Ebner v Official Trustee in Bankruptcy M131/1999 [2000] HCATrans 316 (15 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 THURSDAY, 15 JUNE 2000, AT 10.23 AM

Copyright in the High Court of Australia

_____________________

GLEESON CJ: Yes, Mr Bigmore?

MR BIGMORE: If the Court pleases, all that remains for us to do, I think, is to take your Honours back to the judgment of Justice Callaway and the observations. If I could just complete reference to that, I think that is all we have to say.

Beginning at paragraph 89 of that judgment, I had dealt with paragraphs (a) and (b). In paragraph (c) his Honour deals with the convenience issue and we would, with great respect, adopt what his Honour says. In our case, at least, it was possible for recusal to take place with little inconvenience.

KIRBY J: But that cannot be an absolute criterion, or even particularly significant. Otherwise you say every time somebody objects, a judge has to stand aside and that is totally contrary to what this Court has said in a number of cases.

MR BIGMORE: No, it is not just because of the objection, but because of the interest in the outcome of the proceeding.

GLEESON CJ: There is another matter of convenience to be borne in mind. Some of these things depend on your point of view, Mr Bigmore. It might not cause much convenience in a large Supreme Court where there will be another judge available to take the case without much trouble. It can cause a good deal of inconvenience in a smaller court.

MR BIGMORE: Yes. It is a criterion and where it is convenient, then all the more should the rule be applied.

KIRBY J: Can that be right? That would suggest that a litigant in New South Wales has a greater "right" than a litigant in Tasmania. All the more should he stand aside. That cannot be right. Citizens throughout this country are entitled to the same justice.

MR BIGMORE: I meant in that regard, your Honour, it is the application of the "necessity" principle which we do not so much address in our case, but the rule is absolute, in our submission. It is the application of the question of necessity that would vary from place to place and circumstance to circumstance. His Honour Justice Callaway refers to a situation where there might be only one judge available for an interim order and, even though he has an interest, that judge should hear the matter because injustice would flow from the fact that an interim injunction could not be granted, for example. So we see that flexibility not on the side of the rule but on the side of the exception to the rule in relation to necessity. We recognise that that must be an exception. It does not apply to our case.

As Justice Callaway said on the top of page 48, just before paragraph (d), that last sentence in paragraph (c):

In the unusual case where it becomes apparent later, justice is served by balancing the competing considerations.

I will not repeat what I said yesterday, as his Honour dealt with that later, because of the unusual facts of the Clenae Case. In paragraph (d) his Honour said:

The contrary view gives rise to undesirable questions of fact and degree on which reasonable minds may differ.

I said something about that yesterday. Paragraph (e):

As a general rule, it is the duty of a judicial officer to hear and determine the cases allocated to him or her by his or her head of jurisdiction. Subject to certain limited exceptions, a judge or magistrate should not accede to an unfounded disqualification application. It has not hitherto been the practice for a judge or magistrate who holds shares in one of the parties to refuse to disqualify himself or herself if objection is taken.

We referred in our written submissions to some examples of that where the Court of Appeal in Victoria had reconstituted as a result of objection being taken. The next paragraph, 90:

Finally, and very importantly, this case does not raise for consideration the position of a judge who does not know or forgets that he or she holds shares in a company.

I would interpose that, of course, our case does not raise that either.

It was not submitted that that was the position of the learned judge here. I do not desire, by the reservations expressed above, to cast any doubt on the protection afforded by a properly administered blind trust. As at present advised, I do not think that the beneficiary of such a trust is disqualified, however great his or her beneficial interest may be.

With respect, we do not put anything contrary to that.

KIRBY J: Is that consistent with your proposition, which I understood to be if you have an interest, however small, then you are disqualified because you are, as it were, on the other side of the Bar table? Now, the fact that it is a blind trust may be relevant to what the community would expect of you because of expectations of the appearance of justice, but you still have an interest, though you do not know of it. If it is later discovered, then you are on the other end of the Bar table, according to your submission.

MR BIGMORE: This proposition seems to be consistent with what has been done in America legislatively, where if one's investments are managed by an independent manager and not by the judge himself or herself, there seems to be an appreciable difference.

We still submit that the principle applies but again, like necessity and waiver, this may be a recognisable exception. We do not put it any higher than that from our point of view. It was not the case with Justice Goldberg. We raise that simply to indicate the observations that Justice Callaway uttered in the Clenae Case.

KIRBY J: Could you remind me what happened in the Court of Appeal case where the court reconstituted? Was that relevant to our considerations?

MR BIGMORE: Yes, it was Cooper v Amcor and it is at paragraph 36 of our original submission, this is on 20 February 1997:

three judges of the Victorian Court of Appeal were asked to disqualify themselves on the basis that the wives of two of the judges held shares in the respondent and the remaining judge held shares in the respondent. Their Honours acceded to the objection and declined to hear the appeal.

We simply illustrate that that is consistent with Justice Callaway's observation. No doubt there was some inconvenience involved but as your Honour Justice Kirby said in Wu, inconvenience is a small - - -

GAUDRON J: It is a somewhat old-fashioned notion, is it not, that you should disqualify yourself because your wife has shares.

HAYNE J: It presupposes that you know what shares your wife holds, for a start.

MR BIGMORE: Yes.

GLEESON CJ: Exactly.

MR BIGMORE: Yes, it is inconsistent with what happened in the Bank Nationalization Case.

CALLINAN J: And there is a Queensland case referred to by Justice Charles in Clenae which did come here and special leave was refused. That is the case of Reg v Industrial Court.

MR BIGMORE: Yes.

CALLINAN J: Special leave was refused by Justices Taylor, Windeyer and Owen on 24 May 1966 and I know that this point was argued on the special leave application.

GLEESON CJ: I thought exactly this point was dealt with by the New South Wales Court of Appeal in the last year or so. Do you have a reference to that case?

McHUGH J: Dovade, is it not?

MR BIGMORE: Dovade, yes. Westpac v Dovade, yes.

GLEESON CJ: Do not worry. We can pick it up from the written submissions.

MR BIGMORE: It was mentioned during this special leave application, of course. Again, we refer to that case, Cooper v Amcor, as an illustration of Justice Callaway's observation. Again, it is not relevant to our case but it is obviously a consideration for the Court in attempting to define a rule, if there is to be one.

GLEESON CJ: Would an obligation to disqualify yourself if your wife held shares in companies be accompanied by a duty of disclosure on her part?

MR BIGMORE: We would say it would be prudent, as Justice Orminston said. It would be a counsel of prudence to disclose such things.

GLEESON CJ: Prudent on the part of the wife.

MR BIGMORE: Prudent on the part of the judge to, perhaps, know the answer to the question, but if he cannot find out, he cannot find out, I suppose.

GLEESON CJ: Once you start disclosing other people's assets, co-operation cannot always be taken for granted.

MR BIGMORE: It is not part of our submission, of course, because our submission is that the common law position at the moment is Dimes which does not extend to - - -

GUMMOW J: You say common law position. Now, Justice Goldberg was exercising judicial power of the Commonwealth, was he not?

MR BIGMORE: Yes.

GUMMOW J: And he was an officer of the Commonwealth within the meaning of section 75(v). Now, when you say common law, what are we precisely talking about in that setting? Are we talking about an attribute for the exercise of federal judicial power?

MR BIGMORE: Perhaps the best way to answer your Honour's question is to refer to the Australian Law Journal article which deals with the link between the common law, that we say exists, and the Constitution. Perhaps if I could just turn that up. Perhaps I could hand that reference up a little bit later, your Honour, but there was an article which dealt with it. We did not imagine that that would be part of the issues in this case.

GUMMOW J: It is just useful, writing a judgment, to start at the beginning and that happens to be the beginning, not halfway down the track by reference to what happened in another country 150 years ago.

MR BIGMORE: Yes, your Honour, I understand that.

GUMMOW J: I am interested in what happens in this country now in the light of the Constitution adopted here 100 years ago.

MR BIGMORE: Yes. It stems, as it does in America, from the notion of due process as far as the Constitution is concerned.

KIRBY J: Are you raising any implied consequence of the Constitution of the judicial power?

MR BIGMORE: No, your Honour. None of us has answered the question in relation to whether the Attorneys-General should be notified in relation to this case. It did not seem, I think, to any of us that the issue went beyond the common law issue as whether - - -

GUMMOW J: But what is the common law? How does it get into this well of discourse. That is what I want to know.

McHUGH J: Is it brought in by section 80 of the Judiciary Act, or is the question really inherent in Chapter III of the Constitution itself?

MR BIGMORE: Yes, your Honour, that would be our submission.

KIRBY J: Which one? There were two questions.

MR BIGMORE: That it is inherent in Chapter III.

KIRBY J: Well, if it is inherent in Chapter III and it is an implication from the terms of Chapter III, I hear 78B ringing in the background of the Judiciary Act.

MR BIGMORE: Yes. None of us heard that particular bell but, of course, I do appreciate the way in which, we say, that this original common law becomes part of the law of Australia.

KIRBY J: At least this is clear, as it was said many times, and most recently in Lange, maybe later, that the common law in Australia will have to conform to the Constitution and, therefore, it moulds itself around whatever implications arise from or whatever the terms of the Constitution are.

MR BIGMORE: Yes. In America it seems to come from the Fourteenth Amendment, but our submission, which is consistent with this article which we will unearth in a moment, links it to Chapter III. But if it is a principle which is evolved through the common law, it seems, in our submission, appropriate to apply it throughout Australia, just as one would end up with a situation in State courts that it would be revealed as part of the common law, when State courts apply Dimes, if they do, we would say that it would be right for this Court to declare the law for the Commonwealth in the same way.

McHUGH J: Bias is an aspect of the rules of natural justice and the rules of natural justice are, at least arguably, an incident of the judicial power of the Commonwealth.

MR BIGMORE: Yes, yes. I was concerned more by the 78B point but, with respect, none of us, I think, argue that whatever the common law is should not be applied because there is a constitutional barrier to it.

McHUGH J: Mr Bigmore, we are no doubt expected to write as comprehensive a judgment as we can, having regard to the issues, and I appreciate that this case does not refer to the question of the judge who does not know or forgets that he or she holds shares, but what is your submission about that? Any judge who holds shares in a company, they live in fear of the subsidiary companies. I mean, some public companies today, they have 100 subsidiary companies with very different names. They could even be taken over between annual accounts. What is your submission in respect of it, a judge sitting on a case of a subsidiary company of a public company?

MR BIGMORE: Yes. Your Honour, we would say the rule should apply. Even if one looks at it from the point of view of reasonable apprehension, the informed observer would be apprehensive about a situation where it later turned out that the judge had had shares of whatever nature. We do not cast our case as a reasonable apprehension case, of course - - -

McHUGH J: No.

GLEESON CJ: But is the observer better informed than the judge?

MR BIGMORE: Again, it is the appearance, it goes back to the appearance as opposed to the actuality.

GLEESON CJ: Yes, but appearance from what objective facts? Does the informed observer know something the judge does not know.

MR BIGMORE: No, your Honour, the informed observer will have the wisdom of hindsight. That is the problem with it, because if it turns out after the event that a judgment has been handed down and yet the judge had forgotten a major - if we can suppose a major interest, in a party, it would appear very strange indeed. It does not seem to be the right answer that it was all right because the judge actually forgot. It does not seem to be consistent with the informed observer's approach. So one cannot really look at it sensibly on the basis that the informed observer at the back of the Court has no greater knowledge than the forgetful judge.

McHUGH J: But there is a problem about the subsidiary companies and conglomerates. Take a company like Pacific Dunlop, which have subsidiaries dealing everything from the manufacture of condoms to pacemakers or tyres.

MR BIGMORE: Yes. We appreciate the practical problem. Of course, our answer must be that the principle is absolute as far as shareholding is concerned, providing the party or the person or the entity in which the shares are held has a financial interest in the outcome.

McHUGH J: But if your submissions are right, it may be there will have to be a flight to managed funds.

MR BIGMORE: Yes.

KIRBY J: I think one of the articles you handed up suggested that that was happening anyway and that, therefore, that will provide the solution. I read something that - - -

MR BIGMORE: Yes, I do not know that we said that it is happening anyway, but there is certainly more - the point we wanted to make, I think, was that there is a cyclical thing involved in this. It has been said against us that many, many years ago shares were a different thing altogether from what they are today. That may change again in the future. It may - - -

GLEESON CJ: But any judge who had an interest in a superannuation policy would be almost bound to infer that the superannuation trustees would invest in the ANZ Bank. They would invest in all the major banks.

CALLINAN J: In fact, that is inevitable now because the managed funds, I think, have to have, or they have imposed upon themselves a regime that they have to buy a certain number of Telstra shares and a certain number of other major company shares. That is also why they are so susceptible to change, those shares.

MR BIGMORE: It means that to use the expression "blind trust", as Justice Callaway did, it might be a rare beast indeed because, as your Honour says, it may be possible to draw that inference and it might to the informed observer looking back on a case seem very strange that that inference was not drawn or that the judge was in fact forgetful, depending on the facts.

KIRBY J: Do you say that there is a positive duty on judges to find out what their shares are, what any so-called blind trust involves - is that a consequence of your argument - so that they will not put themselves at the other end of the table?

MR BIGMORE: No, your Honour. If there is such a thing as a truly blind trust and the judge has no function in the administration of it, then that would seem to be a recognisable exception, or an exception that is capable of being formulated. But it is difficult when one raises questions of inference. It may be such a fund that the inference must be drawn.

CALLINAN J: A decision of an appellate court, particularly this one, might have a much bigger impact upon a non-party than it may have upon a party, because that could easily happen. How do you cater for that situation?

MR BIGMORE: On our submissions, we say that what should be applied is something which has evolved through the common law for a long time and if this Court did apply that principle as we submit, the impact would not be great because it would simply be an application, perhaps adjusted in constitutional terms, but it would still be an application of existing common law.

