FEDERAL COURT OF AUSTRALIA

Zhai v Luo [2015] FCAFC 144

THE COURT ORDERS THAT:

1.    The applicant be granted leave to appeal.

2.    The appeal be dismissed.

3.    The appellant pay the costs of the respondents to be taxed if not agreed.

4.    The parties have liberty to apply within seven days for any additional costs orders.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

NATURE OF the APPEAL

1    Ms Sutao Zhai sought leave to appeal and to appeal from interlocutory and final orders made by the primary judge on the sole basis of a reasonable apprehension of bias on the part of his Honour. Although Ms Zhai proceeded by way of an application for leave to appeal, with the consent of the parties, we heard the proceeding as an appeal from the final judgment. Senior counsel for Ms Zhai foreshadowed that he would cause to be filed an amended notice of appeal relying upon the grounds outlined in an application for an extension of time for leave to appeal. Following the hearing an amended notice of appeal in that form has been filed.

2    For the reasons which follow, the appeal will be dismissed.

BACKGROUND

3    The respondent, Mr Xiangnan Luo, brought proceedings against Ms Zhai and a company she controlled, Jantom Furniture Pty Ltd, which is now in liquidation. He claimed a variety of relief in respect of an agreement under which Ms Zhai sold 40% of her shares in Jantom to Mr Luo for $800,000. Mr Luo paid the money, but received neither the shares nor a refund. Ultimately, judgment was given against Ms Zhai (Luo v Zhai (No 5) [2015] FCA 350).

4    The complaint as to the apprehension of bias relates not to the conduct of the trial itself, but to the fact that the primary judge entertained two applications while judgment was reserved following completion of the trial and after delivery of all written submissions in relation to the trial. The first was an application by Mr Luo to amend his statement of claim to allege fraud against Ms Zhai and the second was an application by Mr Luo against Ms Zhai and other persons for a freezing order.

5    The primary judge refused Mr Luo’s ambitious application for leave to amend the statement of claim to claim fraud and to join other parties. His application for a freezing order was allowed in part against Ms Zhai only. The complaint about apprehension of bias relates also to certain remarks made by his Honour in the course of that second application.

6    Counsel for Ms Zhai were unable to inform the Court as to whether the application for his Honour to disqualify himself was a written or oral application and precisely when it was first made. One thing that is clear is that no application of any description was made at the times when his Honour heard, considered and determined the application for leave to amend the statement of claim to claim fraud. The application for his Honour to disqualify himself was made after determination of the pleading argument (in Ms Zhai’s favour) and, at the earliest, during argument on freezing orders. The detail of the timing is not unimportant.

THE RECUSAL JUDGMENT

7    In his reasons given on 30 January 2015 (Luo v Zhai (No 4) [2015] FCA 32), his Honour summarised the grounds for recusal put to him by Ms Zhai. He noted that the essential basis for the application was that a fair-minded lay observer might reasonably apprehend that he might not bring an impartial mind to the resolution of the issues which he was required to decide: cf. Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 at 344 [6]. Ms Zhai had submitted that an observer of that kind might have such an apprehension because of what occurred during Mr Luo’s freezing order application in the context that it was made after the trial had concluded and its purpose was to restrain Ms Zhai and Jantom from dissipating Ms Zhai’s assets to avoid the consequence of any adverse judgment he might enter. The primary judge did not apprehend, and was not clearly told, that the recusal application was also then being put on the basis of his having heard the post-trial pleading amendment application.

8    In his Honour’s ex tempore reasons on the freezing order application (Luo v Zhai (No 1) [2014] FCA 1296), the primary judge summarised the issues at trial on which he was reserved. He noted that the evidence at trial was taken on 14 and 15 October 2014 and that the parties had completed filing all their submissions in writing by 26 November 2014. His Honour recounted that, after the taking of the evidence was completed but before all of the written submissions were filed, Mr Luo had applied for freezing orders against Ms Zhai and a number of other persons because Mr Luo had become concerned that she was attempting to render herself “judgment proof” by divesting herself of assets. As his Honour observed subsequently in Luo (No 4) [2014] FCA 32 at [5] that application was not a happy one and had limped from one procedural calamity to the next over three hearing days on 19, 21 and 27 November 2014. Ultimately, on 27 November 2014, he declined to make freezing orders against the third parties that Mr Luo had identified but was persuaded to make them against Ms Zhai and Jantom. In Luo (No 4) [2015] FCA 32, his Honour explained that the reason why the parties had filed written submissions after the evidence at the trial was that there had been insufficient time to hear oral submissions.

