knowledge, your Honour, no. It is still the VSCA reference that we gave but it might be more convenient, I am not sure, to find it in the other appeal book. Justice Callaway's judgment began at paragraph 87 and your Honours will recall that his Honour found it unnecessary to decide the point because the other two judges in that case had come to the view that there was no interest on the part of the relevant judge in the outcome of the proceedings.

His Honour Justice Callaway took a different view and the first question that he posed was:

whether the learned trial judge was disqualified from giving judgment by reason of his Honour's having become the beneficial holder of 2,400 shares in the respondent;

and in paragraph 89 his Honour dealt with, by way of observation, that particular question. His Honour said:

As a preliminary to deciding the second question, I shall however make some observations on the first:

(a) This case does not concern a judge who holds his or her shares as a bare trustee, as Williams, J. did in the Bank Nationalization Case.....Nor may the holding itself be regarded as de minimus, so there is no occasion to consider the correctness of the tentative view expressed by the New Zealand Court of Appeal in -

the Auckland Casino Case.

Now, your Honours, that focuses on two of the issues that are said against us. The first one our opponents put to us is that Justice Goldberg did not hold his shares himself. We have answered that in our reply and I do not wish to add to that. We simply say that there was a clear beneficial interest, albeit by the process of control of the trustee company.

GLEESON CJ: I do not think this affects the outcome of the case, Mr Bigmore, but I was not entirely clear and maybe it was never made clear what was the nature of the trust. Was it a discretionary trust?

MR BIGMORE: It was never made clear, no, your Honour. It was largely assumed in the Full Court that it was a standard discretionary trust with which most of us are familiar.

GLEESON CJ: So that, the judge would not have had a beneficial interest in the assets of the trust.

MR BIGMORE: Not as such.

GLEESON CJ: But merely a right to secure proper administration of the trust.

MR BIGMORE: Yes, and his Honour described himself as being a contingent beneficiary and from that I think we all inferred that his interest was as a discretionary beneficiary.

GLEESON CJ: Contingent on a favourable exercise of the discretion by a company which people inferred he was one of the two directors.

MR BIGMORE: He said he was a director of it and we never knew whether he was one of several or one of two, but it is fairly obvious that he was one of at least two, having described himself as "a director" rather than "the director." That is what we knew and the objection was taken before him when that was announced. The matter was never clarified further. So, our submission has always been that that is a beneficial interest in the sense that he has the ability through control of the trustee company to appoint corpus or income to himself. I appreciate that that is not a full revelation of the circumstances but it is the position that we have adopted so far.

GLEESON CJ: It would be a surprising thing if it made a difference to the outcome.

MR BIGMORE: Yes. Where it might make a difference is that what is said against us, I think, your Honour, is that control and contingent beneficial interest is not the same as actual beneficial interest and if it is anything other than a direct interest then one must look to the reasonable apprehension test which we have eschewed. We say, no, this is a case of direct interest because of the contingent beneficial interest and the control.

GLEESON CJ: Direct interest in exactly what?

MR BIGMORE: A direct interest in the fruits of the litigation, the outcome of the litigation.

GLEESON CJ: A direct interest in the outcome of the litigation.

MR BIGMORE: Yes.

GLEESON CJ: Which is a different thing from a direct interest in a party to the litigation.

MR BIGMORE: It is a different thing but it can follow from having a direct interest in a party. A shareholding in a party which itself had an interest in the outcome of the litigation, would result in an interest in the outcome of the litigation.

HAYNE J: What exactly do you say is the interest in the outcome?

MR BIGMORE: Firstly, the interest that the ANZ Bank has in the outcome is in the capacity of major creditor of the bankrupt estate and indemnifying creditor, so that it - - -

HAYNE J: But, relevantly, are we not focusing on the judge's alleged direct interest in outcome, or do I misunderstand?

MR BIGMORE: No, your Honour is correct, with respect.

HAYNE J: Then, what is the judge's direct interest in the outcome?

MR BIGMORE: The judge's direct interest in the outcome is that the company in which he has a shareholding may fare better or worse as a result of the decision and it is impossible, of course, we concede, to measure in financial terms what that outcome might be. But if one turns for a moment to the Pinochet decision of the House of Lords the same principle, no one shall be a judge in his own cause, results in no possible measurable financial outcome but simply a community of interest between the judge's position with a different company from the litigant, Amnesty International, and we say the same is true of any judge who has an interest in a party which stands to gain or lose by the action.

GLEESON CJ: I am not sure I understand that. I realise the concession was made in the other case, but in the other case there was a concession that the value of the judge's shares could not have been affected by the outcome of the case. What is the difference between saying that and saying that it did not matter to the judge what the result of the case was going to be?

MR BIGMORE: The difference is perhaps a pragmatic one because - - -

GLEESON CJ: To put bluntly, it did not matter tuppence.

MR BIGMORE: No, and we could not say it was even tuppence. Our position is that the ANZ Bank would fare better or worse, depending on the outcome of the proceedings. As an indemnifying creditor it could fare worse because it would have to pay some costs and as a winner it fares better because it derives ultimately an interest - if the judgment stands - in some $200,000 or so. So, one certainly sees that the Bank, the entity in which the judge has a pecuniary interest, will do better or worse as a result of the outcome. It is not a situation where the Bank's interest is not affected or could not be affected in any way at all, such as an argument between shareholders as to their own fortunes would not matter.

KIRBY J: In any way at all. You reject entirely the de minimis principle. What if it was just one share that somebody had given as a lark?

MR BIGMORE: Our primary contention is, of course, that the de minimis position is too difficult to apply but if we are wrong in that then the type of interest that seems to have been considered in the authorities that accept that proposition is a very small one, indeed, in dollar terms.

KIRBY J: What was the Lord Chancellor's interest in Dimes?

MR BIGMORE: I think it was .8 per cent, from memory. I think we did put that in the material, but it was very small.

