Michael.1
Insolvency and related law and policy, and more

Michael Murray is an Australian author and commentator on corporate and personal insolvency law and related issues, in Australia and internationally. He has a strong law and policy background, is independent of any connections, and his views are his own. He gives no legal advice. 

Apprehensions of the fair-minded lay observer – a review of judicial impartiality

The Australian Law Reform Commission has been asked to undertake a review of the laws relating to impartiality and bias as they apply to the federal judiciary – the Federal and Family Courts, the Federal Circuit Court and others. 

As with any courts, such laws are important to ensure that confidence in the judicial process is ensured and maintained.  The fundamental principles of procedural fairness include that decision-makers must be independent and impartial, and reasonably be seen to be so.

The Terms of Reference direct the ALRC to consider in particular:

  • whether the law about actual or apprehended bias relating to judicial decision-making is appropriate and sufficient to maintain public confidence in the administration of justice;
  • whether the law provides enough clarity to decision-makers, the legal profession and the community about how to manage potential conflicts and perceptions of partiality[1]; and
  • whether current mechanisms for raising allegations of actual or apprehended bias in judicial decision making, and determining those allegations, are sufficient and appropriate, including in relation to review and appeal mechanisms.

The ALRC says that its inquiry will consider whether, and if so what, reforms to the laws on judicial impartiality and bias may be necessary or desirable.

In undertaking the inquiry, the ALRC says it will consult widely with the legal profession, courts, tribunals and the broader community.

An ALRC consultation paper will issue by 30 April 2021 with the final report due by 30 September 2021.

Comment

To some extent the test for judges is the same as for insolvency practitioners and administrative decision makers – that is, whether “a fair-minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of the question the judge is required to decide”,[2] being the “double might” test[3] as stated in Ebner v Official Trustee in Bankruptcy. The importance of the principles is such that if there is an adverse apprehension, it is irrelevant whether the findings and decisions made were “correct”.

In the context of the ALRC inquiry, it may not be likely that the test itself is suggested for variation, but how it is applied in particular cases will continue to vary depending on the context.

The test was applied in a recent family law matter where the Judge and the counsel of one of the parties had personal communications between them based on an existing friendship – phone conversations, meetings for ‘coffee or a drink’, and text messages.[4]  By majority, the Full Family Court held there was no apprehension of bias.[5]  Chief Justice Alstergren dissented, referring to Ebner and subsequent cases.

Personal friendship or connections can raise conflicts in insolvency in what is a relatively small industry of lawyers and accountants. Mere professional acquaintanceship does not of itself create actual or a reasonable perception of bias. But in Commonwealth v Irving,[6] the Court would not allow a liquidator Irvine to be appointed to an insolvent company of his lawyer, Townsend, whom the liquidator had engaged and taken advice from over many years.

“It is implicit in this that he regards Mr Townsend’s professional advice and judgment as sound. In my view, a reasonable person might well apprehend that, if required to investigate Mr Townsend’s conduct as a past director of the second respondent, Mr Irving might tend, consciously or unconsciously, to favour Mr Townsend, and accord to any submissions made by him in regard to any such investigation undue respect”.

And just as Judges who make comments in proceedings need to be careful that those comments do not suggest bias or pre-judgment, so too an insolvency practitioner conducting a meeting of creditors, for example, should ensure that no adverse comment is made about, for example, a type of creditor or express adverse assumptions about the industry of the insolvent.

But there are limits, and in fact it seems that many applications for judges to recuse themselves are rejected.

In an insolvent trading case involving an unrepresented litigant, a Judge was too cautious, disclosing a past relationship with a firm of liquidators when on appeal the court thought that there had been no need for him to have done so – he was ‘ultra cautious because he had an unrepresented litigant before him, but the mere fact that he made that disclosure does not turn something that was not disqualifying into something that was’. See Litigants in person – issues for judges.

That is, just as the hypothetical fair-minded lay observer is taken to be reasonable and informed as to a judge’s training and tradition and oath of office,[7] so too does the fair minded person understand the standing, experience and training of an insolvency practitioner, as an officer of the court.[8]

There are of course other issues concerning the judiciary that go to our confidence in the judicial process, such as consistency,[9] timeliness and knowledge of the law,[10] which may also go to partiality.

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[1] Presumably of the judiciary.

[2] The majority in Ebner v Official Trustee in Bankruptcy [2000] HCA 63 at [6]; (2000) 205 CLR 337 at 344.

[3] Kirby v Dental Council of NSW [2020] NSWCA 91; ASIC v Franklin (liquidator), in the matter of Walton Constructions Pty Ltd [2014] FCAFC 85.

 

[4] Charisteas & Charisteas and Ors [2020] FamCAFC 162 at [168].

[5] Charisteas & Charisteas and Ors [2020] FamCAFC 162

 

[6] (1996) 65 FCR 29

[7] Martin v Norton Rose Fulbright Australia (No 2) [2020] FCAFC 42

[8] Ziziphus Pty Ltd v Pluton Resources [2017] WASCA 193

 

[9] ASC v Marlborough Gold Mines Ltd [1993] HCA 15; (1993) 177 CLR 485

 

[10] See Julzar Pty Ltd v Rodgers and Anor [1999] NSWSC 199 – counsel “agree that the learned Magistrate completely misunderstood the applicable law”.

 

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