GLEESON CJ: Yes, but the point Justice Callinan makes highlights the artificiality of concentrating on shareholdings in companies which are easy to spot and easy to discuss, but a judge on this Court who had a shareholding in a public company which carried on a mining operation might be financially unaffected by a decision affecting native title, and another judge who had no shares in any public company but who owned a pastoral property might not have any interest in any party to the litigation but might be far more affected by the outcome of the litigation than the one who held the shares in the public company.

MR BIGMORE: Yes. We would say that fits in the "reasonable apprehension" large circle.

GLEESON CJ: But even if you confine it to a financial level - and I am sure I do not understand why you should confine it to a financial level - but even if you confined the concept of interest - or, as you call it, sympathy or involvement - to matters of finance, there is a higher degree of artificiality about assuming that holding some shares in a public company constitutes a relevant form of interest but other things do not.

MR BIGMORE: I appreciate your Honour's point and, again, if Mr Allison's suggested three answers are not enough we can only add to that an emphasis on the public confidence in the administration of justice that there is something far more significant to the lay person about financial involvement than there is about other involvements. As Mr Allison suggested, the public can understand that judges will come to the Bench with all manner of different preferences, political, religious or whatever it happens to be. It is not possible to exclude all that. The public would not expect it, but as far as money interests are concerned, that is different.

GLEESON CJ: You used in your argument yesterday the words "sympathy and involvement".

MR BIGMORE: Yes.

GLEESON CJ: In terms of interests likely to compromise partiality, those words have implications that extend far beyond financial matters.

MR BIGMORE: Yes. The point there, your Honour, is that a distinction is made in the cases here today between an interest in the outcome and an interest in a party. In our case, the Full Federal Court found that it was not a direct interest because it was an entity that was not a party. In the Clenae Case an interest in the outcome was disavowed and Justice Charles particular held that that was not direct because it was only an interest in the party, not an interest in the outcome.

Now, with respect, the two sit uncomfortably with each other and what we were trying to do with those submissions about sympathy and involvement were to point out that an interest in an entity which has a financial interest in the outcome of the proceeding is the same thing. Whether it be because of notions such as sympathy or involvement, the fact of the matter is the judge has a financial interest in the entity which stands to gain or lose, according to the result.

CALLINAN J: Let me take up the Chief Justice's example: there would not be a decision of this Court in relation to native title which would not have a significant effect upon a mining company in this country and, indeed, I can tell you, that the mere lodging of a native title claim can cause an increase in the interest rate that a company has to pay on its borrowings. That is just one respect in which a company can be adversely affected but the financial ramification to a mining company of any decision on native title in this Court are capable of being immense, and upon companies in which a person might have no interest or no direct interest at all. How do you deal with this situation.

MR BIGMORE: We would submit there is a distinction between that situation which would be indirect and our situation where there is a direct financial result to the ANZ Bank.

CALLINAN J: Even though the latter might be very, very insignificant and the former might be major?

MR BIGMORE: Yes, it is the directness of it which is important.

KIRBY J: Unless you embrace the idea of involvement, interest, participation, then that seems an irrational principle because if you are looking at appearances, then the appearances will favour disqualification where there is an indirect large impact and not where there is a tiny fraction or insignificant contemptibly small impact. But your principle is the contradictor or contradictory to what commonsense seems to say. The common law is generally commonsensical.

MR BIGMORE: Well, again, as I think it was your Honour yesterday said, we go back to the antiquity of the rule and the fact that it has stood the test of time. It is simple enough and it avoids detailed consideration of what are very complex notions as to a lay person's apprehension about circumstances like those mentioned by Justice Callinan a moment ago. That is a different area of inquiry and it raises very significant questions about disclosure and how one could even devise a rule for disclosure when circumstances change so dramatically.

One might not have thought, a few years ago, that a native title claim could exist let alone one which would result in the change in borrowing rates to a mining company. So, to write a rule 15 years ago that would require disclosure in circumstances like that would have been impossible. So it is very difficult when one comes to questions of disclosure and we have not addressed that issue, of course. Our learned friend Mr Douglas probably will.

KIRBY J: Could I ask you two little questions? First of all, do you know if Locabail was granted leave to appeal to the House of Lords?

MR BIGMORE: I do not know, your Honour - - -

KIRBY J: Secondly, is the word "recuse" an English word or an American word? I notice in the Locabail case their Lordships appear to have embraced it, but I do not know that it has ever been used in this - - -

McHUGH J: I was going to ask you the same thing. It is an American expression, is it not?

MR BIGMORE: It seems to be pretty popular in America when one looks at the writings.

GLEESON CJ: It seems to be a transitive verb.

MR BIGMORE: Yes.

GLEESON CJ: You "recuse" yourself.

KIRBY J: Whereas our theory is, is it not, and, I mean, we have kept on talking about "that the judge should disqualify himself", but our theory is the law disqualifies the judge.

MR BIGMORE: Yes, and, with respect, we would agree with that. It is not, I imagine, without having looked at the question, that it has some Latin origin.

GLEESON CJ: Is it related to the word "recusant" which had a religious significance?

MR BIGMORE: I do not know the answer to those questions, your Honour. It is not a word that we, of course, depend upon. It is not a word that is really pleasant to the ear, I must say. It seems that our case is a case about disqualification and it is better - we would encourage using that word rather than "recuse" transitively or intransitively. Perhaps the last thing - I have that ALJ article now, your Honours. It is 73 January 1999 at page 72.

KIRBY J: Whose article is this?

MR BIGMORE: I appreciate your Honours do not have a copy of it. It is an article by Mr Tilmouth and Mr Williams. It is written after the Hindmarsh Island Case and deals, amongst other things, with the link with Chapter III. That is why I mentioned it. I think probably we have all assumed in answering the 78B question the way we have that it must be incidental to the judicial power - it must be inherent. In answer to Justice Gummow's question, this article seems to go into the question in more detail and we would simply put that forward as our submission on the topic. We could adopt that.

If the Court pleases, there was one minor matter. We did prepare an amended chronology as a result of some criticism of some inaccuracies in dates. I think we picked the wrong year a couple of times. If we could hand that up. Those are our submissions, if the Court pleases.

GLEESON CJ: Thank you, Mr Bigmore. Mr Douglas.

MR DOUGLAS: If the Court pleases, at the outset could we say that we perceive that what we are dealing with here is a two-step process. The first step is disclosure. The second step is the ascertainment of the consequences of that disclosure.

The fact that disclosure of shareholdings is for current and standard practice of judges in Victoria, is borne out by the statement in the judgment of the President of the Court of Appeal, Mr Justice Winneke, at page 825, where he says, at about line 6:

It is the current and standard practice of judges to disclose to the parties, at the outset of a case, the existence of a shareholding interest which they have in one of the parties. That disclosure, as I understand it, is not made in the interests of fulfilling idle curiosity. Rather it is designed to advise the parties of facts upon which they can make an informed decision as to whether the judge's interest could possibly incline him or her to pre-judge the issues.

GLEESON CJ: It serves two functions at least. Maybe it serves others. It is relevant to the question of waiver. In other words, it may simply result in a potential problem being put to one side. In fact, I suspect that in 99 cases out of 100, that is its practical consequence.

But another possible importance is that the judge may know that he or she owns shares in a public company but may not know what the significance for the company of the issue in the litigation is, and it gives the parties an opportunity to draw to the attention of the judge something the judge does not know - - -

MR DOUGLAS: Exactly, your Honour.

GLEESON CJ: - - - about the possible significance of the litigation.

MR DOUGLAS: It is an important process, and one which was not undergone in this case. We recognise, in making this submission, that at the time when the hearing commenced the shares were an undistributed asset of his mother's estate, of which he was the executor, and so, therefore, he did not have a direct interest in the shares at the start of the litigation, but as Justice Callaway points out in his judgment - - -

HAYNE J: Had the judge's mother died by the time the case began? I thought death occurred in the period between completion of trial and delivery of judgment.

MR DOUGLAS: I think the latter of the two propositions.

KIRBY J: Therefore at the beginning of the litigation the judge had no interest. It was his mother's interest.

MR DOUGLAS: No. The process of adjudication involves not only the taking of the evidence but the formulation of the reasons for decision. His Honour took 17 months to deliver his reasons for decision. During the currency of that period he consciously distributed to himself the parcel of shares which is the subject of these proceedings as executor and took a direct interest at that point of time.

We would say that the principle is no different. In other words, whether he held the direct interest in the shares at the commencement of the litigation or whether he acquired it during the process of adjudication, the principle remains the same and, in fact, in the later case, even more so, your Honours.

GLEESON CJ: But he took a direct interest in the shares. He did not gain a direct interest in the outcome of the litigation. The outcome of the litigation had no potential to affect him financially at any stage.

MR DOUGLAS: Your Honour, I recognise what your Honour says about that.

GLEESON CJ: That was conceded as a matter of fact, as I understand it.

MR DOUGLAS: We conceded that on the evidence in the case one could not say one way or the other.

GLEESON CJ: I thought that Justice Charles in his reasons for judgment analysed the financial position of the ANZ Bank and explained why the outcome of the case could not have effected the judge's financial position.

CALLINAN J: But the Bank had $7 billion worth of assets and there was over 700 million allocated for dividend payments.

MR DOUGLAS: Your Honours are taking me out of the way in which I wish to put the argument but let me deal with that matter. The affidavit evidence which was filed showed that over a period of some 15 months the value of the shares fluctuated between $5 and about $11 or $12.

GLEESON CJ: They did not go up as a result of the decision in this case, did they?

MR DOUGLAS: One does not know, your Honour.

HAYNE J: The concession to which reference was made is recorded at page 851 of the application book in the last two lines. Is it accurately recorded?

MR DOUGLAS: Yes, I am not quibbling about that, your Honour.

HAYNE J: It seemed to me you were.

MR DOUGLAS: No. I would not wish to be seen to be quibbling about it, your Honour. But let me put this to your Honour. If the judge held $10 million worth of shares in the Bank, could not one perform the same equation and come to the same result?

If you have a case where, for example, a bank is pursuing a debtor for $30,000 in the Bankruptcy Court and you have a bank which is of similar magnitude to this bank and a judge owns $10 million worth of shares in the bank, is it to be said that the judge does not have to disclose his interest in the $10 million shares or that he is not disqualified by reason of that holding simply because one cannot show that if the bank is $30,000 richer his shareholding will not be affected.

GAUDRON J: On one view it may be that the disclosure is referable, not only to interest in the outcome of the litigation, but also to apprehension of the bias.

MR DOUGLAS: Yes, your Honour.

GAUDRON J: Failure to disclose may generate a greater apprehension of bias than disclosure, on one view.

MR DOUGLAS: That is a matter which is adverted to by Mr Justice Merkel in a decision which we would like to take the Court to because it is quite useful in the context of some of the questioning which has come from the Bench. It is the case of Aussie Airlines v Australian Airlines [1996] FCA 1308; (1996) 65 FCR 215. This is a case in which it really concerned the relationship between Mr Justice Merkel and now Mr Justice Goldberg, but at that stage, Mr Goldberg, QC, who was appearing before Mr Justice Merkel, and former business associations and professional associations which they had with each other, personal associations, and whether those matters should be disclosed. It deals with the question of disclosure and non-disclosure by an adjudicator, in circumstances which we think are relevant to this case because, as your Honour the Chief Justice has been pointing out, it is not only a shareholding which one may need to disclose, but any association with the subject matter of a suit which is known to the proposed adjudicator.

The test which was formulated by Justice Merkel, which we would adopt, with respect, is to be found at page 221 of the judgment. There are certain passages from judgments of Justice Kirby when he was President of a Court of Appeal which are referred to. It is after reference on page 220 to the decision of Kennedy v Cahill, which is a case which your Honours may have read about in the press or be familiar with in some other context, but it was a case in which the judge was actually having a relationship with one of the lawyers who was appearing before her. But then he goes on to deal with a question of a duty of disclosure. He says:

It may not be an unnatural reaction of a client to think that as a judge has disclosed an association with counsel the judge must be concerned about it.

He then goes on to dispose of that proposition. Then he says:

A number of reasons can be identified for the existence of the duty to disclose.

First, it cannot be expected that the parties will be aware of, let alone inquire into, potentially disqualifying circumstances concerning a judge or a tribunal. In respect of non-disclosure by a court appointed referee, who at the time was a director of a company which was a party to and negotiating large commercial contracts with a government department which was in effect a litigant in the reference, Kirby P said in Najjar v Haines (1991) 25 NSWLR 224 at 229-230:

"I do not believe that it is reasonable to expect that a litigant should be put on an inquiry as to the interests and connections of a referee. Indeed, I do not think it desirable that such should be an obligation. The litigant is entitled to expect that there is no relevant interest unless it is declared. Nor does the evidence in this case show that this was a trivial, remote or indirect interest such as could not reasonably be thought to carry the risk of influencing (however unconsciously) the attitudes of the referee and so excuse non-disclosure."

There is also a reference to what Mr Justice Clarke said in the same case.

Reading down, at about point C, it says:

In the usual course, the parties are entirely reliant upon disclosure in order to consider whether an issue of disqualification may arise, and if so whether an application to disqualify is to be made.

Secondly, the failure to disclose, of itself, can be one of the circumstances which together with others may give rise to a reasonable apprehension of bias -

and reference there is made to what Justice Kirby said in S & M Motor Repairs:

A party or the public may well be left with the impression that there was intentional concealment or non-disclosure, or that something was "wrong about it all". A failure to disclose no matter how unwitting, can undermine public confidence in the integrity of, and the administration of justice by, the judicial officer or the tribunal concerned.

Thirdly, disclosure of itself, necessarily assists in securing the object that justice is "seen" to have been done. Kirby P in S & M Motor Repairs at 369 said "the very practice of prior announcement is a protection of the manifest integrity of the judicial process". That is particularly so where the duty to disclose may arise in respect of circumstances known to the tribunal and possibly some, but not all, of the parties or their legal representatives. In such circumstances the duty to disclose may be a duty owed by both the tribunal and the parties aware of the relevant circumstances -

which is a matter which your Honour the Chief Justice raised with me just before.