KIRBY J: That is right, it was less than 1 per cent.

MR BIGMORE: But it was not so small in pound terms. I think it was a [sterling]276 dividend, or something like that, which would have been a substantial sum, and - - -

HAYNE J: But it invites attention to what is meant by this word "interest".

MR BIGMORE: Yes.

HAYNE J: In what sense are you using the word when you say the judge had a direct interest in the outcome of the litigation?

MR BIGMORE: In the Dimes' sense, in the sense that - - -

HAYNE J: No, no, what is it that you are saying is an interest?

MR BIGMORE: The interest we say the judge had is a sympathy with an entity which stood to gain or lose.

KIRBY J: Sympathy or involvement? Sympathy rather implies some sort of benefit or something accruing, whereas involvement is you say, in a sense, that the judge places himself into the camp of a party.

MR BIGMORE: Yes, your Honour is quite correct in respect to this.

GLEESON CJ: To be a shareholder in a bank is not necessarily to love it.

MR BIGMORE: No, your Honour, that is true, but then some of the writers, such as Allison in the United States has proceeded on the basis that one is just as much afraid of over compensation as under compensation.

GLEESON CJ: But are we not - I know, as I say, the concession was explicit in the other case - but both of these appeals are being argued on the basis, are they not, that it is not suggested that the outcome of the case either way could have been to the financial benefit or detriment of the judge?

MR BIGMORE: As I said to the Full Court, your Honour, his position would not be any worse and really the fact of the matter is that the interest in the ANZ Bank was a financial one of some size - it was not insubstantial or, we would say, de minimis if it comes to that, and because - - -

GLEESON CJ: If it is not suggested that the judge's personal financial position was at stake in any way, is this an emotional involvement that we are talking about?

MR BIGMORE: It is more than an emotional involvement. If one's football team were litigating a case before one, it might be an emotional involvement, but if it is one's company in which one has a fair amount of money invested, then there is an involvement or a sympathy. It is a situation which is quite distinguishable from an emotional attachment.

GLEESON CJ: Well, what do you mean by sympathy?

MR BIGMORE: Involvement. It is, as his Honour Justice Kirby said, an involvement because the interests of the judge are consonant with the interests of the party in which he has the shares.

GUMMOW J: Now do not assume for a minute, for my part, I regard us as bound by Dimes.

MR BIGMORE: No, your Honour. We have said in our written submissions probably all we need to say about that from our position, your Honour, but we certainly do stress that some Judges in this Court have accepted it as the law in this country.

KIRBY J: Does not the problem with Dimes illustrate the fact that a case comes up and it has to be solved and the Court deals with the particular case and lays down a principle that it is, in a sense, a step on a way to a broader concept and the broader concept would seem to be disqualification for ostensible bias; that people will say, the informed laymen will say, that the judge ought not to have sat, and if you apply that principle as distinct from simply a few cents or a few dollars or even a few hundred dollars interest, then you have got a broader principle to which the common law moves.

MR BIGMORE: That is the distinction we make, your Honour. The reasonable apprehension test, if that were to be applied to the facts of this case, we have said that it would not have disqualified the judge. We said that - - -

GAUDRON J: Why not?

HAYNE J: Where, then, is that taking you? If that is so, why is the judge to be disqualified where the assumed basis is that the judge's personal financial position will not be affected by the outcome?

MR BIGMORE: For the same reason as the reasonable apprehension test would not have worked in Dimes' itself, and for the reason that Justice Callaway submits in paragraph (e). As his Honour says, there is room - - -

GUMMOW J: Why would not have applied in Dimes' Case anyway if, too, it had at that stage been invented, which it had not? Why would it not have applied in the particular facts of Dimes' in any event if, too, at that stage it had been invented, which it had not yet been invented?

MR BIGMORE: It had not been invented as a cognate test, but the words that we have quote in our reply tend to suggest that Lord Campbell focused on the fact that no one would suspect. It was not a case where, of course, Lord Cottenham was not, in fact, biased. His Lordship said "No one would suspect that Lord Cottenham was biased". Even though - - -

KIRBY J: As Justice Callinan suggested in argument in another case, that sometimes is a polite way of - people sometimes restrain themselves from suggesting actual bias, but sometimes litigants may not be quite as polite as lawyers are.

CALLINAN J: Because actual bias is almost impossible to prove anyway.

MR BIGMORE: Yes, but there is a difference between saying that Lord Cottenham was not in fact biased, and saying that no one can suppose that Lord Cottenham - I used the word "suspect", but the correct word is "suppose" in the judgment, and this is in paragraph 3 of our reply. Again, as Justice Gummow said, the test of reasonable apprehension had not been invented at that time.

KIRBY J: It is rather like it, though, is it not? "No one would suppose" sounds very much like reasonable apprehension.

MR BIGMORE: Yes, and that is why we have pursued the argument that reasonable apprehension would have disqualified Justice Goldberg in this case. The submission was put to him by counsel originally - - -

GUMMOW J: No, no, when it says "no one would suppose his bias" means actual bias. It did not work because Lord Cottenham was so mortified, it was said to have carried him to his grave according to Holdsworth, the shame of the whole thing.

GLEESON CJ: May we take it that we can proceed upon the basis first of all that it is not suggested that Justice Goldberg's personal financial position would have been affected by the outcome of this case and, second, that it was not and is not suggested that the reasonable apprehension test if applied would have required that he disqualify himself?

MR BIGMORE: The second concession we have always made and continue to make. The first we do not concede because the answer to that is we do not know. We cannot point to a measurable financial change in his Honour's circumstances as a result of the outcome of the case as it stands or any alternative outcome, possible outcome.

GLEESON CJ: It is accepted that the "reasonable bystander" test did not require that he disqualify himself and as to whether or not he could have been financially affected by the outcome of the case, we can only proceed on the same information as you have.