9    His Honour discussed the subsequent history when, on 11 December 2014, he declined a further application by Mr Luo for orders against some of the same third parties, one of whom was resident in Bristol, England: Luo v Zhai (No 2) [2014] FCA 1367. Following an urgent contested hearing on 9 January 2015, the primary judge released Mr Luo from his earlier undertaking, given on 27 November 2014, that he would not apply outside Australia for a freezing or similar order without the leave of the Court, so as to allow him to commence the English proceedings: Luo v Zhai (No 3) [2015] FCA 5.

10    In Luo (No 4) [2015] FCA 32 at [7] his Honour then addressed the issue now arising on appeal, recording that the disqualification application was put on three bases:

(a)    during the course of the initial application for freezing orders on 19 November 2014 he had expressed the view that Mr Luo’s application had merit and had assisted his counsel in formulating the claim as one based on a fraudulent conveyance under s 37A of the Conveyancing Act 1919 (NSW);

(b)    in his ensuing reasons for judgment in Luo (No 1)[2014] FCA 1296 he had said that he had seen both Mr Luo and Ms Zhai give evidence at trial and that her solicitor had formed the suspicion that she was seeking to emigrate her assets to the United Kingdom. It was said that, from this, one might reasonably infer that he had formed an adverse view as to her credit; and

(c)    in Luo (No 1)[2014] FCA 1296 he had also expressed the view that Mr Luo’s application had merit and had rejected Ms Zhai’s affidavit evidence that one of the dispositions of money was the repayment of a loan.

11    His Honour accepted that Ms Zhai had identified matters that might give rise to an apprehension of bias. However, as he explained, she had failed to articulate the logical connection between those matters and the feared deviation by him from the course of deciding the case on its merits: see Ebner 205 CLR at 345 [8].

12    The primary judge disposed of each of the three matters in turn in his reasons (Luo (No 4) [2015] FCA 32 at [10]-[18]) as follows (using the same letters to identify the issues set out at [10] above):

10    As to (a): the relevant part of the transcript of the hearing on 19 November 2014 is as follows:

‘HIS HONOUR:    Ordinarily, we have a third party procedure under the rules. You normally join a bank. It’s usually the person who gets joined. They get named as a party. Outside the sort of context where you have a stakeholder who’s involved and they’re just being frozen, as it were, what you really have here, I think, is a prospective case under the Conveyancing Act under section 37 to set aside a voidable transaction because it has been done with the intention of defrauding creditors, which is what that requires. There’s a couple of things which seem to follow if that’s right: first, although the third party procedure provides for an application to be made against a third party, one view might be that, in fact, you need to proceed substantively against these third parties because what’s actually involved is a foreshadowed claim under section 37A of the Conveyancing Act ---

MR NORRIE:    Yes, your Honour.

HIS HONOUR:    --- or a foreshadowed bankruptcy of your client with then an application under the provision of the Bankruptcy Act by the trustee for setting aside what would otherwise be a voidable preference under the bankruptcy legislation. So I suppose if that’s the correct analysis, then the issue I have to ask myself is whether there’s a prima facie case for either of those routes. That’s one question. The second question is, is the claim under section 37A within the jurisdiction of this court. I think the answer to that is probably yes, but there are a few twists and turns there. Then in relation to Mr Li, there’s the question of whether service has to happen under the Hague Convention and whether I need to be satisfied that the matter is in the Hague Convention before I make orders against him.

…’

11    What is being discussed in this passage is just what the mechanics of Mr Luo’s claim were. I did not say that Mr Luo had a claim under s 37A. What I said was that it was necessary for me to identify what the ultimate claim against the third parties was and the legal wrong which I was being asked to restrain. I thought there were two potential claims – fraudulent conveyances under the Conveyancing Act and equivalent bankruptcy remedies. On the assumption these were the underlying claims I identified the need for a prima facie case to be shown. I then flagged potential jurisdictional problems with the Conveyancing Act relating to the potential absence of a federal matter together with certain difficulties relating to service out of the jurisdiction. A fair reading of this passage does not reveal that I had determined that Mr Luo’s claim had merit. All that this passage reveals is an attempt on my part to put some procedural clarity on what Mr Luo was applying for.

12    There is no logical link between these matters – none of which involve any fact finding – and the issues which arise in the main suit. I reject the ground.

13    As to (b): In Luo v Zhai (No 1) I said this at [7]:

‘I had, during the course of the trial, the benefit of seeing both Ms Zhai and Mr Luo in the witness box. The solicitor for Mr Luo is Mr Peng. He has been involved in the dispute with Ms Zhai for some time now. His dealings with Ms Zhai have made him suspicious of her. Consequently, he has taken to monitoring her property holdings by performing periodic title searches.’