The duty, has been said to arise in respect of facts or circumstances that may be or are potentially disqualifying, that is, disclosure of "any dealings which might create an impression of possible bias" -

and reference there is made to a case of Commonwealth Coatings Corporation v Continental Casualty which is dealt with in the judgment of Justice Rogers in Najjar v Haines which is a case in the United States where, as a result of a failure to disclose, there was one automatic disqualification.

GLEESON CJ: I just want to be clear as to how you are putting your case, Mr Douglas. Are you putting your case on the basis of the proposition that the shareholding which the judge acquired in the Bank produced the result that the judge should have disqualified himself, or are you putting the case on the basis that it produced the result that the judge should have disclosed the shareholding?

MR DOUGLAS: Your Honour, may I have the luxury of putting both propositions?

GLEESON CJ: I understand the first proposition. I have a little difficulty in understanding the second proposition, unless it is in support of the first proposition. If the judge's duty was a duty to disclose, what was then going to happen?

MR DOUGLAS: If he disclosed, one of three things would happen, your Honour: either he may choose not to proceed further. In this particular circumstance - - -

GLEESON CJ: Choose?

MR DOUGLAS: .....In the particular circumstances of this case, that is a very unlikely situation because he had embarked upon the process of adjudication. He may, for example, your Honour have chosen to disclose at a time prior to distributing the shares to himself, but let us leave that to one side. Secondly, the parties may have waived it. Thirdly, the question then arises, what is the situation if, having distributed the shares to himself and having made disclosure, one of the parties objects?

GLEESON CJ: That, I would have thought for myself, is the same as the first question; it is the real question.

MR DOUGLAS: It depends then, your Honour - - -

GLEESON CJ: To say that one of the parties may have waived simply is another way of saying that the problem may have disappeared. That is a good practical solution but we have to be concerned, do we not, with the possibility that your client would have objected?

MR DOUGLAS: Yes, your Honour. In that circumstance the question is whether this does fall within that class of case of automatic disqualification which has been referred to, for example, in Justice Deane's judgment in Webb's Case.

GLEESON CJ: If your client had objected, do you say the judge would have had a discretion as to whether in the circumstances, which included all the money that had been spent on the litigation, he would, to use the expression Mr Bigmore does not like, recuse himself, or, is your submission that the judge, subject to any question of waiver, was automatically disqualified?

MR DOUGLAS: We say that the failure to disclose, of itself, amounts to a disqualification. I am sorry, for failure to disclose of itself makes the decision voidable, so, if we could just meet all of those questions at that level, but just then trying to deal with the proposition which your Honour puts to me it does depend upon the content of this principle of automatic disqualification for a direct pecuniary interest and whatever that means.

GLEESON CJ: Could I invite your comment on this possibility. There are two principles, one relating to actual bias and one relating to perception of bias. Let us put actual bias to one side. Why should not the problem addressed in Dimes and Pinochet and Ebner and Clenae and - what is that New South Wales case about the wife - Dovade, why should not all those problems in this country now be dealt with on the basis of applying our test of reasonable apprehension of bias? That is the objective bystander test.

MR DOUGLAS: It is because if in fact the test is really a shareholding interest as distinct from what has otherwise been referred as a direct pecuniary interest in the outcome of the suit, it is a clear, bright line, but I accept in putting that submission - - -

GUMMOW J: But it is not clear and it is not bright. That is why we have got all these cases about blind trusts.

MR DOUGLAS: Certainly, the courts so far - and I am not being critical of this Court - have not assisted in drawing that clear, bright line because the nomenclature of this interest has changed over the years and particular judges, for example Lord Goff in Gough's Case seems to be expressing a view that there has to be a direct pecuniary interest in the outcome of the suit yet when he comes to express his judgment in Pinochet's Case seems to express it more in terms of a shareholding interest is enough which seems to be agreed with by Lord Hope and Lord Nolan - - -

GLEESON CJ: But we have a different rule from the English.

MR DOUGLAS: We have.

GLEESON CJ: And the question I am asking you is why our rule is not good enough to cover all cases other than cases of actual bias.

MR DOUGLAS: It could be dealt with under that heading.

GLEESON CJ: If you dealt with it under that heading why should you not take the next step and say, in the ordinary case, unless there are unusual circumstances, a reasonable bystander knowing that a judge held a parcel of shares in a publicly listed company would not apprehend that there was a risk of inability to bring an impartial mind to bear on the decision in the case unless there was at least a possibility that the outcome of the case could affect the value of the judge's shareholding.

MR DOUGLAS: That is stating a principle too narrowly, in our respectful submission, and, I think, Justice Deane had in mind two categories of cases when he looked at the principles in Webb's Case. The reason why we believe it states the principle too narrowly is it does not really accommodate the situation which I put in argument earlier, of a judge, for example, who earns $10 million worth of shares in a company which is capitalised at $20 billion and which - - -

GLEESON CJ: I thought it would accommodate that. I would have thought that if the judge had a major shareholding in a public company then that might affect the apprehension of the bystander. But the possible attraction of dealing with it in that way is that it accommodates all the other situations apart from simple shareholding, of which Ebner is an example, and of which another example would be a judge who had a large overdraft account with a bank or a judge who was in the course of negotiating with a bank for a mortgage over his house. The test that we have in this country would accommodate all those different situations by allowing them to be considered in the light of their particular facts.

MR DOUGLAS: The test which your Honour propounds there does, with respect, more readily accommodate the two competing public interests which are at issue here. The one which Justice Mason referred to in Re L, of the importance that a judge not be too readily disqualified, and the other being the interests of open justice, because if there is disclosure and the nature of the interest being known, and if there is not automatic disqualification, it then means that the judge, knowing what the parties know presumably, and the parties knowing what the judge has, can then proceed upon the process of adjudication and any grievance of the party who wishes to say that the judge should not sit, will have been dealt with at the outset of the case.

But the example which your Honour is putting to me is one which would be appropriate in circumstances where both stages of the process have been gone through, where there has been disclosure and where then the question of whether there is a reasonable apprehension of bias has been considered. Different considerations, in our respectful submission, apply in circumstances where there has not been disclosure.

GLEESON CJ: Disclosure may have two aspects. It may be a rule of prudence and it may have a legal consequence. It may have a double aspect. As a purely practical matter, in most cases it produces the consequence that this problem disappears altogether.

MR DOUGLAS: It does, yes.

GLEESON CJ: But it may also elicit information that the judge did not know and it may also, as has been pointed out, affect the apprehension of the reasonable bystander. But in the facts and circumstances of the present case, bearing in mind the stage the litigation had reached, and bearing in mind the fact that the outcome could have no effect on the judge's personal financial position, why would a reasonable bystander apprehend that the judge might not be able to bring an impartial mind to bear on the decision of the case?

MR DOUGLAS: Your Honour is putting that question to me in a context where it appears to be assumed that the Court of Appeal in Victoria and this Court could look at the question as if disclosure had been made, and what the consequences of that would have been.

GLEESON CJ: No. What I am suggesting to you is that, bearing in mind the circumstances of this case, you really cannot draw any adverse inference, or the reasonable bystander could not draw any adverse inference against the judge, from the failure to disclose.

MR DOUGLAS: But, your Honour, in a context, may I respectfully put to your Honour, where you are proceeding on the assumption that there has, in fact, been a disclosure, because that is a relevant factor - - -

HAYNE J: Why? What is the relevance of the fact of disclosure?

MR DOUGLAS: Your Honour, is it not relevant in this context, that there has been much said about the higher duties which lawyers owe to their clients and which judges owe to the public who bring their suits before them? It is established from what Justice Winneke says in his judgment, that it is a standard practice to make disclosures.

HAYNE J: The standard practice of the past may owe much to the folklore about the consequences of Dimes. For my part, I draw little, at the moment, at least, from the fact of a practice in the past as bearing upon what rule this Court should now say should be applied.

MR DOUGLAS: It is relevant to what should have been done in the context of my clients' case, your Honour, because it was the practice which applied at that time. Now, on a daily basis, solicitors and barristers and others who are in a fiduciary capacity to their clients, make disclosures of matters which they feel their clients may need to know.

Decisions such as Brickenden say they cannot be afterwards heard to say that if disclosure had been made, the same result would have applied anyway. Is some lesser rule going to apply to judges, so that judges and appellate courts presiding over what judges have done, can simply say "Well, if his Honour had disclosed this matter, the matter probably would have proceeded as it did anyway, and the parties would have waived it"? And in any event - - -

HAYNE J: No. It is not a question of whether the parties would have waived it. Had the parties been informed of this fact and one had objected, what then would have been the outcome?

MR DOUGLAS: His Honour may well have decided that because he did not think that the outcome of those proceedings could affect the value of his shareholding that he was entitled to sit.

HAYNE J: Thus, is the ultimate question that is presented in most cases of this kind concerning shareholdings, the question of the likelihood of effect on the value of the shares?

MR DOUGLAS: Well, your Honour, that is a very difficult question, is it not, because we all seem to be proceeding on the basis that you can do a few sums and work out what the effect of that is going to be on the value of the shares. Whereas we all know that share prices are moved by considerations other than financial considerations. Emotion and stock market sentiment has a lot to do with it. The effect of a decision upon a company as a result of what is said in a judgment or collateral consequences of a judgment, can be very different from what are perceived to be the financial considerations which apply.

What Justice Charles has said is that you basically just do a few sums and see what the financial effect would be. That does not seem to us as though that test is necessarily going to produce the result, but you will know as a result of having carried out that equation what the effect on the price of the shares will be.

HAYNE J: Accepting for the purposes of argument that if a judge in the course of reasons for judgment was to make harsh criticism, say, of a lending institution and its practices in relation to particular kinds of borrowers, assume for the purposes of still further considering the point that this was a matter that might ultimately affect the share price, that seems to me to say no more than that the question of effect on the value of the shares may require consideration of a number of different matters but it leaves intact the proposition that the ultimate question is the question of effect on value. If that is not the ultimate question, what do you say it is?

MR DOUGLAS: Your Honour, as we would see it, that chain of reasoning, because of the imponderables which we have been referring to, does lead one back to a situation in which possibly the shareholding interest itself should be regarded as being the criterion.

HAYNE J: I do not wish to be misunderstood. It seems to me to be a tenable position to adopt to say the problem is so difficult and diffuse that a single answer having arbitrary consequences in some cases must be adopted, but if that is the way in which the argument is ultimately to be based - as I say, I am not to be taken as suggesting it is untenable - then let us grapple with it at that level rather than at some other level.

MR DOUGLAS: Your Honour, it is because of the imponderables that your Honour has referred to in the question which your Honour has put to me that in some of the earlier cases - I have in mind in particular what Lord Shand said in Smith's Case - they have said it is all just too hard and the shareholding interest is sufficient. That is one possible approach and it seems to have been the approach which was adopted by the courts, although in Rand's Case Lord Blackburn used the expression "direct pecuniary interest" which was picked up by Lord Goff in Gough's Case and used as a basis of his consideration of the matter by Justice Deane in Webb's Case. That then seems to have led to the adoption of that criterion and not the shareholding criterion in a number of the more recent cases.

HAYNE J: But if that path is to be pursued, it seems to me you then need to also recognise that there are other kinds of problem which are not addressed and which the adoption of this rule as a rule of practical expedience gives you no guidance in resolving. If that is the position you come to, "so be it" is perhaps the answer you make, but I need to understand what it is that you say is the relevant field of discourse.

MR DOUGLAS: Your Honour, we do not wish to abandon any reliance upon the earlier authorities so, in other words, we would wish to maintain our argument that any shareholding interest, however small, is a sufficient disqualification, but I am a realist enough to recognise that there are members of this Bench who may feel that that is not a sufficient criterion of discrimination in a modern age where it can lead to the automatic disqualification of judges at the whim of one of the litigants, even though the shareholding interest may be very small. But it may be as good a criterion as we can come up with for resolving these types of matters, bearing in mind that in 99 per cent of cases they are dealt with by waiver by the parties concerned and it does not seem to have given rise to any great public inconvenience when coupled with the disclosure by the judge as an integral part of the process.

GLEESON CJ: Let us consider how that rule operates in practice. Suppose the litigation in the present case were not between your clients and Australia and New Zealand Banking Group Limited but were between your clients and a partly owned subsidiary of Australia and New Zealand Banking Group Limited. How would the bright line rule operate then?

MR DOUGLAS: Your Honour, the bright line rule does not apply to such a circumstance as we understand it because it has never been suggested, even in the earlier authorities, that a shareholding interest involves an interest in a subsidiary corporation, but there may be, depending upon the circumstances, a duty to disclose the shareholding having regard to the formulation of the test of disclosure set out at the foot of page 221 of Justice Merkel's judgment in Aussie Airlines.

GLEESON CJ: Would you have given a different answer if, in my example, I had made the litigant not a partly owned subsidiary of the holding company but a wholly owned subsidiary of it?

MR DOUGLAS: Your Honour, that depends upon considerations of authorities such as Walker v Wimborne, the separateness of the partly owned subsidiary and the wholly owned subsidiary because, after all, the directors of the subsidiary have to take into account the separate interests of the group and it makes the matters somewhat more remote.

GLEESON CJ: Except you are postulating a test based on the word "direct" and I am simply trying to understand how you apply the word "direct" to a very common situation.

MR DOUGLAS: Your Honour, in the older authorities, Dimes' Case, Smith's Case, Sellar's Case, both Dimes and Smith's Cases were unincorporated bodies.

GLEESON CJ: Dimes was decided many years before Salomon's Case.

MR DOUGLAS: It was, but Sellar's was not, your Honour. Lord Buckmaster's decision in Sellar's Case is in 1919, just about five years before Megorra's Case, approximately 20 years after Salomon's Case. Smith's Case was a case of an unincorporated body and they actually went to pains, if you look at the judgments in that case, to find out whether, in fact, the body was incorporated or unincorporated because there was an Act which had been passed, a Scottish Act, which excused adjudicators, I think they were, arbitrators, from disclosing shareholding interests in certain banks and insurance companies, incorporated banks and insurance companies, but it did not apply to unincorporated bodies.