MR BIGMORE: Indeed, your Honour, yes.

KIRBY J: I suppose you can say that Dimes looks rigid but it least it saved litigants, and judges for that matter, from the embarrassing and perhaps time-consuming inquiry into quantum, that it is one of those strict rules of the law and it is a rule which, at least arguably, ought to be strict. Whether it ought to be quite as strict as Dimes is another matter.

MR BIGMORE: Yes. Your Honour, the way Justice Callaway put it in paragraph 89(b) in Clenae is that his Honour said, "This is an ordinary commercial dispute." So is our case. As we understand it, there is no dispute about that in the Clenae appeal. If there is room for a presumption that a shareholding imports an interest in the litigation, there is room for that presumption to operate.

GAUDRON J: That really is the question, is it not? Is there any longer room for that presumption? But it is in the context of that question that I would like to take you back to what seems to have been a concession that there was no room in this case for an argument of reasonable apprehension of bias. Does that depend on the judge having made a disclosure? Would it be the same if there were no disclosure?

MR BIGMORE: We, with respect, agree with what his Honour Justice Callaway said about that. It is a matter of balancing. If one has got to the stage as in Clenae that judgment has been reserved and then the shares have come into the hands of the judge, one has a situation where there could not have been actual disclosure until that point in time. Then by the time the judgment is handed down, the key witness, as we understand it, on the other side has died and it is a matter of balancing the two fundamental rights, the right we assert to an independent judge and the right of the respondent to a fair trial with all witnesses judged on their merits. The way Justice Callaway dealt with it was to then measure the extent of the shareholding and the interest in the outcome.

GAUDRON J: That is what I was really wanting to know. Would your concession stand that there was no basis for an argument of reasonable apprehension of bias in this case if there had been no disclosure by Justice Goldberg of his financial position?

MR BIGMORE: It would, your Honour, yes. We do not see it linked to disclosure.

GAUDRON J: What is the basis then upon which judges frequently do disclose this sort of thing? It is just to parade their wealth, is it?

GLEESON CJ: Or perhaps it is to give the parties an opportunity to inform them of something they do not already know about the possible consequences of the outcome of the case.

McHUGH J: If they do not object, there is a waiver.

MR BIGMORE: Exactly, your Honour, and in most cases there will be a waiver. The fact of the matter was in this case our client was not the reasonable informed litigant or member of the gallery in the back of the court. Our client was, if you like, unreasonable in that she took the view that she would object to the judge hearing the case because of the fact.

GLEESON CJ: A judge who has a shareholding in a company may not know whether the outcome of the case will affect the value of his or her shareholding, and one of the reasons for making a disclosure is to give the parties an opportunity to consider that matter for themselves so that the judge, if it is possible for this happen to a judge, might be better informed.

MR BIGMORE: Yes, your Honour, and one can see from the documents we have reviewed - and they seem to be extensive in America - there has been a great concern with requirement to disclose. In this country we do not seem to have had the need, so far at least, for a requirement to disclose. It has been willingly done and it is only in the case of oversight or just plain not knowing that it has not occurred, or in the peculiar case of Clenae where the shares did not exist at the time the case was heard.

GLEESON CJ: But an example where it does not occur is where a judge, without knowing it, holds shares in an insurer of a party to litigation.

MR BIGMORE: Yes.

McHUGH J: I have never held shares in insurance companies or newspaper companies for this reason, that it seemed to me that you are more likely to have, in a Dimes sense, an interest in litigation that is really removed from the immediate parties. For instance, suppose you own shares in an insurance company and you have a Todorovic v Waller type about interest rates payable on damages. That has an enormous effect on verdicts. Take newspaper defamation verdicts, as in Carson's Case where the Court laid down a rule or freedom of communication which gives press freedom from defamation verdicts to some extent.

KIRBY J: Whilst we are making announcements, I do not own any shares at all, but that is what your principle will drive judges to. Not all take my view.

GLEESON CJ: On the other hand, judges have other interests apart from owning shares in companies. One of the bizarre aspects of some of the statements of principle in this area is that they seem to assume that what is most likely to deflect a judge from impartiality is financial interests. It might be thought that if a person's main interest was in money, that person would not become a judge in the first place, or at least would be very ill advised to do so.

MR BIGMORE: Although in the recent decision, we have not brought it to your Honour's attention I do not think, but in the recent Ronan decision, the Court of Appeal in Victoria seemed to be suggesting something to the contrary, in that a small share dealing would be inconsequential compared with the usual remuneration of the judge.

GLEESON CJ: I would have thought that, as the case of Pinochet demonstrates, an interest in a cause could be far more likely to give rise to an apprehension of partiality than a modest shareholding in a public company.

MR BIGMORE: But, your Honour, as Lord Browne-Wilkinson stressed, that was a very peculiar case and one would not ordinarily find, as the constitutional court in South Africa has said, that strong-willed men and women who become judges would be devoid of causes or beliefs. If the cause is so passionately espoused, to go to the extent that Lord Hoffman's involvement in the associated company had, then in those peculiar cases there will be a need to recuse. But it is an unusual thing, whereas with money it is a very tangible and measurable thing.

We quote from Mr Allison, the American writer, in his analysis of the reason why money has become so important, compared with other passions. The three reasons he gives, I think, are as close as one can get to it. It is at paragraph 4 of our submissions in reply, your Honours. He said:

Three possible explanations for the law's traditionally harsher treatment of economic interests may be suggested. ... First, an economic stake in the outcome usually will be more objectively identifiable and thus more easily provable than most other sources of potential bias. Second, many people probably have a greater expectation that purportedly impartial decision makers will be free of economic interests in outcomes than that they will be free of other forms of bias.

GAUDRON J: But that goes back to apprehension of bias. Do you say that has any role to play where there was money involved? Where there is financial interest involved, does reasonable apprehension of bias, in your submission, have any role at all?

MR BIGMORE: No.