14    I do not accept, as was submitted, that the first sentence of [7] can give rise to an apprehension of bias. I have seen both individuals in the witness box – this is an historical fact – and I cannot see that that fact can be a disqualifying matter. Indeed, it was not suggested that it was. I struggle to see how my saying what is plainly the case can be any different. In his oral address, Mr McGrath submitted that [7] might be read by a layperson as suggesting that I shared the suspicions of Mr Peng set out in the fourth sentence. I do not think that it can be reasonably read that way. The paragraph says nothing about my views of the credit of Ms Zhai.

15    As to (c): in Luo v Zhai (No 1) I said this at [19]-[21]:

‘19    Combined with the distinctly ad hoc appearance of the deed of loan, which I should note the applicant wishes to have forensically examined, and the total absence of evidence of bank records for the loan drawdowns, or any evidence about the nature of Yuan Han or Xiaohua Zou, I think there is more than a good chance that what is involved here is not a loan at all, but an attempt on Ms Zhai’s part to remove her assets away from the potential of Mr Luo’s judgment, and to do so in a disguised fashion.

20    In the case of Mr Dongsheng Li, the situation is worse. Ms Zhai said that she borrowed 3 million Renminbi on 15 May 2000. A handwritten document, which may be in Cantonese or Mandarin, dated 15 May 2000, was produced together with what was said to be a translation of it. Assuming this is a real document, it records a loan for the amount alleged, but one which is repayable in three years at an interest rate of 10%.

21    Since the loan document is dated 15 May 2000, this suggests a repayment date earlier this century. I do not accept that the amount transferred to Mr Dongsheng Li in October 2014 is plausibly likely to be a repayment of a loan which was repayable over 11 years ago. I draw the conclusion, at least for interlocutory purposes, that there is a respectable case that in truth this transaction is an attempt by Ms Zhai to disburse her assets ahead of judgment.’

16    Again it is important to stress the context of these paragraphs, explicitly stated in the last sentence of [21], that I was concerned with an interlocutory determination of the merits of the proposition that Mr Dongsheng Li was dispersing Ms Zhai’s assets to the four winds. I was not determining as a fact that he was: I was determining that the evidence appeared to be strong enough to grant relief pending a substantive application. A fair reading of these paragraphs needs to take into account:

(i)    their expressly interlocutory nature;

(ii)    the fact that the only issue before the Court was interlocutory; and

(iii)    the ex tempore nature of the reasons.

17    Read in that light I see no rational connection between [19]-[21] and the idea that I might determine the issue of whether Ms Zhai had to pay Mr Luo $800,000 for the shares other than on its merits.

18    A variant of the submission relied on the combined effect of (a)-(c) together with the uncertain procedural future of the case. This observation related to the fact that at some stage, unless Mr Dongsheng Li voluntarily surrenders the contents of the Bristol account, Mr Luo will need to sue him. I do not see how the potential existence of such a final proceeding has any impact on my ability to resolve the first case. It is not even entirely clear that it would be in this Court. It may be – depending on what happens with the first case – that I would be unable to hear the second (assuming it was in this Court). But the time when that will be known is not yet at hand. It says nothing about my ability to hear the present case. Ms Zhai’s argument leads to the surprising outcome that I cannot hear either case. Whilst I find that proposition personally attractive it is my duty to hear the cases which are assigned to me unless the principles in Ebner are otherwise satisfied. (emphasis added)

13    His Honour noted that, quite apart from the failure to satisfy the second step in Ebner 205 CLR at 344-345 [6]-[8], he would have rejected Ms Zhai’s application for another reason. This was that he had tried the case and had received the parties’ submissions. The primary judge observed that there were real difficulties with the concept of pre-judgment in that context and that he would inevitably have formed some views as to credit, when credit was part of what had been in issue at trial.

14    His Honour said (Luo (No 4) [2015] FCA 32 at [19]) that although he had not in fact done so, he could have permissibly suggested to Ms Zhai’s counsel in argument that he found aspects of either Mr Luo or Ms Zhai’s evidence difficult to accept and this certainly would not have created an apprehension of bias. He said that the position could not be different after the trial had been concluded. By that time a reasonable observer would have expected the judge to have views.

THE amended GROUNDS OF APPEAL

15    The first amended ground of appeal was that the primary judge ought to have recused himself because, after the hearing concluded and while judgment was reserved, he had:

(a)    entertained applications by Mr Luo:

(i)    for freezing orders; and

(ii)    to amend the statement of claim to include a claim of fraud; and

(b)    in the course of doing so made comments adverse to Ms Zhai including as to credit.