So, I have to concede that the expressions of view by the Lords in that case were expressions of view which applied to an unincorporated body as distinct from an incorporated body. But, nonetheless, they seem to have been applied without reference to that distinction in Sellar's Case, which seems to have been a case concerning an incorporated body, and after Salomon v Salomon. The expression "direct pecuniary interest", as far as we are aware, was first used by Justice Blackburn in Rand's Case, and that is the passage that is referred to by Lord Goff in Gough's Case. Justice Deane refers to that passage in Webb's Case, but later, when he came to decide Pinochet [No 2], Lord Goff said, "a shareholding interest is enough".

Lord Justice Browne-Wilkinson said "Well, a relevant interest", but does not describe what a relevant interest was and did not need to because he was dealing there with a case of association. Lord Nolan agreed with both of them. Lord Hope seems to have been in the same boat because he referred to Sellar's Case, as Lord Goff. The other justices, I think Lord Hutton, seems, on the other hand, to have come up with the test of direct pecuniary interest.

Justice Deane, in Webb's Case said in the footnotes that "a direct pecuniary interest has to sound in money or moneys worth." That may be an indication that he was thinking in terms of a test which has been used by Justice Charles in the decision under appeal, and by the Court of Appeal of New South Wales in Dovade, and Locabail which applied Clenae. But it is not at all clear, if one has an historical review of the authorities, that it is not merely the shareholding interest of itself which is enough. In any event, it is a matter which needs to be cleared up. As your Honour has said, it may be, as a result of that review, the Court comes to a view that the reasonable apprehension of bias test can apply, and these sorts of tests which have been devised for shareholdings over the years, are tests which can be used in a context of the reasonable apprehension of bias test for the purpose of determining whether a fair-minded person could, in fact, have a reasonable apprehension of bias in relation to that particular shareholding.

I come back to the particular facts and circumstances of this case because we say in the context - - -

KIRBY J: If you do, can I just ask you for a little help on this. Assume we are into the realm of the reasonable fair-minded person, how does a judge extract that idea from the typical life a judge leads? I mean, how does one know what a fair-minded person might take, what view they might take? I suspect myself - I may be wrong - that a fair-minded, ordinary citizens, persons, are possibly less understanding of these cases and perhaps are more demanding than judges, who see all the nuances and peculiarities and know in their own hearts that it would not affect them at all in any way. But if we are into the realm of applying the ordinary person test, how does one find what the ordinary person would think about a case like the present?

MR DOUGLAS: One's experience of life, I suggest, your Honour, but having - - -

KIRBY J: But judges' experience of life, by and large, is pretty sheltered or pretty - - -

MR DOUGLAS: What I would say, your Honour, is that $30,000 is not an insubstantial sum of money to a lot of men and women in Australia, and one may have thought that fair-minded persons are not necessarily people who very readily go to the profit and loss account and balance sheet of a major corporation and try and work out what that shareholding means in the context of its assets.

GLEESON CJ: Well, it is sometimes suggested that there is a wider spread of shareholding in public listed companies in Australia than in any other community.

MR DOUGLAS: That is only because we have sold off Telstra, your Honour.

GLEESON CJ: I mean, there are some people, no doubt, who regard owning shares in companies as a suspicious manifestation of capitalism, but, as I understand it in our community there is, in fact, an unusually wide spread of shareholding in public companies.

MR DOUGLAS: Yes, that is obviously a matter which the court would take into account. I am not suggesting it would not, and I have seen those sorts of prognostications in the press.

GLEESON CJ: And, of course, all manner of people have interests in superannuation arrangements and schemes which invest in public companies.

MR DOUGLAS: Yes, but, of course, their main interest there, your Honour, is a dividend and the capital appreciation. They are not too troubled by the investments of the fund, except in a more global sense, the nature of the investment: blue chips, speculative, dot.com companies, whatever. But one does not suspect, your Honour, that the ordinary member of the public has taken a degree in finance at the University of New South Wales and is capable of reading a balance sheet.

Indeed, your Honour, I remember an occasion in the Spedley litigation where your Honour made some observations about the doctrine of necessity where I was cross-examining a managing director of a major public corporation in this country, and after having suggested to him on a number of occasions that bills of exchange were a reasonably liquid asset and there would be no reason why Spedley should not have been able to realise those assets, he said to me, "I cannot read a balance sheet", in cross-examination. Now - - -

GLEESON CJ: Some barristers are like that.

MR DOUGLAS: I suspect I am one of them, notwithstanding that I have seen many of them. So one cannot, I do not think, necessarily assume that fair-minded persons in our community can readily say, "Well, there is $30,000 and here is a major corporation, and that is not going to affect the judge".

GLEESON CJ: But one thing the fair-minded person is entitled to know, if it is a fact, is that the outcome of the litigation could not possibly affect the value of the judge's shares. That is a pretty concrete piece of information to fasten on to, is it not?

MR DOUGLAS: Yes, but it does depend on disclosure, and the concession which Justice Hayne has referred to is on the evidence before the Court. One does not know, your Honour, what effect it is going to have. There are all of those other imponderables.

Could I then come back to the submission which I made, lest it be forgotten, that one cannot look at this case, this particular case, if there is a duty of disclosure, which we suggest there is, or if there was a convention of disclosure which was known to the President of the Court of Appeal at the time, absent the duty, one cannot look at it as if disclosure had been made. That is the way the Court of Appeal has gone about their task, and I would encourage this Court not to do that because that does not seem to us to be an appropriate way to proceed in a case such as this, because it will encourage judges, may I respectfully say, not to disclose. Disclosure is an important and integral part of the process because it enables fair-minded persons to have brought before them the sorts of considerations which we have been discussing. In other contexts which I have referred to, the fact that no disclosure has been made is not allowed to be brought to account by fiduciaries who seek to say, "Oh, but the same thing would have occurred anyway".

So it is at that point, we say, we are entitled to argue that the judgment is voidable, merely because of the non-disclosure, and there is support for that view in that case of Commonwealth Coatings Corporation v Continental Casualty which is referred to in the Justice Merkel's decision at page 221 and I think the Court has a copy of it and - - -

KIRBY J: Is this the most recent pronouncement of the Supreme Court of the United States and on this topic?

MR DOUGLAS: It is the most recent one we are aware of, your Honour, and we have looked.

KIRBY J: Quite a way back.

MR DOUGLAS: Yes. If I could just go to the consideration of it by Justice Rogers in Najjar's Case - - -

GLEESON CJ: What is the reference, Mr Douglas?

MR DOUGLAS: It is in 25 NSWLR 224, and the Court should have a copy of it. We distributed it to them yesterday. He discusses the case - I will not read it out to your Honours - at pages 259 to 261. It was a situation in which the arbitrator had a business relationship with one of the parties and did not disclose it and the majority came to their view, as appears at the top of page 261:

notwithstanding the admission by petitioner's counsel that if he had been told of the third arbitrator's relationship he would not have objected.

Which is a not dissimilar concession to the one which has been made in this case. Now, if, in fact, we do not get up on voidability simply because of non-disclosure, we are entitled to have the matter looked at on the basis of a reasonable apprehension of bias. In that context - - -

KIRBY J: Can I just interrupt you? Did the Court of Appeal say anything in their reasons to the effect that the judge ought to have called the parties before him and said that, "This supervening event has occurred and it is not something that I could have anticipated; my mother has died and her shares have passed into - - -

MR DOUGLAS: Your Honour, there is the passage of Justice Winneke's judgment which I took the Court to at page 825, where he refers to the practice. He does not criticise the judge in that passage but it is clear from what he is saying there that he believed that the judge should have disclosed. At 853 at about lines 10 to 15, Justice Charles said:

When the learned judge became entitled to his mother's shares in the Bank, hindsight now suggests that his Honour should, with respect, immediately have informed the parties of this fact.

Your Honour, so far as that finding is concerned, we believe it to be kind because hindsight is not the only indication as to why he should have done it, having regard to the practice, and Justice Callaway said at the passage which I think was read out by my learned friend before at page 870 at about line 17:

Finally, and very importantly, this case does not raise for consideration the position of a judge who does not know or forgets that he or she holds shares in a company. It was not submitted that that was the position of the learned judge here. I do not desire, by the reservations expressed above, to cast any doubt on the protection afforded by a properly administered blind trust. As at present advised, I do not think that the beneficiary of such a trust is disqualified, however great his or her beneficial interest may be.

Other authority for a proposition that it is disclosure of itself which leads to avoidability of a decision is to be found in the speech of Lord Buckmaster in Sellar's Case [1919] UKHL 1; (1919) SC(HL) 19, which you have a copy of, and it is just after the passage on page 20 where he refers to a shareholding as distinct from a direct pecuniary interest in the outcome of a suit, and it is this passage where he says - this is from the foot of page 20:

The importance of preserving the administration of justice from anything which can even by remote imagination infer a bias or interest in the Judge upon whom falls the solemn duty of interpreting the law is so grave that any small inconvenience experienced in its preservation may be cheerfully endured. In practice also the difficulty is one easily overcome, because, directly the fact is stated, it is common practice that counsel on each side agree that the existence of the disqualification shall afford no objection to the prosecution of the suit, and the matter proceeds in the ordinary way, but, if the disclosure is not made, either through neglect or inadvertence, the judgment becomes voidable and may be set aside.

We would see that as being the correct principle to be applied in this case. If in fact your Honours are of a different view and feel that non-disclosure does not of itself lead to voidability we do rely upon what has been said both by Justice Kirby in another context and what was said by Justice Merkel in the Aussie Airlines Case, that the failure to disclose of itself can be one of the circumstances which together with others may give rise to a reasonable apprehension of bias. We would submit in this case, against a background where there is in fact an established practice of disclosure and the fact that the shareholding was not disclosed, the fact that the judge must had adverted to the fact that he was distributing the shares to himself whilst he was adjudicating upon this particular dispute.

These are all matters which properly can be taken into account by the Court in determining whether there was a reasonable apprehension of bias in this case and you would then determine the case on that basis if you were to come to a view that the principle which we have referred to of automatic disqualification flowing simply from a shareholding interest in one of the parties to the suit is no longer the law of this country, if it ever was.

GLEESON CJ: Would it have made a difference to the outcome of this case if the judge had simply deferred distributing the shares until after he had given judgment?

MR DOUGLAS: It would then not be a direct interest, would it, because Livingston's Case would suggest that he had no interest in the shares.

GLEESON CJ: I am simply testing the merits of bright line rule. If the answer is that it would have a made a difference at the outcome of the case, that seems to suggest that the bright line rule is rather silly.

MR DOUGLAS: Possibly, your Honour, but he does not suggest that the principle of disclosure is a rather silly one. It is quite clear that the bright line rule is an arbitrary rule and - - -

GAUDRON J: There is this difference, though, is there not, whilst the judge was still executor he and his co-executors might have decided to distribute them in specie to his brother in some form of arrangement between themselves.

MR DOUGLAS: He could have taken some other shares and not those shares. He could have given all of those shares to his brother. You will see - - -

GLEESON CJ: But your answer to my question was that he should have just done nothing for the time being, just waited.

MR DOUGLAS: He may have felt that he should disclose it, so when his mother died and he became the executor maybe at that point he should have disclosed that.

KIRBY J: That assumes he had the time to find out what the share portfolio was. His Honour took 17 months, was it, to decide this case?

MR DOUGLAS: He did, your Honour. He swore an - - -

KIRBY J: He obviously was very busy.

MR DOUGLAS: I am sorry, I am interrupting, your Honour. He swore an affidavit which was in evidence - and I can take the Court to it - which shows the portfolio of shares which the estate had - - -

KIRBY J: That was admitted in the Court of Appeal, was it?

MR DOUGLAS: Yes, at page 738 of volume 4 of the appeal book. That is the inventory produced and shown to Philip Mandie at the time of swearing his affidavit of 4 September 1996 and there you see the shares. In fact, what happened - there is a parcel of ANZ shares and there are parcels of other shares, and so he took, as we understand it, half of those shares and his brother took the other half.

GLEESON CJ: It really does not sound like a rule that is calculated to advance public confidence in the administration of justice if its effect can be avoided by the vices and stratagems.

MR DOUGLAS: Your Honour, it may be therefore that one which would more inspire public confidence in the administration of justice which requires disclosure of facts that might found or warrant a bona fide application for disqualification as distinct from facts which the judge himself might perceive to be able to give rise to disqualification.

GLEESON CJ: If there is a duty of disclosure in relation to the wider principle of reasonable apprehension of bias, it of course extends far beyond financial matters.

MR DOUGLAS: It does, your Honour. As a passage from Aussie Airlines points out, gives a number of useful examples at page 222:

Personal acquaintanceship - - -

GLEESON CJ: Personal enthusiasm.

MR DOUGLAS: Yes:

financial and business dealings.....shareholdings in a litigant by a judge's spouse -

but the reference there is to the Industrial Court Case Justice Callinan referred to. Dealing with that situation because it is one which has been raised by the Court, I understand the trepidation which some of your Honours may feel in inquiring about your wife's shareholding portfolios.

GLEESON CJ: I was trying to move away from financial matters. We all know that if a judge marches up Macquarie Street next Sunday in a crowd of people who are carrying banners protesting against the government's refugee policy, most people would be surprised to see the judge sitting on a refugee appeal on the Monday.

MR DOUGLAS: Yes.

GLEESON CJ: What if instead of marching in the group the judge had watched it on television and said, "I strongly support those marchers". Should the judge disclose that?

MR DOUGLAS: If he gets on television and says that?

GLEESON CJ: No, if the judge says to himself or if the judge says to his wife, "My personal sympathies are strongly in support of those protesters". When the judge comes to sit on the refugee case on the Monday, should the judge disclose that?