GAUDRON J: None at all?

MR BIGMORE: No, but we do recognise, of course, because it is obvious that there will be cases where the degree of financial interest would result in the impartial lay observer saying, "Well, that person must have - or I have a reasonable apprehension that that person would be biased".

GAUDRON J: Then your answer to me is yes. It is not no.

MR BIGMORE: The answer to the question, your Honour, is no because it is not essential. It is not a role that is necessary. We say that the principles should stand and be accepted as part of the common law of this country.

GAUDRON J: I know you say that.

MR BIGMORE: Yes.

GAUDRON J: But even assuming for the moment you are right in that regard, is there any area for overlap of the principles?

MR BIGMORE: There is area for overlap. I agree with that, your Honour, yes.

GLEESON CJ: Am I right in thinking that in Dimes' Case the conduct of the person which was in issue in the litigation involved filling in a canal in circumstances that would have prevented the canal company, in which the Lord Chancellor owned shares, from carrying on its business?

MR BIGMORE: Yes, and one might assume from that that there would be a financial or measurable financial outcome one day but not at the time that the hearing was taking place, the approval was being given.

GLEESON CJ: The analogy to the present case would be if the litigant was trying to get some injunction to restrain the ANZ Bank from carrying on business.

MR BIGMORE: Yes.

KIRBY J: That is why you have to say there are two circles. One is the big circle of apprehension, reasonable apprehension, but you say that within that there is another circle either overlapping or very substantially overlapping which is interest, because this is Justice Gaudron's question to you, I think.

MR BIGMORE: Yes.

KIRBY J: If you have an interest you do not move to the larger question. If you have an interest you are disqualified.

MR BIGMORE: Yes.

KIRBY J: If, though, you do not have an interest you have some other reason why you ought not to sit, you are disqualified on that basis.

MR BIGMORE: Yes, your Honour. If one looked at them as.....diagrams you would not have a small circle within a big circle. You would have a small circle which overlapped the edge of the big circle.

GLEESON CJ: Now, in the circle dealing with interest, do you confine it to financial interest?

MR BIGMORE: We are not because of Pinochet's Case but perhaps without Pinochet's Case we might have thought we were.

GUMMOW J: You must not assume that one is bound by Pinochet's Case either.

MR BIGMORE: No, I do not assume that, your Honour.

GAUDRON J: And if one ever comes to reasonable apprehension of bias, then the bystander or the person in the back of the court has to be an Australian citizen, not an English one.

GLEESON CJ: Well now, leaving aside what forensic problems Pinochet may give you, as a matter of principle should we confine "interest" to "financial interest"?

MR BIGMORE: The principle goes back, as we have said, to Justinianus Codex and it is simply "no man shall be judging his or her own cause". "A cause" has been traditionally regarded as financial in that sense, because perhaps of the three reasons that Mr Ellison gave, but we have to say that there will be cases where that cause is not financial - not "economic" is the word used in America apparently - but is other than economic as in Lord Hoffman's case, but they must be rare and courts have traditionally counselled against expanding the boundary. So, it is not necessary for our case, because ours is a financial case, and we do not press the Court with a view wider than that, but perhaps the answer is that it is not necessary to declare the boundaries closed at financial.

KIRBY J: Why would one not move to redrawing the circle and simply say, "That criterion is reasonable apprehension on the part of an informed lay person. I will pass on the part of the judge" and just look at Dimes and Pinochet confirming Dimes and early cases in this Court taking the same view as simply stages on the way to a broader more conceptual approach?

MR BIGMORE: One could redraw the test, of course, and this Court is completely free to do so, but in redrawing the test we would counsel against leaving the test the way it is, as established by the existing authorities, and declaring that test to be sufficient, because we would add the gloss to the test, or we would urge the gloss to be added to the test, that in the case of financial interest there is a mandatory disqualification.

KIRBY J: There is at the moment, but if we are in the business of reconsidering what the common law in Australia is, then the question is, is it simply history and the ease of proof that has led to this special rule for a share holding however small, which seems, at first blush, to be a little irrational to say that if you have just got this tiny one share, you are disqualified. That does not seem a rational principle. It does not seem rational.

MR BIGMORE: It is very difficult to argue against a de minimis test which involves the one share or the ten dollars. Auckland Casino the difference was between, I think, $1,000 and $10,000. Justice Callaway in the Clenae Case accepted that 2,400 shares was enough. It depends whether you focus, as Justice Hayne did, on the ability to measure what difference it will make in the final analysis to the judge's own personal fortune, which will be so difficult, as we have explained in our written submissions, because one will have to wait and see in a lot of cases. One might even have to take account of other cases involving the same principle.

GLEESON CJ: Why would you limit it to a share holding if you were a substantial creditor of a bank? What if a bank owes you $1 million?

MR BIGMORE: Yes, well Justice Sackville in the Full Court declared having an account with the ANZ Bank, although he did not say $1 million, your Honour, but the answer to that is that it makes absolutely no difference to his financial position because he is assured by the government that he will have his money.

HAYNE J: Well, what then are the steps in the reasoning that underpin the contention that the judge had a direct interest in the outcome? That is the conclusion. What are the steps along the way that get you to a conclusion described in those terms?

MR BIGMORE: It is enough for a judge to have a shareholding in a litigant or a party who will gain directly from the litigation, as the ANZ Bank did in our case.

HAYNE J: That is simply to restate the conclusion, in other words. What I need to understand, especially given your reference to Pinochet, is what are the intermediate steps in the process of reasoning which lead to the conclusion the judge had an interest or, alternatively, if as Justice Kirby has raised with you we should be looking towards apprehended bias, what are the steps in reasoning that the informed lay observer would make towards the conclusion, "The judge was biased. I did not get a fair trial"?

MR BIGMORE: Well, perhaps, ought to disqualify himself at the outset, as the case may be, your Honour, yes.

