To recuse or not to recuse? An enunciation of principles and their application in Karadaghian v Big Beat (Australia) Pty Ltd (No 3).

In Karadaghian v Big Beat (Australia) Pty Ltd (No 3) [2014] NSWSC 1691 (Karadaghian case), an application was made by the first defendant for Rothman J to disqualify himself from hearing the substantive hearing in the proceedings on the basis of apprehended bias due to a pre-judgment arising from interlocutory rulings and alleged credit findings.

The application was made based on the judgment of Rothman J in Philip Karadaghian v Big Beat (Australia) Pty Ltd [2014] NSWSC 496, an earlier interlocutory judgment that Rothman J handed down in the proceedings (the First Judgment).

The facts of the underlying case were as follows:

  1. The plaintiff, Philip Karadaghian, sued Big Beat (Australia) Pty Ltd (Big Beat), the first defendant, in negligence, from an assault on him on 20 October 2007 by a security guard at a nightclub owned by Big Beat;
  2. The security guard was an employee or agent or subcontractor of Big Beat;
  3. Approximately 2 years prior to the commencement of proceedings, the plaintiff’s solicitor made a request for further and better particulars of the identities of the occupier of the nightclub and the entity responsible for providing security services;
  4. A reply to the request was provided in November 2008, signed by the financial controller of Big Beat, which provided that Ambient Pty Ltd (Ambiant) was the security provider;
  5. The Statement of Claim was drafted based on this reply (as inferred by Rothman J);
  6. Big Beat filed a defence admitting that at all material times and at the incident date, it contracted with Ambiant to provide security services;
  7. In or about June 2012, just over a year after filing a defence, Big Beat formed the view that it should not have made the said admissions in its reply and defence, and indicated that the security services were instead provided by Southland Security and Protection Pty Ltd;
  8. On 27 September 2012, Big Beat filed a notice of motion seeking leave to withdraw the admission.

In the First Judgment, Rothman J held as follows:

  1. He expressly declined to make any final conclusion on the credibility of witnesses;
  2. He expressed the view that the evidence could be reconciled (as to its apparent inconsistencies);
  3. He made comments as to which statement of evidence he preferred, expressly because it was corroborated by independent contemporaneous records;
  4. Based on the test of the Courts as to the withdrawal of admissions 1, he concluded that, on the balance of probabilities, Ambiant had provided security services and Mr Moraitis negotiated those services on its behalf, and that despite there being an arguable possibility that a corporate entity other than Big Beat was the contracting party, it was insufficient to allow the withdrawal of the admission given the considerable delay. 2

In the present application, Big Beat relied upon three factors for the apprehended bias application:

  1. During the course of the hearing leading to the First Judgment, the plaintiff submitted that Mr Moraitis (a witness) defied all credibility – no acceptance, expressly or otherwise, was made in the First Judgment on this point;
  2. At [33] of the First Judgment, Rothman J made the following comment:

“[33] The venture was not successful. Mr Moraitis and Mr Markowski resigned from the board of the company and as Directors on 30 June 2007, or effective as that date. Mr Dupre wrote to the Security Licensing and Enforcement Directorate of the New South Wales Police Force on 11 July 2007 substituting his own name for that of Mr Markowski as the master licence holder and doing so on the ground that Mr Markowski had resigned from Southland. Mr Dupre did not inform ASIC as soon as he should have, but I accept his evidence that the failure to notify ASIC was an oversight.

3. At [36] of the First Judgment, Rothman J made the following comment:

[36] It is unnecessary for me to come to any final conclusion on credibility. The evidence can be reconciled. If it were necessary to state a preference, I would clearly prefer the evidence of Mr Dupre over that of Mr Mortaitis. Mr Dupre’s evidence was corroborated by independent contemporaneous records.

Principles for Apprehended Bias

In his judgment, Rothman J makes the following comments:

  1. “[t]he principles relating to the apprehension of bias admit the possibility of human frailty.” They are well-known and have been stated many times, but are difficult to apply: see [19];
  2. The principle is that justice must not only be done, it must be seen to be done: see [21];
  3. A judicial officer must bring an impartial mind to the issues to be decided: see [21];
  4. In the common law system, it is fundamental to the rule of law: see [24];
  5. The principle is that a judge should disqualify herself or himself if, in all the circumstances, the parties, or the public, properly informed of the procedure and circumstances, might entertain a reasonable apprehension that the judge might not bring an impartial or unprejudiced mind to the resolution of the issues to be heard and determined: see [22];
  6. Cited, at [20], the High Court in Johnson v Johnson 3, which succinctly summarised the principles for apprehended bias as follows:  “It has been established by a series of decisions of this Court that the test to be applied in Australia in determining whether a judge is disqualified by reason of the appearance of bias (which, in the present case, was said to take the form of prejudgment) is whether a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial and unprejudiced mind to the resolution of the question the judge is required to decide.
  7. Cited at [26] to [29] Re Polites; Ex parte Hoyts Corporation Pty Ltd, which notes that where the application of the principles do not disqualify a judge from sitting, the judge must continue to preside so as not to undermine the independence, impartiality and legitimacy of the justice system. In the Hoyts case, the High Court required a judicial member of an Industrial Tribunal to preside after the member had disqualified himself (on the basis that he had advised a party to the proceedings on the employment structure to be, or which could be, implemented by it).
  8. In citing the Hoyts case, Rothman J noted that the Tribunal was one in which its members had an understanding of a number of corporations in the industry, and that the application was made after the proceedings had been continuing for some significant period of time;
  9. Rothman J noted that in Livesey v New South Wales Bar Association 4 (Livesey), adverse findings of credit by two of the judges of the Court of Appeal in earlier proceedings against the central witness in the proceedings in which the bias application was brought, was held not to be able to sit on the latter case;
  10. Rothman J also said that both Livesey and Australian National Industries Ltd v Spedley Securities Ltd (in liq) 5 (Spedley) were cases involving adverse findings in prior litigation;
  11. Rothman J relied on comments by French CJ in British American Tobacco Australia Services v Laurie, 6 including that there is a material difference between the situation where a judge’s statement precludes the possibility of [his or her] acceptance of the uncorroborated evidence of either party on its merits, and where a judge makes an interlocutory finding expressly acknowledging the possibility that there might be a different outcome on difference evidence or after a full trial.

In his Honour’s application of the principles to the present case, Rothman J made the following comments:

  1. The first defendant’s application relied heavily on the Spedley case. In Spedley, credit findings were made in another proceeding involving similar, but not the same, parties, and in which the witnesses would be the same. Further, in that case, the trial judge had expressed firm views about the involvement of ANI in the breach of fiduciary duty and other aspects, thereby rejecting the testimony of two witnesses. The trial judge had concluded that the evidence of one of the witnesses was “false” and left “the reader … in no doubt about the impression gained by his Honour as to their credit”.
  2. In the present case:
  1. There was no adverse finding against Mr Waterson (a witness);
  2. There was no adverse finding on credit against Mr Dupre and Mr Moraitis (both witnesses);
  3. There was no criticism of Mr Moraitis as to a failure to clearly define the operations of some of his corporate entities from others (as this was common);
  4. It was stated in the judgment that there was no need to determine issues of credit, finally or otherwise;
  5. The stated preference for the evidence of Mr Dupre over Mr Moraitis, already qualified, was based on a reference to contemporaneous records;
  6. The matter was determined based on the first defendant not satisfying its onus of proof;
  7. Rothman J did not consider that a fair-minded lay observer, fully informed of the circumstances, might reasonably apprehend that he would bring an impartial mind to the resolution of any factual issue in the final proceedings;
  8. Rothman J made a comment that he found the application premature, because there was no guarantee, and a considerable lack of likelihood, that he would be presiding over the final hearing. In this regard, he did not consider that a change of presiding judge would increase significantly the length of the trial.

Accordingly, Rothman J dismissed the proceedings, with the plaintiff’s costs in the cause.

As Rothman J notes in this case, it is a fundamental aspect of the rule of law and to the administration of justice, that a judicial officer presiding over a case not only be just, but, from the eyes of a fair-minded lay observer, be seen to be just.

The judgment in these proceedings provides an articulation of the principles applicable to a recusal application and demonstrates its application to the facts in this case.

[1] Namely, that the admission was inadvertent, or that it was contrary to the established facts.

[2] Rothman J found that the admission was not made inadvertently as it was made formally, both initially and in the pleadings. The officer making the admission was a person authorised to do so. He also found that the admission was not made contrary to the established facts.

[3] [2000] HCA 48; (2000) 201 CLR 488 at [11].

[4] [1983] HCA 17; (1983) 151 CLR 288.

[5] (1992) 26 NSWLR 411.

[6] [2011] HCA 2; (2011) 242 CLR 283.

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