MR DOUGLAS: Your Honour, it must always be a question of fact and degree, but what if, for example, a judge were going to sit on a medical negligence case and the medical negligence case concerned a person who had one good eye and had lost the sight of the other eye as a result of the alleged negligence of a surgeon, and the judge himself had only one good eye and felt that possibly if he were to sit on that case he may not bring an entirely impartial mind to bear upon it. He could in those circumstances simply decide not to sit.

GLEESON CJ: But the whole idea of our test is not to leave it to the judge to have to decide that. That is why we have the objective test. So you tell me. In a case of that kind where the judge only had one good eye, would a reasonable bystander apprehend the possibility that the judge would not bring an impartial mind to bear?

MR DOUGLAS: Your Honour, that is a possibility.

GLEESON CJ: So, the judge should disclose that he only had one eye.

MR DOUGLAS: Yes, your Honour, but often what happens is that judges choose not to sit.

McHUGH J: Take the Anti-Discrimination Tribunal. There are, sitting on that Tribunal in New South Wales, at least one, perhaps more people, who suffer from significant physical disabilities and may sit on cases, as I think one has in recent times, where a school has been involved catering for persons of disabilities. Now, is that member automatically disqualified for that reason, for the reason that he, himself, has a disability?

MR DOUGLAS: Your Honour, it may, in some circumstances. It must be a question of fact and degree. What, for example, if a judge in the past has had a relationship with a barrister and, let us say 20 years ago, who is appearing before him, is that fact to be disclosed? It must be a question of fact and degree. Obviously if your relationship is a current one, as it was in Kennedy's Case, one would believe that it should be disclosed. It ultimately comes down, and it is always hard to draw a bright line, but it must be a question of fact and degree and how the judge, himself, feels it will affect his judgment in the matter.

GLEESON CJ: There are metaphorical as well as physical ways of having only one eye.

MR DOUGLAS: Yes. Nelsonian blindness, your Honour.

GLEESON CJ: Your proposition, as I understand it, is that a judge must disclose any circumstance that could lead a reasonable bystander to apprehend a possibility or a risk of partiality.

MR DOUGLAS: Your Honour, I like the test as formulated by Justice Merkel at the foot of the page, which I have read out several times and will not read again. It really is an association with the subject matter of the suit, as we would see it. Now, how wide that concept is, I think it really must be a matter, ultimately for - it is a question of fact and degree. I do not have to address all of these examples because I am dealing with a shareholding interest which is not insubstantial, in our respectful submission, and it is the nature of an interest which has traditionally been regarded as the type of interest which needs to be disclosed, and was at the time a settled practice, as we understand it, of the Victorian Supreme Court judges to disclose their shareholding interest.

So, we are seeking to examine what the width of the principle is, but it would seem to me that the width of the principle can be expressed as being that of association with the subject matter of a dispute and one should err on the side of disclosure, rather than non-disclosure, because that will promote the integrity of a judicial system and it will mean that if problems do arise in the future, you will not be confronted with too many applications for saying that a decision is voidable because of a non-disclosure of an association with the subject matter of a suit.

There is only one other matter that I want to deal with and that is the question of necessity. So far as necessity is concerned, an argument which has argued against us, there are many judges on the Victorian Supreme Court who could hear this matter. It is said that one of the major witnesses for the ANZ Bank has died. We have told the court that we would let his evidence be admitted into evidence, in the event that this matter were to be re-tried. The principles of necessity are not a principle of convenience, and that flows as we would see it from the Builders Licensing Board Case, Law's Case and Justice Kirby's decision in Spedley's Case at the Court of Appeal level in New South Wales. And this is not a case in which it is necessary that the matter to which the doctrine of necessity applies.

KIRBY J: The page you referred us to in the appeal book was the transcript of an application for the reference of the matter by Justice Mandie to the Court of Appeal of Victoria. You said an affidavit had been sworn by his Honour. Is that correct?

GUMMOW J: It is a probate affidavit.

MR DOUGLAS: A probate affidavit. I took your Honour to the inventory of the - - -

KIRBY J: I misunderstood you. His Honour did not swear an affidavit in these proceedings at all?

MR DOUGLAS: No, your Honour. He made a statement from the Bench which, I think, your Honour has and your Honour has seen that.

KIRBY J: Yes, that is in the transcript beginning at 741 and following.

MR DOUGLAS: And then what happened in relation to that is that I came down to argue that application.

KIRBY J: Yes, I see that.

MR DOUGLAS: He wished to refer it to the Court of Appeal. The Court of Appeal said he should decide it himself. He then decided it effectively without argument at a later stage and then it went up again. He just basically dismissed our application. There is an affidavit which has not been reproduced.

KIRBY J: Was this before the court below?

MR DOUGLAS: Yes, it was, your Honour. The affidavit of Sergio Guerra in relation to his Honour's subsequent conduct of the matter and also the transcript of the argument before his Honour in relation to that application, which are items 74 and 77 in the appeal book index which are referred to as being not reproduced. We would wish to give your Honours the benefit of that material because it seems to us the way in which his Honour handled the matter subsequently is also a matter which your Honours could take into account on the question of reasonable apprehension of bias because, having had the matter referred back to him by the Court of Appeal, he did not really give us, in our respectful submission, an opportunity for substantive argument and just basically went ahead and dismissed it.

KIRBY J: He did that, presumably, because he knew you had a right of appeal as of right.

MR DOUGLAS: That may be so, your Honour.

KIRBY J: But he does say at 755 at the top of the page:

This application places me in an invidious position -

and I suppose you are entitled to say that is an invidious position - - -

MR DOUGLAS: That he put himself into.

KIRBY J: It should not be entered.

MR DOUGLAS: As your Honour's judgment in Najjar points out, and I think a number of other decisions of the New South Wales Court of Appeal, these are matters which should be determined by the judge before whom the application for disqualification is made because they are the ones - - -

KIRBY J: How long was the trial in this matter?

MR DOUGLAS: Eighteen days, your Honour.

KIRBY J: It does arm a party with a very strong weapon. I am not saying as between these parties, but if you raise at a very late stage by supervening events that no one could have anticipated, because I think it is fair to say this case was, it puts a party in a very strong negotiating position if we are looking at practicalities.

MR DOUGLAS: Your Honour, if we are looking at the practicalities of the matter, there was a practice and his Honour did not adhere to it. If it please the Court.

GLEESON CJ: Thank you, Mr Douglas. Yes, Mr Beach.

MR BEACH: Your Honours, there is only one Australian test. It is the reasonable apprehension of bias test. The so-called Dimes' rule derives from the maxim that a judge should not sit in his own cause. That maxim exists to avoid bias or the appearance of bias. That objective is what underlies the reasonable apprehension test. Your Honours referred to metaphors of circles yesterday; if there are two circles, they are concentric circles. Everything covered by the Dimes' rule should be embraced by the reasonable apprehension of bias test, and there is no independent - or should be no independent operation of the Dimes' principle outside the reasonable apprehension of bias test.

KIRBY J: You say that is the law, but if one looks at the case in about 1914 - I forget the name of it - and Justice Deane's reference to Dimes in Webb, there do seem to have been a number of observations which have assumed that Dimes, or whatever it says, is part of the common law in Australia.

MR BEACH: You could only put it as highly as observations. In each of those cases, it is our submission, that the observations were obiter and not necessary for the decision in each of those cases. In Webb v The Queen the observations of Justice Deane were obiter, he was in dissent on other aspects of the matter, but whatever be said about that, his observations were obiter. In the decision of Dickason v Edwards only Justice Isaacs cited Dimes at page 259, and he cited that as support only for the proposition that one disqualification is pecuniary interest. So not even the per se Dimes' rule that the appellant submits. In any event, if one looks at Dickason v Edwards, it was not a financial interest case.

The other two cases - the Bank Nationalisation Case; there was no direct pecuniary interest on the facts, and in The Queen v Watson, where reference to Dimes was made in the majority judgment, that was not a direct endorsement of the Dimes' rule. It cited Dimes, but after a broad proposition to the effect that a judge may not sit in a cause in which he has an interest. So if one looks at the four High Court authorities that have dealt with it, it is hardly compelling authority for a Dimes' rule, whatever that might be, so far as Australian law. But, if I am wrong in all of that in terms of what the position ought be today, there is no reason in principle why there should be a Dimes' rule that has any independent, or additional, scope beyond the reasonable apprehension of bias test.

GLEESON CJ: Mr Beach, there used to be, and for all I know there still is, a statutory provision in New South Wales to the effect that the judge who is a ratepayer in a municipality was not, as a result, disqualified from sitting in a case in which the municipal council was a party. That is a particular illustration of what I would take to be the Dimes' test at work.

MR BEACH: Yes, and, in fact, there is some English authority that refers to disqualification that would ordinarily follow absent a special legislative provision of that type.

GLEESON CJ: I would like to be satisfied that the "reasonable apprehension" test does, in practice, cover everything that was covered by particular rules like that one.

MR BEACH: If you take the "reasonable apprehension bias" test, it has a number of advantages beyond a direct pecuniary interest-type rule, the sort referred to in Dimes. First, you do not have to worry about the distinction between direct and indirect nor do you have to worry yourself with what is meant by the expression "direct". You do not have to concern yourself with extensions of the type dealt with in the Pinochet decision. You do not have to work out whether there is a de minimis exception, and if there should be to such a rule, what that de minimis exception means. You also, in terms of the "reasonable apprehension" test, take into account the judge's knowledge of his interest.

Those who propound this automatic rule say that the judge should be disqualified, even though he might not know at the time, of his interest. That is the literal formulation of the rule - are put forward by the appellants which makes little sense. How could it be said that there is an appearance of bias, in terms of what a judge is doing, if he has no knowledge of his interest? He might not have any knowledge because he might invest in a superannuation fund or a managed investment fund, and it makes little sense to have a rule that requires disqualification where the judge knows nothing about the interest or the impact of the litigation on the interest.

GLEESON CJ: The assumption that a blind trust is a solution to a problem like this involves the proposition that if the judge does not know of the interest then the reasonable bystander knows that the judge does not know of the interest.

MR BEACH: That is exactly right. The "reasonable apprehension" test gives you the flexibility to consider the question of knowledge or lack of knowledge of the judge in terms of his interest. The automatic Dimes principle does not give you that flexibility at all.

KIRBY J: I realise the force of that but what is put is that there is a germ of an idea which is different in each of these two tests and the one - it is the judge who is sitting here and the person in the back of the court does not like it, and the other, the judge is, in effect, sitting there, on one side of the Bar table because he is, as it were, a participant in the cause of a litigant, and that it is a different conceptual foundation, the - - -

MR BEACH: We take issue with that. We say that the only person who is important in the room is the reasonable bystander. We say it is his perception that is the all-important thing, not whether the judge has an interest in the case that he knows nothing about. If you are talking about apprehension of bias, it is the apprehension of the reasonable bystander - no more and no less than that. That is why our test is much more flexible than the English test which talks of real danger.

KIRBY J: I realise that, but the argument against it is that it is more flexible because it is softer and that there is a point - the principle of international law is the judge shall be professional, impartial and independent. The question is: it is not "the judge shall be professional at the appearance of impartiality and be independent" but is "be impartial". That has the element of appearance, as Lord Heward acknowledged, but it also has the element of reality, of non-involvement.

MR BEACH: Our submission is that the question of independence or perceived independence is under the umbrella of avoiding bias or apprehension of bias. That is the ultimate objective and, as Justice Thomas said in his publication on judicial ethics:

the distinction between possession of an interest and the question of impartiality has outlived its usefulness.

We have handed the Court a copy of the relevant extract. It is Justice Thomas, "Judicial Ethics in Australia", page 54, footnote 17. So he certainly seems to take the view that at the end of the day possession of an interest is only one means to get you to a demonstration that there is a lack of impartiality, but it is the lack of impartiality that is the key issue. That is why I say you have concentric circles. You do not have some independent operation of Dimes beyond bias or apprehension of bias.

Similarly, in a New Zealand Law Journal article that followed Pinochet, that is the article of Caldwell which we have also provided to the Court, he describes the matter on page 104 in the second column, about point 1 on the page:

And, although never expressly stated, the assumption behind that automatic disqualification must surely always have been that that type of interest would have such a potent impact on the capacity of a decision-maker to determine the dispute in a detached and impartial manner that it would be otiose to go through the motions of applying any of the designated tests.

GLEESON CJ: Whereabouts on the page is that?

MR BEACH: That is the second column on page 104, about the fourth line.

GLEESON CJ: Thank you.

MR BEACH: Then a bit further down that column he refers to Lord Campbell's endorsement that Lord Cottenham could not have been actually biased by the holding of his interest, and he said at about point 4 of that column:

That attestation to the detachment of Lord Cottenham, supposedly both in reality and in the public perception, may, as Lord Woolf commented in Gough, have been comforting to the Lord Chancellor; but unless it could be maintained that Judges or administrators are entirely divested of human responses, it is probable that they are as prone to being subconsciously influenced by a material financial benefit as their fellow men and women.

Then towards the bottom of that paragraph, he says:

In other words, if an interest is of such a nature that it requires automatic disqualification, it is surely a little previous to contend that an actual, if subconscious, bias or leaning of the mind could not have been present.

Now, we submit that Lord Cottenham would have been disqualified under the reasonable apprehension of bias test. We submit that Lord Hoffmann in Pinochet would have been disqualified under the reasonable apprehension of bias test and that any automatic rule and the objective and the purpose for that automatic rule is wholly overlapping or wholly a subset of the objective which founds the reasonable apprehension of bias test. Of course, in the decisions of Clenae Justices Winneke and Justice Charles at paragraph 3, 31 and 61 and also in Ebner at paragraphs 36 and 37, their Honours express doubts about whether there should be such a separate rule although they - - -

GLEESON CJ: Part of the unattractiveness of the automatic disqualification rule is that it is so capricious in its practical operation, particularly when you bear in mind the level of sophistication at which financial interest may be held or arranged.