HAYNE J: Just so, but there are intermediate steps and, unless that reasoning is unpacked, all we have is assertion, counter assertion and no illumination whatever.

MR BIGMORE: Of course, one starts from the proposition that no one should be a judge in one's own cause and if that is the starting point - - -

GAUDRON J: Taken literally that might mean that if I am being sued in this Court I should not sit on the Bench. We can understand that.

MR BIGMORE: Yes.

HAYNE J: And I might have brought a rather more informed view to the disposition of some appeals to this Court from the Court of Appeal of Victoria, but there we are.

MR BIGMORE: Yes. Your Honour asked me the steps in the process of reasoning, but this is a process of reasoning towards a new test which is to pick up the "reasonable apprehension" test and also deal with the Dimes or Ebner or Clenae-type situation.

GUMMOW J: The fact is there is no reasoning in Dimes, is there, apart from what Lord Campell said about the Latin tag? There is no reasoning at all.

MR BIGMORE: With respect, those are the steps, and the answer to Justice Hayne's question is that there are not many steps from start to finish.

GUMMOW J: It is just conceptually barren, Dimes.

HAYNE J: But it is not self-evident to me that Pinochet speeches advance matters terribly much further down the track either, but perhaps I am mistaken there.

McHUGH J: Your point is it is just a fixed rule of law and that is the beginning and end of it.

MR BIGMORE: It seems, with respect, your Honour, to be a very sensible fixed rule.

GLEESON CJ: But what exactly is the fixed rule?

MR BIGMORE: The fixed rule is that if there is a financial income, a pecuniary interest or economic interest in the outcome of the litigation.

GAUDRON J: No, "in a party". You have to say "in a party to the litigation". You have to say, "in the outcome of the litigation" or "in a party to the litigation".

MR BIGMORE: Yes. In a party to the litigation in the way of shares, being shares in a party who has an interest in the outcome of the litigation.

GLEESON CJ: Now, this is the problem that bedevils a lot of this discussion. People pick on shares, perhaps for no other reason than that they are easy to spot. But the kind of interest that a person might have in the outcome of a litigation could be manifold. Let me give you an example: suppose a judicial officer had no shareholding interest in a party to litigation, but had entered into an agreement with a party to the litigation to take a share in the proceeds of the outcome of the litigation. That, I should have thought, would be an obvious case of bias and disqualification.

MR BIGMORE: Yes, your Honour.

GLEESON CJ: But that is an interest in the outcome of the litigation, not an interest in a party to the litigation.

MR BIGMORE: Yes, your Honour, and the proposition has not been stated. As Justice Charles said in the Court of Appeal in Cleanae, the test is whether there be an interest in the outcome of the litigation as opposed to an interest in the party. But as Justice Callaway recognises, it is enough, in our submission too, that there be an interest in the party that stands to gain from the result of a litigation when it is in the way of shares, and that party does stand to gain financially.

GLEESON CJ: The word "interest" then starts to take on different shades of meaning, does it not?

MR BIGMORE: Yes, because it really goes back to cause, that we are confining the word "cause" to pecuniary types of causes as opposed to non-pecuniary causes. That is why we say the "reasonable apprehension" test, if it is to be restated as a result of this case, should include, as a gloss, the particular circumstances which allow for Dimes to result in disqualification of Lord Cottenham, whereas the "reasonable apprehension" test probably would not have.

GLEESON CJ: A possible point of view is that there are two principles that can both do important work. One, the "reasonable apprehension" test, and the other a rule that any judge who is a party to litigation must disqualify himself or herself from sitting on the litigation.

MR BIGMORE: Yes, and it has been stated thus on occasions.

GLEESON CJ: And it may be that Pinochet is an example of perhaps the outer boundaries of an area in which a judge will relevantly be treated as a party to litigation, because the litigation is about a cause with which a judge is identified.

MR BIGMORE: Yes. He does not have the interest in the party because his control is of a related entity.

KIRBY J: Is there not a problem with that? I can see the force of it, but nowadays the view would generally be taken that if the judge's spouse or partner had an interest in shares, that that may take on a particular flavour, at least if the shareholding was substantial. Now, if you are applying the strict test of the judge shall not sit in a cause in which he has an interest, then the interest of his family or people close to him or her is not going to really matter. So that this is the problem of the very strict, isolated and tiny but special rule of law of Dimes.

MR BIGMORE: Yes, your Honour, it is and we, of course cannot submit that the authorities so far establish in this country or England that one can look beyond the judges' own financial interest to spouses and - - -

KIRBY J: Is that right?

MR BIGMORE: It seems to be in the Bank Nationalization Case that one judge's wife had shares.

KIRBY J: That is a long while ago.

MR BIGMORE: And another judge was a mere trustee for his sister's shares or his sister's beneficial interest in the shares.

KIRBY J: It is half a century ago. It was a different world, a much less questioning world.

MR BIGMORE: Yes, but if one looks at America one can see that a development in United States Code 455 from its form some decades ago which extended the Dimes' type of disqualification for economic interest from the judge and his wife and the children living with him to children that are no longer living with him, which is an interesting extension, but it shows that the focus of the Congress in America - - -

GLEESON CJ: Yes, but you can do that by legislation.

MR BIGMORE: Yes.

GLEESON CJ: When you are talking about codes you do not have to work from what has been described as a baseline of principle. You can engage in what is sometimes called overkill and you can say, without having to advance a reason for it, a judge must disclose the wife's shareholding and a judge must disclose a second cousin's shareholding but it is not necessary to disclose a third cousin's shareholding. When you are making rules like that you are in the area of legislation.

MR BIGMORE: Yes, or one can have guidelines and we know from looking at papers that have been presented to Chief Justices in the Pacific region's conferences and so on that it is an area which really does not cry out for a code, certainly not in this country, maybe in America but it may cry out for some guidelines in relation to disclosure.

GAUDRON J: Why? How does disclosure bear on this question. I mean, one is obviously disclosing because there is some underlying principle that requires it. One is not disclosing just to boast about one's wealth or one's interests.

MR BIGMORE: Or one's spouse's interests.

GAUDRON J: No. It is being done for a reason and one has to ascertain what that reason is before one can come to grips with the problems presented by these cases.

MR BIGMORE: We say it is not part of the law at the moment but there is no reason why it would be inappropriate for disclosure to take place of a spouse's shares.

GLEESON CJ: But that demonstrates the problem, if I may say so, Mr Bigmore. When you are in the area of disclosure you are in the area of prudential behaviour. Guidelines enunciated by some organisation for the guidance and assistance of judges might well say to them, "It is prudent for you to disclose in these circumstances.", and somebody might say, with the benefit of hindsight, a judge who failed to make a disclosure was imprudent but we are in a different area. We are in an area of a legal rule as to whether a judge is disqualified.

MR BIGMORE: Yes, and our submissions have tried to go down that path, and we submit that the Dimes' principle is part of the common law country, or if it is not, it should be.

McHUGH J: But how close do you get? Suppose a judge has shares in a public company which has a 15 per cent interest in another company which holds a public licence which is under challenge, should the judge disqualify himself from sitting on that particular case?

MR BIGMORE: Not on the principle that we say is part of the common law because one cannot - following what your Honour was saying through, if I followed it correctly, it does not seem that there would be a financial benefit from the outcome.

GAUDRON J: Well, there might well be. Let us assume it is a casino licence; there is only one to be had; the casino licence is the subject of an administrative law decision. If the subsidiary of company A, in which the judge has shareholding, gets the licence, you can assume the shares in company A will increase significantly and overnight.

MR BIGMORE: I think I put in too many jumps in that test. Perhaps what I anticipated was your Honour Justice McHugh was trying to create a situation where it was so divorced, that there was no financial outcome, but - - -

McHUGH J: No, no, no.

MR BIGMORE: If there were - - -

McHUGH J: The judge has shares in a company which is a 15 per cent shareholder in a licence holder.

MR BIGMORE: Yes.

McHUGH J: The question of the validity of the licence is under challenge, so you are a couple of steps removed from the litigation.

MR BIGMORE: We would say it would be prudent for disclosure and it would be a financial interest in the outcome, so it would require disqualification - - -

GLEESON CJ: But why is that not a good practical test? Why is not the practical test of whether you have a financial interest in the outcome of a litigation whether or not it could possibly affect the value of the shares that you hold in the company?

MR BIGMORE: Yes, that is a sensible test.

GLEESON CJ: That is the test that Mr Justice - - -

KIRBY J: Even fractionally, even if it is only, say, one cent in the year?

MR BIGMORE: Yes.

KIRBY J: That does not seem very convincing. I mean, this is the problem with the Dimes' test, it is so absolute, it is like some of the old rules of the past. I mean, you just assumed you could lay down this absolute rule, instead of looking to what the law was getting at. What is the law getting at here? It is getting at ensuring that people have, and appear to have, independent and impartial judges, not just to lawyers, but to lay people, that lay people will say "The judge was impartial and we do not believe that interest or that financial stake had anything at all to do with the matter".

MR BIGMORE: Yes. The reason the Dimes' test has to survive in that context is because it is inherently reasonable, and no doubt explains the long history of the rule, that someone who has a financial interest, whether it is a judge or a tribunal, in the litigant who stands to gain or lose, as distinct from the litigant who is dispassionately involved, but not financially involved in the outcome, is a situation where the judge must recuse, or the tribunal must recuse, because the slight financial interest - and there may be room under that for a de minimis test if it is only a dollar or two - but it is the extent of the interest in the party that may gain or lose from the litigation that seems historically to be the vice.

GLEESON CJ: Could I ask you what the force of the word "direct" is, in the usual statements of principle about this? A "direct interest".

MR BIGMORE: Well it has been distinguished in the Bank Nationalisation Case apparently from an interest of a spouse or an interest which is legal as opposed to beneficial.

KIRBY J: I do not think that will wash nowadays.

MR BIGMORE: It would not wash within the "reasonable apprehension" test.

KIRBY J: People can put the funds through their spouse or partner or children.

MR BIGMORE: But it would not wash because if the extent of the holding were great enough, then the "reasonable apprehension" test would catch the transaction, but there might be cases where the "reasonable apprehension" test would not catch it, but yet the Dimes' principle could not catch it either, because of the distance between the judge and the spouse or sister and so on.

KIRBY J: That is why, if you accept that, you are searching for a higher principle; you are searching for something which is not de minimis, is not simply an interest, no matter how minimal or insignificant, it is not just the reasonable apprehension. You are looking for something that is an umbrella over all of these categories.

MR BIGMORE: Well, in looking for an umbrella over all those categories, the great temptation, as is apparent from the judgments in the cases below, used to say that the existing "reasonable apprehension" test is wide enough to do the job. We say that that cannot be right, because cases like Dimes and ours, are cases where there is a financial holding in the Bank, which stands to gain or lose from the litigation. One can readily imagine why a lay person, or minds may differ amongst lay people, as to what that really means in terms of the potential for judicial bias, but what we say is that a judge should not put it to the lay person's mind that should simply recuse where there is that direct pecuniary interest, no matter how small.

KIRBY J: But the lay person who has postulated in Watson and all the other cases is a reasonable lay person, not specially informed but not totally ignorant about the way the law operates and the training that judges have and so on.

MR BIGMORE: Yes. I think it was Allison, again, who - and I might be wrong about that - who made the observation that it is not necessarily easy in the context of considering one's own financial interest to postulate such a lay person.

McHUGH J: Do you not face this dilemma, either Dimes is simply a manifestation of the reason of apprehension test or it is not, in which case it serves no useful purpose.