MR BEACH: Precisely. Your Honour has asked on a number of occasions, "What does `direct' mean?" None of the cases tell you precisely what "direct" means. All of the cases appear to deal with shares in a party or, in the Auckland Casino Case, shares in a holding company the 80 per cent subsidiary of which was the beneficiary of a casino licence but once you move beyond being a party or having shares in a party you are into the unknown so far as the concept of "direct". One interesting academic discussion of what directness is was provided by Allison in his article, "A process value analysis of decision-maker bias". That was an article that my learned friend Mr Bigmore referred the Court to. If you have a look at that article on page 516 - - -

GLEESON CJ: What is the reference to that?

MR BEACH: It is "John Allison, A process value analysis of decision-maker bias: The case of economic conflicts of interest" and it is reported in the American Business Law Journal, volume 32, and it is referred to in paragraph 4 of the appellant's reply submissions. At page 516 of that article he talks about what the concept of directness means and he says:

Included in the concept of directness are several interrelated factors; (a) as perceived by the decision maker, the probability that the decision actually will have an impact on the decision maker's economic interests.....(b) if such an impact is to occur, the time that probably will elapse between the decision and the impact on the decision maker's economic interests; and (c) the number of steps in a chain of events through which the decision's impact must pass before affecting the decision maker's economic interests.

Now, once you start talking about "direct" or "directness" in those terms you instantly, in our submission, create a false debate. Why have an automatic rule and then contentious discussion about what "direct" means when you do not need to have such a debate? You have the reasonable apprehension of bias test. It has within it the flexibility to deal with directness in many of the different ways it might arise and that is a further reason why if there was an automatic Dimes rule it is not something that should survive the reasonable apprehension of bias test.

Similarly, as I said, you do not need to concern yourself with the Pinochet extension, a de minimis exception. You do not need to concern yourself with the illogicality of disqualifying a judge when he does not even know of his interest. You avoid codification problems of the type that exist in the United States and Thomas, in that article that I referred the Court to, basically referred to the US attempt to codify these various criteria as something which bamboozles, rather enlightens. He said as much on page 55. Now - - -

GLEESON CJ: I can assure you that it is not only in the United States that that problem has been encountered.

MR BEACH: Yes. Also, when you are talking about a rule, direct financial interest in the outcome, you do not really mean that at all. You mean the possibility that the outcome could impact on direct financial interests, whatever that means. So you still have questions of possibility and uncertainty, but they are the same sort of questions that arise in the reasonable apprehension of bias test. So, if you are talking about a rule, it is a rule which lacks certainty. It gives rise to false issues, and on the very narrowest formulation of the rule, namely that a shareholding in a party per se automatically disqualifies, you are talking about a rule that has little, if any, logic.

GUMMOW J: What do you say about Lord Cooke's criticism in Auckland Casino that there is no real difference between the reasonable apprehension of bias and the real risk test?

MR BEACH: We disagree with that entirely, and - - -

GUMMOW J: It is taken up in this article you took us to.

MR BEACH: Yes, and Pinochet is a good - - -

GUMMOW J: Page 106.

MR BEACH: If you look at Pinochet, none of the counsel in that case argued for an extension of the Dimes' rule. If you look at the authorised report and you look at counsel's arguments and then you see how counsel's argument are reproduced in the judgment, they all talked about the real danger test. The House of Lords avoided dealing with that by finding in it a Dimes' extension, and we say they did that because they did not want to apply the real danger test because of the sensitivity that real danger test might have had in terms of Lord Hoffmann. This is not a novel idea either because if you look at what, I think it was, Justice Deane said in Webb's Case - - -

GUMMOW J: Yes, I know, but what Lord Cooke is saying is once you attribute to the reasonable bystander a certain amount of specific awareness of the situation, you are doing no more than applying a real likelihood test. That seems to be what his criticism is.

MR BEACH: The real danger test has at its foundation, as we understand it, the idea that the judge personifies a reasonable man, so if the judge forms a view about something, then the reasonable man would hold the same views of the world. We say that that is not right. The reasonable bystander is less sophisticated than the judge. He knows less than the judge. It is much more an appropriately targeted test to look at the reasonable bystander and his possession of some knowledge but a lack of sophistication. It is not appropriate to apply a real danger test where it is the judge who is deciding whether there is the possibility of bias.

McHUGH J: Yes, in Webb Chief Justice Mason and myself said that with the "real danger" test the court applies its view of the facts and in the "reasonable apprehension" test it seeks to apply what the bystander's view of the facts would be and, at least for my part, I think there is a real difference between the two tests.

MR BEACH: There seems to be something associated with the "real danger" test in the sense that - as Justice Deane explained in Webb at page 72:

In contrast, the real danger test is focused upon that very question -

which is bias -

Regardless of an appellate court's care to make plain that its finding is only one of possibility of danger, such a finding is likely to be unfairly damaging to the reputation of the person concerned - - -

GLEESON CJ: Conversely, is it part of the difference between the "real danger" test and the "apprehended bias" test that built into the "real danger" test is an appreciation of the personal qualities of the judge?

MR BEACH: Yes, if the judge is deciding his own state of mind he is possessed of more knowledge than the reasonable bystander could ever be possessed of.

GLEESON CJ: I may be revealing my lack of acquaintance with the "real danger" test by asking this question, but built into the "real danger "test is there an element of regard for the individual integrity of the judge?

MR BEACH: If the judge is deciding whether there is a realistic possibility that he could be biased, that must be built into his consideration.

KIRBY J: Normally this comes up on appeal or review. I suppose at first instance you could put it to the judge.

MR BEACH: Yes.

KIRBY J: But most of these cases are cases where a Court of Appeal has a look at it.

CALLINAN J: Did not Sir Anthony Mason write an article, after, I think, I gave my decision in the Hindmarsh Island Case, in which he suggested that questions of apprehended bias should perhaps, or could perhaps, be better decided by a person other than the one in respect of whom the challenge is offered? I must say that it seemed to me that a number of things that he said were very hard to contradict.

MR BEACH: Yes.

CALLINAN J: All the "apparent bias" points are laid out and they should be laid out by counsel and by the judge and then the decision can equally well be made and made more apparently impartially by some other judge or judges.

MR BEACH: That is right, given that we have a test that the primary judge can apply. At least, if he can apply it in terms of reasonable apprehension, he does not have to worry about finding that he himself has put himself in a position of a possibility of danger.

CALLINAN J: Why cannot that be equally well decided by another judge that the challenge is made or the suggestion is made to a judge that there may be an apprehension of bias? The facts to support that submission are stated, usually by agreement and, indeed, they are usually uncontroversial. The judge may or may not have something to add, that we are only dealing with an apprehension of bias. You have, in the nature of a clear stated case, why cannot and, indeed, why should not that be better decided by another judge or judges?

MR BEACH: The answer is it would be better decided by another judge but, practically, people need decisions on the spot and to proceed with litigation rather than worrying about delays in procedure and that sort of thing that might follow such - - -

CALLINAN J: It usually does not take very long to go down the corridor and get another judge.

KIRBY J: That is not always so. In cases that I have sat on the in the Court of Appeal, you are in the middle of a very busy list and somebody gets up and often the litigant, in person, makes some sort of challenge and it has to be dealt with quickly. If you were standing it over to another court, that could mean it would go over to another day and that could involve cost, inconvenience, and maybe injustice to the particular parties.

MR BEACH: You might find one of the parties just using that frivolous application as a means of delaying the proceeding whilst - - -

CALLINAN J: Does anybody have that article, by the way, that I mentioned?

MR BEACH: We do not, no.

CALLINAN J: It is only fairly recent.

McHUGH J: Mr Beach, in Webb, the trial judge had in fact applied the "real danger" test and held that there was no ground for imputing bias or danger of bias, but at page 54 of the report Sir Anthony Mason and I said:

If the learned judge had applied the reasonable apprehension test.....it is by no means certain that he would have reached the same conclusion -

and we examined the matter for ourselves.

MR BEACH: In our submission, one of the strongest indications that there is some substantive difference between the two tests is the way the House of Lords dealt with Pinochet - by reluctance to apply their test when both counsel had put submissions on the basis that the real danger test should be applied - - -

KIRBY J: But would it not be fair to say if you read Pinochet and you read Locabail, Lord Bingham's opinion in Locabail in which Lord Booth took part, that the English are now on a journey to a test something like our test, but they have not yet abandoned the real danger test?

MR BEACH: Yes.

KIRBY J: If you read what Lord Bingham said in Locabail it does seem to indicate that he acknowledged most relevantly to the English courts that the "real danger" test, as expounded in England, is probably inconsistent with the jurisprudence of the European Court of Human Rights, which creates difficulties in England because it can then lead to another nasty case in Strasbourg.

MR BEACH: Yes. Well, it certainly appears that the English are moving that way, although Reg v Gough was certainly - - -

KIRBY J: That is long before Locabail and Pinochet.

MR BEACH: In Pinochet they avoided dealing with that. In fact, they expressly eschewed dealing with that and extended an automatic rule without any discussion of the necessity to extend the automatic rule and without any reference to what Lord Woolf said in Gough's Case which was that there should not be any automatic extension unless there is a very good reason.

GUMMOW J: Part of the trouble in Gough was that the House of Lords was not referred to the earlier decisions of this Court, which is pointed out in the argument in Pinochet [2000] 1 AC 122. Now, there is a reference there also to a subsequent New Zealand case subsequent to Webb of B.O.C. New Zealand in 1997 in which it said the New Zealand court has shifted tack and is now following Webb. Have we been supplied with those?

MR BEACH: No, your Honours have only been supplied with the Auckland Casino Case.

GUMMOW J: Yes, I know. But it is later than that, you see.

MR BEACH: Yes.

GUMMOW J: Well, perhaps we should be. The citation to it is found in [2000] 1 AC 122. If the House of Lords can be referred to it, it seems a bit strange we are not on the other side of the Tasman.

MR BEACH: We have only referred to the direct pecuniary interest case of Casino, but we can supply a copy of that.

GUMMOW J: Yes, I understand.

KIRBY J: A slightly disturbing, or troubling, consideration is that both in Canada and in South Africa they appear to still apply the Dimes principle. Is that a correct impression that I have or not, that it is a special category?

MR BEACH: They seem to apply it but they apply it in the way that Justice Charles described it in Cleanae which is a direct financial interest in the outcome as a matter of substance, rather than disqualification for a shareholding in a party per se. So, we say if there is a Dimes rule of the type expounded by Justice Charles in Cleanae, supported in Dovade, supported also in Locabail, that rule has also been followed in that way in other jurisdictions.

Can I finish off my submission dealing with the automatic rule. We take issue with the proposition that Dimes ever stood as authority for the proposition that a shareholding per se in a party is disqualifying. We say Dimes never said that. We say Smith never said that. And the only judge who seems to have said that recently is Lord Goff in Pinochet at page 137 - and we submit that he was in error - and Dovade at paragraphs 80 and 82 also indicate the view of the New South Wales Court of Appeal that Lord Goff was probably in error in the way that he formulated the Dimes principle, if there is one.

There has been a lot of cases referred to by the appellants, both in England and in Australia, that they say are applications of the Dimes rule in its narrow sense. We say when you properly analyse each of the cases, they fall into the following types of categories. The vast majority of them do not deal with shares in a party type scenario, so they provide no support for the per se rule; or they expound the more general principle of an interest in the outcome, rather than disqualification for a shareholding per se; or where there are cases that do appear to be an endorsement of the Dimes per se rule, the facts of those cases do not tell you whether the shareholding could or could not have been affected by the outcome. There is not enough in the facts stated in each of the reports to determine that question.

Also, there are some cases which were criminal cases, such as the railway ticket prosecution cases, which are not really Dimes cases at all because, of course, in a criminal case there is not going to be any direct pecuniary interest in the outcome involved. So when you properly read all of those cases, we say they provide little, if any, support for the Dimes per se rule.

We have provided to the Court a schedule of all of the cases that have been referred to in the written submissions of the parties. I will not take you through it, but it may be a convenient summary for the Court of which cases were interest in a party, which cases involved other types of alleged pecuniary interests, and which cases involved non-pecuniary interest situations. It may be a useful reference, but I am not going to take your Honours through that in any detail at this stage.

If there is an automatic disqualification rule of the type expounded by Justice Charles in Clenae, where you need to establish the prospect of possibility factually that the interest could be affected by the outcome, we say that the appellant must fail. In our case there was no evidence demonstrating any risk that the price of shares or dividends would be affected by the outcome. That was what was necessary to be established. Can I give the Court references to Clenae: at paragraphs 57 and 62; Dovade at page 197; and Ashton v Prentice at paragraphs 28 and 9.

Mr Bigmore in his submission said that the matter was in doubt as to whether the shares could be affected by the outcome. We say that was not a submission that was put to the primary judge. If you look at the appeal book at page 12 between lines 16 and 35, his Honour made his disclosure of his indirect interest in ANZ shares and said at line 30:

It seems to me that the issues before the court this morning are such that they could not in my opinion impact in any significant way on the share price of the ANZ Bank -

Now, it was not then said by counsel for the appellant, "Hold on, your Honour, there's still a doubt. We need more information. We need to get the balance sheet of the ANZ Bank. We need to consider also what percentage your shares were in the issued capital." It was just never followed through and we say that given that position it is not really open to the appellant to say to this Court there was a doubt about whether the outcome could have affected the interest, therefore the rule applied.

The other aspect about our case, too, is that the judge's interest was indirect. He was not even a shareholder in the ANZ. He was a beneficiary under a family discretionary trust. His only right was equity as a beneficiary to ensure that the trustee complied with the terms of the trust deed so he had an indirect interest in ANZ shares. The ANZ was an indirect beneficiary in the sense that the ANZ was not a party to the proceedings and we say whatever else you say about the judge's interest, it was indirect so on any formulation of the Dimes' rule, whether the per se rule or the rule as expounded by Justice Charles, we say that it did not apply in the present case.

GLEESON CJ: It would be a great testimony to the bright line rule if we applied it to these two cases with different results.