MR BIGMORE: No, your Honour, we put it this way in our submission that the origins of the Dimes test is no one should be a judge in one's own cause. The origins, in large degree are - of the "reasonable apprehension" test are Lord Heward's remarks in the Sussex Case that justice must manifestly appear to be done and not just be done. There is a difference between appearance and actuality and we say it is an age-old principle that if there is an actuality of financial interest, no matter how small - - -

McHUGH J: But not an actuality of bias, is there?

MR BIGMORE: But there is an actuality of financial interest which justifies disqualification because of the potential for bias, the fear of bias, or, if you like, overcompensation the other way. It is the financial interest which gives rise - - -

GAUDRON J: I wonder if they are not really manifestations of the same thing except in cases where there is something inconsistent - and I am not calling it actual bias - of something totally inconsistent with the exercise of judicial power like, for example, if the accused person is known to jurors. The principle we are talking about, whatever it be, is it necessarily restricted to judges?

MR BIGMORE: No.

GAUDRON J: It may flow over to jurors and there may be questions about administrative decision-makers.

MR BIGMORE: Yes, and we would say the principle applies there as well.

GAUDRON J: Yes, but we have to find that principle.

MR BIGMORE: Yes, but, of course, there is no reason why the Dimes principle, simple as it is, cannot be applied there. It may be that tribunals and jurors might have disparate financial interests more likely to give rise to the types of difficulty that we have here.

GLEESON CJ: Could I approach it from a slightly different direction, Mr Bigmore. If or since in the present case a reasonable bystander would not think there was a risk that Justice Goldberg would bring other than an impartial mind to bear on the ultimate decision in this case, what interest was being served by Justice Goldberg disqualifying himself?

MR BIGMORE: I understand your Honour's question, but the interest we say that was being served is, ultimately, public confidence in the administration of justice by knowing that no judge is a judge in his or her own cause. To look at it the way your Honour has approached it is rendering amorphous what should be clear and precise because minds may differ.

McHUGH J: This is the Caesar's wife principle. Even though there is no breach of the "reasonable apprehension" test, nevertheless there should not even be the slightest scintilla or argument that there possibly could be.

MR BIGMORE: I suppose there could be a case where, if it had been Justice Goldberg's wife who owned the shares and his Honour had made disclosure, we might be here today pressing that the Dimes' principle should be extended, notwithstanding the Bank Nationalisation comments.

GLEESON CJ: I can understand why you would say - and I think it has been said in this Court - that in addition to the reasonable apprehension test, it is useful to have a bright line rule. Unfortunately, the line does not seem to be very bright.

MR BIGMORE: With respect, your Honour, when one stands back for a moment from the Ebner facts, one had a situation where the ANZ Bank stood to gain a couple of hundred thousand dollars, or lose some money in respect of costs. With respect, it is a bright line to say that a judge who had an interest in that particular non-party beneficiary of the litigation, or loser of the litigation in the case of costs, ought to stand aside.

GLEESON CJ: But there is another practical problem that has to be borne in mind. Judges have a duty to sit, not to disqualify themselves, and as has been reminded in the judgments in this case, great inconvenience can result from judges disqualifying themselves. That may mean that it is desirable to have, in addition to a reasonable bystander test, about which people may have different views, a bright line rule which produces the result that in certain limited circumstances everybody knows, beyond argument, that the judge should not sit. But if there is to be such a rule, it has to be clear and based on principle.

MR BIGMORE: Yes.

GLEESON CJ: It is not a rule of expediency.

MR BIGMORE: Yes, and I go back to where I was heading with Justice Callaway's observations because what becomes crystal clear from that is that if one has the bright line, and I call it Dimes' test, appreciating, of course, that it is barren as far as reasoning goes but if we can say that that is the bright line test that would be applied, it is simply, as Justice Callaway said, a test which has to be balanced on occasion, rare occasion, against other bright line tests such as the respondent in Clenae was entitled to a fair trial.

If there are balancing bright line tests, then all the judge can do or all the court can do or a Court of Appeal can do is make the loss fall where it best lies in practical terms. What Justice Callaway would do or would have done with the Clenae Case - and Justice Charles agreed with him in this regard - was to balance the competing interests of the respondent to a fair trial, given that its witness had died, against the bright line Dimes test which his Honour said had room to operate on the facts of that case.

Of course, we say there are no significant distinctions, except that if one is going to insert a de minimis test it was obvious that Justice Callaway would put that de minimis test well below Justice Mandie's 2,400 shares.

GLEESON CJ: I thought there was a decision of Justice Deane in one of the cases where he said in addition to the "reasonable apprehension" test you have a hard and fast rule in certain limited circumstances. What is that case?

MR BIGMORE: Webb.

GUMMOW J: Yes, Webb 181 CLR 74 to 75. It is clear from the passage at 74 that his Honour embraces all this within the "reasonable apprehension" test. The first branch of that includes all of this but then he comes back to it at the paragraph at the bottom of 74. He regarded himself as bound by authority, I think.

McHUGH J: But it was a dissenting judgment.

GUMMOW J: Save for this other provision, though.

MR BIGMORE: Yes, although - - -

GUMMOW J: Webb is a case about jurors, too, it is not a case about - - -

MR BIGMORE: Yes.

GUMMOW J: At some stage someone has got to explain to us whether it should be any different for jurors, whether it should be any different for administrative fact finders or what.

MR BIGMORE: We do not suggest it should be any different. The cases do not suggest it should be and the passage we chose from Webb is at paragraph 33 of our original submission, your Honours, and we do not think the fact that his Honour was in dissent makes any difference to the authority of the statement.

KIRBY J: It does really. If he is in dissent you disregard it for the purpose of finding the holding of the Court, the ratio of the case.

MR BIGMORE: Yes, and the holding of the Court, of course, was not a Dimes-type holding. It was not to do with that particular situation.

KIRBY J: Now, in New Zealand it is Dimes minus de minimis, is that correct?

MR BIGMORE: Yes.

KIRBY J: What about Canada and South Africa? There are, of course, the cases about reasonable apprehension but have there been Dimes-type cases, financial interest?

MR BIGMORE: No, not that we have discovered, your Honour, no. I am reminded, of course, that the BTR Case is the South African case which I think is in our materials. We refer to it, but only in passing. It is Dimes and it is minus de minimis but in an obiter statement, if I recall correctly, in BTR.

GLEESON CJ: In Webb on page 75 Justice Deane referred to the rule of "automatic disqualification" which is the rule you are relying on.

MR BIGMORE: Yes.

GLEESON CJ: - - - as a subclass of the rule relating to interest and that subclass, he said, consisted of cases in which the judge, juror or statutory officer has a direct pecuniary interest in the outcome of the proceedings. Is it not the case that the most that could be said of the interest of Justice Goldberg was that it was indirect and that, subject to the reservation you expressed earlier about the limits of our knowledge, it does not appear to have been pecuniary.

MR BIGMORE: No, your Honour. What can be said about Justice Goldberg's interest is it was direct in the sense that it was control of the trust and one could see how directly Justice Goldberg could derive benefit from the trust.

GLEESON CJ: How can you be said to have a direct pecuniary interest in the outcome of proceedings if it does not matter tuppence to you, personally, who wins or loses.

MR BIGMORE: Because the difficulty with that is that one cannot measure what it does matter but one can measure the extent of the interest in the party and because of the involvement and continence of the interest of the party in which one has a substantial financial interest, one says that there is a direct pecuniary interest in the outcome.

KIRBY J: You have said that three times now but I do not think that is valid logic because that simply says, "If you postulate my test, it is easy to prove in evidentiary terms", but that does not help at all in deciding whether it ought to be the test or not.

MR BIGMORE: Yes, I follow your Honour.

KIRBY J: That is why the first of the three reasons you attribute to the American commentator really seems to me not logically to underpin the acceptability of the test that is - - -

MR BIGMORE: Yes. Well, Justice Deane in Webb links it to the public confidence in the administration of justice. We would say that one has a financial interest in the outcome and is perceived by everyone, judges and laymen alike, as having a financial interest in an outcome if the person in which the judge has a financial interest, leaving aside possibly de minimis interests, has a financial interest in the outcome, because one cannot determine right at the outset of a case when this disqualification point comes up, as in our case, how one could measure that outcome. It may not be tuppence.

One does not know, one would have to look at the market, look at the possible dividends, to engage in speculation as to whether the dividend would increase or decrease, whether the share price would increase or decrease or whether the net worth of the company might increase or decrease involves an enormous difficulty of measurement. The bigger the organisation, the harder the task, but what one can see is a cause of the person in which the judge has a great financial interest, and if that is saying it a fourth time, I am sorry, but it is the way we put it.

GLEESON CJ: Do you accept the principles as formulated by Justices Deane in Webb?

MR BIGMORE: Yes.

GLEESON CJ: Then, on that basis, the argument comes down to a very narrow point, does it not? That is whether or not Justice Goldberg, in the facts of the present case, had a direct pecuniary interest in the outcome of this case.

MR BIGMORE: Yes.

KIRBY J: However small.

MR BIGMORE: However small, yes, and we say it was probably tiny, but it was - - -

KIRBY J: Real.

MR BIGMORE: Real, a real interest, yes.

KIRBY J: The best argument it seems to me that you have is this was laid down in dramatic circumstances in Dimes. It stood the test of time, it was accepted early this century in this Court, it has been referred to by other Justices of the Court, it is a rule of the common law. It ought not to be changed by the Court, it has simple application, and if it is to be changed, it ought to be changed by Parliament, and these are not days to change it because these are days of scepticism of authority and, therefore, we should adhere to it. It is just that when you look at it, it seems to produce results which are offensive to common sense, that a judge who could not care less about, and probably does not have time to consider deeply, shareholdings, is going to be disqualified for a very small stake in the matter. It does not seem sensible when you are looking at the other way the law has developed about reasonable apprehension of bias.

MR BIGMORE: But when your Honour turns to that analysis, that it does not seem sensible, your Honour is taking a view which is from the Bench. The public confidence that Justice Deane was talking about is a cumulative view of the entire society which expects, in our submission, that anybody with a financial interest in the outcome, however small, should not sit on a matter. It is easy enough to do, as Justice Callaway points out, when there is knowledge and disclosure at the start, because one can reconstitute the court relatively simply.

GLEESON CJ: Do you say that the rule in Dimes has stood the test of time?

MR BIGMORE: We do, yes.

GLEESON CJ: Well, I can tell you that a great deal of mental effort has been devoted in recent years on the part of people concerned with the judiciary to work out exactly what it means as witness, for example, the extrajudicial speech of Lord Bingham referred to in the written submissions.

MR BIGMORE: Yes, and Justice Thomas. What those speeches show is that there is a feeling from the Bench that it may be too rigorous a test. Maybe that excites wonder as to whether there should be a de minimis principle involved in it. But the problem with that is what is de minimis? Auckland Casino really highlights the absurdity of a distinction between $1,000 and $10,000 because times change, values - minds may differ as to what is small and what is large. We would see the wisdom of someone saying, "Well, it is only one share worth $1 and it just happened to fall out of the sky in some inheritance along the way. You cannot even sell it because it is so small". Something like that would have to be, I suppose, regarded as de minimis.

GLEESON CJ: Mr Bigmore, is that a convenient time?

MR BIGMORE: Sorry, your Honour, yes, it is.

GLEESON CJ: I think we will say not before 12.00 for the next case following this case tomorrow, and we will adjourn until 10.15 tomorrow.

AT 4.22 PM THE MATTER WAS ADJOURNED UNTIL THURSDAY, 15 JUNE 2000