MR BEACH: Yes. Our point is there is no such thing as a bright line rule. The fact that we are here debating, the fact that there has been so much debate about what Dimes stands for indicates that there is no bright line rule and we say that the "reasonable apprehension" test should be applied. Whether that gives rise to different results in the two cases, it is not my position to make the submissions about it. We just say that if you apply the "reasonable apprehension" test to our case, the appellant must lose because the appellant conceded before the Full Court that the "reasonable apprehension" test was not satisfied by her in the present case.

McHUGH J: Mr Beach, in this schedule you have handed to us, the reference to Vakauta v Kelly, I think it is accurate as far as it goes. It could perhaps be a little misleading because if I recollect correctly, in that case, the Court went on to hold that by reason of what the judge said in his judgment he, in effect, reagitated the views that he had expressed in evidence or during the evidence and there was held to be a reasonable apprehension of bias sufficient to set aside the verdict.

MR BEACH: Yes. The reference to waiver may be to Justice Dawson.

McHUGH J: I think your point is right on that particular point just standing alone but it was what appeared in the judgment, I think, from recollection that swung the matter.

MR BEACH: Yes.

McHUGH J: Anyway, it has been noted.

MR BEACH: Now, it has been said by the appellant that there are practical difficulties in applying the Clenae formulation. We say there are none. There were certainly no difficulties in our case. It was never suggested before Justice Goldberg that there were difficulties or that there had to be some investigation. His statement was made and it was not taken further. If there is to be some investigation, so what. There are lots of cases that required investigations to be made. Gascor v Ellicott is a very good example and we have given your Honours a reference to that. It is caseNo 21 in our list of authorities.

It is nothing unusual that some cases might require an investigation. That is no reason why there should be an automatic disqualification rule for direct financial interest. The appellant has referred to the article of Cranston, "Disqualification of judges for interest", where he says that there are practical problems in requiring a person seeking disqualification to show some realistic possibility of the outcome of a case affecting interests. We say that there are no practical problems. He also makes a reference at page 242 of his article to a case of Jones v American Central Insurance which he cites as authority for the proposition that a judge owning shares in a creditor was a disqualifying circumstance in that case.

We have handed the Court a copy of that case. If you read it carefully the judge in that case was also a vice-president of the bank so that is not really a case that is authority for the proposition cited by Cranston. Now, in terms of the question of "direct" and "indirect", we have made our submissions. Can I just make some observations about the Auckland Casino Case which is No 9 in our list of authorities - - -

KIRBY J: Do we really have to get into the detail? It is a case that apparently has been overtaken. It applies a different test to the test which we apply for apprehension of bias. It just another case.

MR BEACH: Yes. We would say that there is no discussion of what "direct" or "indirect" meant. There was a waiver argument, anyway, and delay argument that was sustained. So, in a sense, the observations about disqualifying interest do not carry very much weight. In any event, the shares were sold before the decision.

Now, can I make some brief submissions about the fact that there should be no extension to the automatic rule, if one exists. We would adopt the reasons of the Full Court at paragraphs 46 to 51 in Ebner, that there should be no extension of the Dimes' rule. They make a number of points: that if you extended the rule, then the rule would apply to a judge holding shares in a creditor corporation owed small amounts; second, that it would be difficult to identify the creditors, but the judge would have to identify all, and this would be onerous; third, that the very point of requiring a direct pecuniary interest is to avoid the practical difficulties resulting from an over-broad rule; and, fourth, that a test which turns on whether a non-party corporation might obtain a benefit is uncertain in its application and would create practical difficulties where it might not be possible to identify the creditors.

Now, we have dealt with that in more detail in paragraphs 3.17 to 3.22 of our written submission. We say other authority that supports the proposition that there should be no extension is provided by Lord Woolf in Reg v Gough at page 673. He says "it would immediately create uncertainty as to what are the parameters of that category" if there were to be an extension. His observations were approved of by Justice Deane in Webb v The Queen. They are agreed that there should be no extension. Justice Deane said that at page 75 and also in Locabail, at paragraph 14, the Court of Appeal agreed that there should be no extension.

So far as Pinochet is concerned, we say that, as far as counsel in the case were concerned, it was not argued that there should be a Dimes' extension. If you look at the arguments in the authorised report at pages 122 to 123, 129 and 131 to 132, counsel only argued the real danger test.

GUMMOW J: Yes, that is right.

MR BEACH: When you look at what was said about the desirability of extending the Dimes automatic rule, you will see that there is nothing in the judgment of Lord Browne-Wilkinson talking about the whys and wherefores of such an extension. At page 135B, all he said was:

there is no good reason in principle for so limiting automatic disqualification.

He does not even discuss what Lord Woolf said in Gough's Case. It is also interesting to note that Lord Goff in the Gough Case supported Lord Woolf in Gough in saying that there should be no extensions. Yet, when we come to Pinochet, Lord Goff agreed that there should be an extension but did not refer back to what Lord Woolf had said in Gough's Case, or what he Lord Goff had said in Gough's Case adopting what Lord Woolf had said, that there should be no extension.

So, when you look at Pinochet, the discussion is completely silent about the desirability or not of extending the automatic rule. We say that it really provides little authority for extending Dimes and should be considered as an exceptional case, to use the court's own language at page 134. We say that, on any view, Lord Hoffmann would have been disqualified on a "reasonable apprehension of bias" test.

GLEESON CJ: How long do you expect to require, simply?

MR BEACH: Five minutes. In terms of the duty of disclosure, the appellant took you to what Justice Merkel said in Aussie Airlines but did not make any reference to what Justice Ormiston said in Gascor v Ellicott, which is case number 21, at pages 355 to 6 and 360 to 361, where he basically said that although it might be a counsel of prudence to disclose potentially disqualifying facts, he thought if you were talking in terms of a duty to disclosure you really did not have a duty to disclose anything other than what would be disqualifying, absent waiver, consent or necessity. He also, on the facts of that case, rejected the notion that a failure to disclose something potentially disqualifying that it was not actually disqualifying provided grounds for the application of the reasonable apprehension of bias test.

So, there is a difference in approach between what Justice Merkel said in Aussie Airlines and what Justice Ormiston said in Gascor v Ellicott. Justice Ormiston's observations in Gascor v Ellicott were followed by the New South Wales Court of Appeal in Dovade at paragraphs 104 to 105. Can I make reference to one final matter and that is section 34 of the Crimes Act. The Court should have a copy of that. Section 34(b) applies to federal judges and talks about an offence being committed if federal jurisdiction is exercised:

in any matter in which he has a personal interest;

So a few observations. We say that is essentially the Clenae position, that you are talking about a personal interest in the matter. We say, also, that the Court should be very careful about applying an automatic rule in terms similar to what this section envisages and there is no interpretation of the expression "personal interest" and, of course, we have not found any cases that deal with that section directly. Those are the only matters.

GLEESON CJ: Thank you, Mr Beach. Yes, Mr Jackson.

CALLINAN J: Just before you begin, Mr Jackson, that article by Sir Anthony Mason is in the Constitutional Law and Policy Review of 1 and 2 August 1998.

MR JACKSON: Your Honours, may I say one thing before commencing. There is some discussion about the word "recuse". It is, I think, a word one sees used in the early Privy Council decisions removing a judge in Tasmania.

KIRBY J: Usually these funny words that the Americans used have a very long and old history. It is like a time capsule, a frozen vocabulary.

MR JACKSON: Yes, your Honour, I may perhaps be confusing that with commentary upon those cases, but I think that is the position.

Your Honours, could I say, first of all, we adopt the submissions made by my learned friend Mr Beach. I just wish to say a number of matters in relation to them and then move on to two other aspects of this case. Your Honours, a starting point, of course, in this case is the fact that as was referred to by Justice Charles at page 836 in volume 4, lines 12 to 15, this is the passage different from the one referred to by your Honour Justice Hayne earlier, it was accepted that any verdict in the proceedings could not have affected the value of the shares. Your Honours, no wonder, if one looks at the relevant figures which are set out at page 835 in paragraph 28 of the reasons. The value of the shares was under $30,000 when judgment was given and the bank's net assets were recorded as being nearly $7 billion. In terms of numbers of issued fully paid shares, the percentage held was , your Honours, .0001559 per cent.

Your Honours, could I move then to say something about Dimes and it is this: too often, in our submission, the actual result in Dimes has been treated as representing the principle. Your Honours, if one goes to that case one sees that the test adverted to by Lord Campbell in 3 House of Lord Cases at page 315 in the English Reports is where he looks at, your Honours will see in about the fourth or fifth line:

influenced by the interest that he had in this concern -

and then on the next line:

a judge in his own cause -

and the next line:

but applies to a cause in which he has an interest.

And then a few lines further down:

because an individual, who had an interest in a cause, took a part in the decision.

Your Honours, in so far as it is possible to derive a principle from it, what is being spoken about is the interest in the cause and you will see that is treated as being something almost synonymous with interest in the concern.

Your Honours, the cases, in our submission, demonstrate that the relevant interest is the interest in the outcome. Could I, in that regard, refer your Honours, without going to them now, paragraphs 12, 13(a) and 13(b) of our written submissions, and the passages there referred to.

In relation to Dimes, could I also say a submission was made earlier that Dimes has stood the test of time. Well, your Honours, not without considerable adverse comment and if one comes to modern times, one sees, particularly, the decision of the Victorian Court of Appeal in this case; one sees the decision of the New South Wales Court of Appeal in Dovade; and one sees also the observations of the Court of Appeal in the United Kingdom in Locabail; in each of which Dimes is treated as not having the binding effect that has been suggested and as being a decision which does not, in the end, support a principle of the rigidity that is being contended for.

Your Honours, could I turn then to the underlying principle? Your Honours, if a judge has no actual interest in the outcome of proceedings, there is not, in our submission, any basis for saying that there should be any automatic disqualification. The judge has no interest in the result and has sworn or affirmed an obligation to give justice according to law. What basis, your Honours, is there for saying, in those circumstances, that the judge should not sit or should not continue to sit?

Now, your Honours, if may be, of course, that there are cases where, notwithstanding the absence of an interest in fact in the outcome, the circumstances might give rise to an apprehension of bias. That is why it is often appropriate for the judge to tell the parties of any facts which could possibly give rise to any such apprehension. It enables them, as has been observed, amongst other things, to investigate, if appropriate, and to consider whether there is ground for an application to the judge not to sit or not to sit further. But, your Honours, in our submission, there is not a legal duty on the judge to do so.

My learned friend, Mr Beach, has referred to the relevant passages in Dovade and also to what was said by Justice Orminston in Gascor v Ellicott. Could I invite your Honours to note that it was not only Justice Orminston in that case who expressed those views; they were agreed in by the other two members of the Court, with Justice Brooking agreeing with Justice Tadgell, and Justice Tadgell, at page 346, at the top of the page, agreeing with Justice Orminston's observations.

Our learned friends relied upon the decision in the House of Lords case of Sellar in 1919, a Scottish case in the House of Lords. Could I just take your Honours for a moment to the bottom of page 20 and the top of page 21 of that decision. What your Honours will see is at the bottom of page 20, the last two lines of the main text, the proposition is put as being:

The importance of preserving the administration of justice from anything which can even by remote imagination infer a bias or interest in the Judge.....is so grave -

et cetera. Then your Honours will see at the end of that paragraph, what is said in relation to disclosure is:

if the disclosure is not made, either through neglect or inadvertence, the judgment becomes voidable and may be set aside.

Your Honours, what does not appear from that is that any setting aside is to be one ex debito justitiae or as of course. It may be, even if one adopts the view that disclosure is obligatory, it does not appear from that that the result of non-disclosure is that the judgment is inevitably avoided. The way in which the expression - the manner, is put, "judgment becomes voidable and may be set aside", would convey, in our submission, an element of discretion as distinct from a matter of right.

GLEESON CJ: There seems to be an element of hyperbole in that proposition of Lord Buckmaster. The "reasonable apprehension of bias" test is very different from a test aimed at preserving the administration of justice from anything which can even by remote imagination infer bias or interest in.

MR JACKSON: Indeed, your Honour. The other thing I wanted to say was in relation to the bright line test. The term "bright" can be used in two sense, of course. In our submission, if there is to be a bright line test, then there should also be a sufficiently justifiable reason for having it. The problem with the simple shareholding test is that it selects one but not necessarily, as this case demonstrates, a relevant or the most relevant factor as a basis for automatic disqualification. There are so many different classes of case where the question of the appropriateness of disqualification can arise in circumstances which are connected or unconnected with financial matters that to have one area of the law where there is a simple - indeed not simple but a simplistic test - is one which, in our submission, provides for there to be a kind of bump in the general principle or anomaly in the general principle for no very good justification.

Your Honours, surely, in our submission, the rule which should obtain is one which should look to the existence of some actual interest in the outcome. Could I refer your Honours to paragraph 15 of our written submissions? Could I come then, your Honours, to the question of necessity? The first point we would seek - - -

GAUDRON J: You do not say "direct" in that, Mr Jackson.

MR JACKSON: I am sorry, your Honour.

GAUDRON J: You say "actual, you do not say "direct".

MR JACKSON: No, your Honour, I do say "actual".

GAUDRON J: Yes, and you - - -

MR JACKSON: Well, your Honour, a "direct" interest in ordinary parlance would normally be an "actual" interest, but not every interest that might disqualify would necessarily be direct.

GAUDRON J: Yes, thank you.

MR JACKSON: Could I give your Honours an example perhaps? If a judge owned a property or lived, or had owned a property in an area where the values of the properties might be significantly affected by the decision on an appeal from a planning court, for example, where the applicant was seeking to put in an institution of the kind which was referred to in the Colex Case that the Court heard last year, a waste disposal facility. Now, your Honours, in those circumstances, the fact that the judge had no direct interest in the case, would not alter the fact that it may well be the judge would have an actual interest sufficient to make it inappropriate for the judge to sit on the matter. So, your Honour, actual is what - - -

GAUDRON J: When you said "make it inappropriate", if it is an actual interest it goes beyond inappropriate, does it not?

MR JACKSON: Well, it does, your Honour. Yes. But at the same time, that is a case where one might say there is an actual interest, but one is looking to a reasonable apprehension of there being an actual interest in the outcome. Could I move then, your Honours, to the question of necessity, which is the last issue with which I wish to deal. The point we seek to make, your Honour, in the first place is that necessity, we would submit, is really, in a sense, a genus of a broader species reflecting the interests of justice.

Could I, in that regard, your Honours refer to Livesey v New South Wales Bar Association 151 CLR. I wanted to refer your Honours to the bottom of page 299 in the joint reasons of five members of the Court where what was said was - in the last three lines:

Necessity and the extraordinary case make it impossible to lay down an inflexible rule; each case must be determined by reference to its particular circumstances. It is, however, apparent that, in a case such as the present where it is not suggested that there is any overriding consideration of necessity, special circumstances -

your Honours will see those words:

or consent of the parties, a fair-minded observer might entertain a reasonable apprehension of bias by reason of prejudgment if a judge sits to hear a case at first instance -

et cetera. Now, your Honours, no doubt the ambit of the exception, if I could call it that, is one which would be relatively narrowly drawn. But it must, in our submission, turn ultimately on the interests of justice and the interests of the parties reflecting that concept in the particular case.

Your Honours, in relation to this case, this is one which was critically concerned with the question of whether the oral evidence of one witness should be preferred to that of another. Could I give your Honours the references to the parts of the trial judge's reasons where one will see that without taking your Honours to the words. It is volume 3, page 642 to page 647 where, on a number of occasions, the judge deals with the question of which evidence should be preferred and prefers the evidence of Mr Skehan, who is the retired bank officer who later died before judgment was given, to the evidence of one of the appellants. Your Honours, it is also referred to or the importance of that is referred to in the Court of Appeal. Your Honours will see that in volume 4, page 860, in paragraph 70 and at paragraph 71 on page 861.

KIRBY J: Your opponents say that they will have that admitted; that they will not object to having all of that admitted.

MR JACKSON: Of course, your Honour, but what you have then is a case where you have the oral evidence of witnesses seen by the judge on the one hand - a new trial and the other hand, you have the deposition.

Now, in those circumstances, where the core issue - and that is apparent from the passages to which I have referred and will give your Honours reference to in a moment - is which of two witnesses should we believe, a matter of the greatest significance is the way in which the witness looked in the box. Mr Skehan was a man who was obviously very sick. He had throat cancer. He was speaking with considerable difficulty and having to manipulate his throat as he did so. In those circumstances, the importance of seeing the person is very significant. A very long trial, too, your Honour.

Could I also say, at page 863 about line 27 his Honour quotes from the primary judge and then at page 864 beside about line 20 he referred to the preference given to the evidence of Mr Skehan and that, of course, was, as later appears, disastrous for the case of the other side. So, our submission is that if one looks at what Justice Callaway said on this issue at page 870, paragraph 91, which goes over to the top of the next page and through to paragraph 92, that was a view that was perfectly open to the Court of Appeal and was the right view and the other two members of the court agreed with Justice Callaway. Your Honours will see that in the President's reasons at page 823, paragraph 2, and Justice Charles at page 854, paragraph 60. Your Honours, those are our submissions.

GLEESON CJ: Mr Connor, how long do you expect to be in reply?

MR CONNOR: About two minutes, your Honour.

GLEESON CJ: And what about you, Mr Bigmore?

MR BIGMORE: About the same, your Honour.

GLEESON CJ: All right. We will adjourn until 2.00 pm.

MR CONNOR: I am sorry, did your Honour - two minutes I said, your Honour.

GLEESON CJ: Yes. We will adjourn until 2.00 pm.

AT 12.58 PM LUNCHEON ADJOURNMENT

UPON RESUMING AT 2.01 PM:

GLEESON CJ: Yes, Mr Connor.

MR CONNOR: Your Honour, the first point: we see the case of Sellar as standing for the proposition that a judge who has a share in a litigant first must disclose that and, secondly, is disqualified.

KIRBY J: If he is disqualified, why bother to disclose it? He is just disqualified by operation of law.

MR CONNOR: It needs to be disclosed in order for the disqualification to occur, your Honour.

KIRBY J: That is in the course of disqualifying himself or herself?

MR CONNOR: Yes, your Honour.

KIRBY J: It seems a very absolute rule. It seems to lack common sense. It offends the sense of common sense.

MR CONNOR: Your Honour earlier referred to the idea of, on the one hand, independence and, on the other hand, impartiality. Now, to the extent that the concept of impartiality is so expanded to absorb or to cover the same area covered by independence it may have no separate operation. It really depends on the interpretation and the application of the concept of reasonable apprehension of bias. We see both those ideas of independence and impartiality as being fundamental to the exercise of judicial power and to the extent that impartiality is limited by a fairly stringent test there may be a separate notion of independence and it may be the strict or the Dimes mere shareholding may represent that value rather than the value of impartiality. Your Honour's judgment in S & M - - -

KIRBY J: Dissent.

MR CONNOR: In dissent, your Honour discusses the concept of independence and it is a - - -

KIRBY J: Yes, I read that the other day and I wondered if I had got mixed up with impartiality, but you say that the idea of us being up here is impartiality and the idea of not being involved with another party is being independent of the parties.

MR CONNOR: They may be separate ideas. Mr Beach, in answer to your Honour, said they were synonymous. Now, it just depends on what interpretation is given and what application the reasonable apprehension of bias test has how far the idea of impartiality goes and whether it covers the same area covered by the concept of independence. We see both as attributes of the more fundamental idea of open justice and as essential attributes of the exercise of judicial power.

GUMMOW J: I know what you say about Sellar, but looking at Dimes itself, and looking relatively carefully at the argument, this notion of judge in ones own cause is really talking about being a party. What they were saying, I think, was that this was a company incorporated by a private Act of Parliament in 1793, long before Salamon's Case, and it is not at all clear how many of the shares had been, in fact, issued, but it does look as if the Lord Chancellor's interest was a very substantial one. What was really being said was, "He was not a party because of the fact of incorporation".

If it had not been for that though, all the proprietors of this entity would have had to have been plaintiffs to seek this injunction. So, it may be that there is some separate rule that someone is so substantially interested they are virtually a party and that may be some separate rule but that would be very rare today, I would have thought. If Dimes is understood in that sense, it could be put to one side.

MR CONNOR: There is also the aspect of Dimes, that no regard is paid to it in the decision in Dimes which is the non - - -

GUMMOW J: Dimes is all about whether the order is made by Lord Cottenham were void or voidable. If they are void, Mr Dimes, who had been sent to prison for contempt, would have had an action for false imprisonment against various people, I imagine. And the case decides they are only voidable, as we know the law is.

MR CONNOR: No attention was paid to, what we say, is the obligation of disclosure or the duty of disclosure, and for 10 or 11 years - - -

GUMMOW J: Well, that is right. But the real point was whether he was a party.

MR CONNOR: Yes. The next point we seek to make is in relation to Mr Jackson's submissions in relation to this - - -

GUMMOW J: And that has noting to do with these modern cases. None of these people are remotely near parties.

MR CONNOR: The concept of necessity is the next point we want to address. Mr Jackson really seeks to convert that into something that it is not, into the idea of merely interests of justice. It seeks to limit then the concept of interest of justice, or the circumstances in which the interests of justice are examined as limited to the individual case. We say that there is some fundamental values at stake in the conduct of this case, in particular the obligation to disclose the connection with the subject matter of the suit, the obtaining of the shareholder interest.

That is a fundamental principle. We say at its highest level it is the concept of open justice. It is not - the unavailability of a particular witness is not a countervailing consideration of sufficient weight to oust that idea. Nothing further, your Honours.

GLEESON CJ: Yes, Mr Bigmore.

MR BIGMORE: If the Court pleases. Your Honour Justice Kirby made mention, I think, to whether there might be a more recent American case. Our learned friend Mr Jackson refers to Aetna Life v Lavoie [1986] USSC 78; (1986) 475 US 813 in paragraph 18 of their written submissions and. It is decided a few months after Union Carbide Case from which we quote in our submissions. Your Honour the Chief Justice also referred to the example of the Refugee Tribunal and I would point out that the Aetna Life Case concerned a judge who was suing an insurance company at the time that he was a member of the Alabama Supreme Court and joined in a decision against an insurer.

KIRBY J: He was the casting vote apparently in the court and they divided five to four, and he wrote the court's opinion.

MR BIGMORE: Yes, although, as the court said, it was not that fact, joining in an opinion is the same; it happened to be the case that he wrote the judgment. But, again, it might be relevant to the Refugee Tribunal example, but I particularly raise it because it is the most recent United States decision, I think, that any of us has referred to, although, it is 1986.

KIRBY J: It is a bit difficult for us to use US decisions because it is obvious from this that it is all subsumed in the due process course.

MR BIGMORE: It is now because of the legislation.

KIRBY J: That jurisprudence is a very large body that is hard to comprehend unless you live with it.

MR BIGMORE: Yes. And USC 455 is the principle on which this case is based as well, of course. The second point we wanted to make was, again, your Honour Justice Kirby raised a moment ago with our learned friend Mr Connor the lack of common sense that might be apparent. If there is disclosure, then there is the opportunity for the parties to consider the position, for counsel to obtain instructions and either object or waive. In the rare case where there is an objection, we say that if disqualification is warranted on the basis of the Dimes principle, then that is what should occur, and the court should be reconstituted.

GLEESON CJ: As I understand it, in this American case of Aetna what happened was that the decision to which the judge was a party was an important precedent having a bearing upon his own claim against the insurance company.

MR BIGMORE: Yes. We would submit that the test we propound, as well as the existing Australian "reasonable apprehension" test, would quite clearly deal with this fact situation. We have not advanced it particularly as supportive of our position but we do not see that it damages our position either. It is an interesting case and it again is based on the United States Code.

The final point we wanted to make was, going back to the facts of our case and perhaps changing them slightly, we would invite the Court to consider the question of what would have occurred if Justice Goldberg had been the indemnifying creditor himself rather than the Bank in which he beneficially held shares or contingently held a beneficial interest and whether there is a difference between being the indemnifying creditor, thus liable in respect of costs, and if he had simply been an ordinary creditor owed a few thousand dollars by the bankrupt.

Again, we would say that certainly the Dimes principle, which we propound, would require disqualification, but whether the "reasonable apprehension" test would deal with the situation is a difficult one. It is a curious bankruptcy situation where the informed person in the back of the court would see that the party was the official receiver or official trustee, but that the judge was, in fact, a creditor of the bankrupt. The bankrupt was not a party, only his wife was the party. I do not know myself what the reasonably informed observer would think. We have never contended that the reasonably informed observer would think in the present circumstances where there is a holding of shares, rather than being the creditor himself, but, certainly, our submission is that our propounded test would deal automatically with the situation where the judge was a creditor, especially the indemnifying creditor. We say there is no difference, in reality, between a judge who is the indemnifying creditor and a judge who is a shareholder to a reasonable extent, at least, leaving aside the de minimis issue, in the indemnifying creditor, or even a creditor.

GLEESON CJ: But just a moment. An indemnifying creditor gets an advantage under the bankruptcy law, does he not?

MR BIGMORE: Yes, your Honour, yes. He may, depending on the exercise of discretion.

GLEESON CJ: Yes, unless there is a discretionary power, in effect, to prefer or to advance the interest of an indemnifying creditor over other creditors.

MR BIGMORE: Yes.

GLEESON CJ: Are you suggesting that the judge would exercise that power?

MR BIGMORE: Not necessarily, and not in that case, not in the case that has been decided. It would be a subsequent application by the creditor or by the trustee, as often happens, for that particular order under the subsection. No, I am not suggesting that but there may be a level of difference - we do not suggest there is - between a judge who is an indemnifying creditor and a judge who is a mere creditor.

GLEESON CJ: There was actually a judge in the early history of the colony of New South Wales who sat on an action against himself. He won. But that was regarded as poor form.

MR BIGMORE: Yes. We would say on the basis of the test we propound that the judge being a party plainly has a direct interest in the outcome of the proceedings. A judge being an indemnifying creditor or creditor in the bankruptcy where as creditor he stands directly to gain from the result of the proceeding, there may be proceedings by an official trustee, for example, relating to a question of discharge or annulment or something with respect to the bankruptcy which may not involve an interest in the outcome, certainly not a pecuniary interest in the outcome if the application were simply for annulment of the bankruptcy on some ground.

In those circumstances the test perhaps would not be met, but in a case where the outcome clearly, as we all know in this case, is one where there is a financial advantage to the ANZ Bank and there would have been a disadvantage as it turns out because they were the indemnifying creditors if the case had been lost, in those circumstances the judge having an interest in that creditor himself has a financial, pecuniary, economic interest in the outcome.

CALLINAN J: In the 1890s in Queensland Mr Lilley of counsel had a large number of successors before his father Mr Justice Lilley. What sort of rule should be formulated for that situation?

MR BIGMORE: It does not fit within the Dimes rule that we propound here.

KIRBY J: You say that is an impartiality case, not an independence case.

MR BIGMORE: Yes. For one thing, of course, the father had the interest in the counsel, not in the counsel's client, of course, but it is not an independence type case. It certainly would fall under the "reasonable apprehension" test, as I understand it now.

KIRBY J: I must admit I have always thought "independence" in that context meant independence of the Executive Government but Mr Connor has suggested it is independence of everybody and notably, perhaps most importantly, of the parties.

MR BIGMORE: I must say for myself, your Honour, that impartiality seems to embrace the circumstances that we have here. Independence, with respect, may, in most contexts, relate to the separation of powers. But again, the expression seemed to have been used, sometimes interchangeably, sometimes cumulatively, by judges in a time where separation of powers was not such a great issue and in non-federal structures. So, I do not know that we can advance that aspect of the debate further. If the Court pleases, those are our submissions.

GLEESON CJ: Yes, thank you, Mr Bigmore. We will reserve our decision in these matters and we will adjourn to reconstitute and reconvene in Court No 2.

AT 2.18 PM THE MATTER WAS ADJOURNED