16    The second amended ground of appeal was that the primary judge failed to address the argument that, having granted a freezing order to maintain the status quo, the mere entertaining of the further application to amend to allege fraud (where the alleged fraud was said to pertain to Ms Zhai “judgment proofing” in anticipation of the reserved judgment) of itself gave rise to a reasonable apprehension of bias.

17    It may be seen that there is not a clean overlapping of the grounds as now advanced with those argued below but counsel for Mr Luo was content to deal with the arguments as formulated on behalf of Ms Zhai on the appeal, as well as those considered by the primary judge.

THE PRINCIPLES

18    Heydon, Kiefel and Bell JJ identified the relevant principles applicable here in British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283 at 331-332 [139]-[140], where they stated:

It is fundamental to the administration of justice that the judge be neutral. It is for this reason that the appearance of departure from neutrality is a ground of disqualification (Ebner v Offıcial Trustee in Bankruptcy (2000) 205 CLR 337 at 344-345 [6]-[7] per Gleeson CJ, McHugh, Gummow and Hayne JJ; Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at 77 [66] per Gummow, Hayne and Crennan JJ). Because the rule is concerned with the appearance of bias, and not the actuality, it is the perception of the hypothetical observer that provides the yardstick. It is the public’s perception of neutrality with which the rule is concerned. In Livesey [v NSW Bar Association (1983) 151 CLR 288] it was recognised that the lay observer might reasonably apprehend that a judge who has found a state of affairs to exist, or who has come to a clear view about the credit of a witness, may not be inclined to depart from that view in a subsequent case. It is a recognition of human nature.

Of course judges are equipped by training, experience and their oath or affirmation to decide factual contests solely on the material that is in evidence (Johnson v Johnson (2000) 201 CLR 488 at 493 [12] per Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ). Trial judges are frequently required to make rulings excluding irrelevant and prejudicial material from evidence. Routine rulings of this nature are unlikely to disqualify the judge from further hearing the proceeding. (bold emphasis added)

19    The test involves, first, ascertaining whether there is a real, and not remote, possibility that the judge might not decide a case on its legal and factual merits, and secondly, the articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits, that is, impartially: Ebner 205 CLR at 345 [8] per Gleeson CJ, McHugh, Gummow and Hayne JJ. However, a fair and unprejudiced mind “… is not necessarily a mind which has not given thought to the subject matter or one which, having thought about it, has not formed any views or inclination of mind upon or with respect to it”: The Queen v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group (1969) 122 CLR 546 at 554 per Barwick CJ, McTiernan, Kitto, Taylor, Menzies, Windeyer and Owen JJ.

20    A reasonable apprehension of bias will exist if the fair-minded lay observer might reasonably consider, as a real possibility, that the judge might be so committed to a conclusion already formed that he or she is incapable of altering it, whatever evidence or arguments may be presented: Cabcharge Australia Limited v Australian Competition and Consumer Commission [2010] FCAFC 111 at [25]-[29] per Kenny, Tracey and Middleton JJ. And as their Honours added ([2010] FCAFC 111 at [32]), “disqualification flows from a reasonable apprehension that the judge might not decide the case impartially, rather than that he will decide the case adversely to a party”.

21    It is also important to keep in mind what Barwick CJ, Gibbs, Stephen and Mason JJ said in R v Watson; Ex parte Armstrong (1976) 136 CLR 248 at 264 (see too GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Ltd [2013] FCAFC 150 at [36]-[40] per Allsop CJ, Middleton and Katzmann JJ) namely:

The remarks on which the wife’s submission was founded were made during argument in an interlocutory proceeding. One must be careful not to exaggerate the importance of remarks of that kind. During the course of argument a judge will often follow the common, and sometimes necessary, course of formulating propositions for the purpose of enabling their correctness to be tested, and as a general rule anything that a judge says in the course of argument will be merely tentative and exploratory.” (emphasis added)

22    In GlaxoSmithKline [2013] FCAFC 150 at [36]-[39], Allsop CJ, Middleton and Katzmann JJ said:

36    First, whether or not the suggested apprehension is reasonable must be considered in the context of ordinary judicial practice. A judge is not expected to sit in silence, Sphinx-like, while arguments are presented and will often form tentative opinions on matters in issue. Counsel are ordinarily assisted by hearing those opinions: Johnson v Johnson (2000) 201 CLR 568 at [13], [53] and [80]. Indeed, the exposure of those opinions is calculated to encourage a response from counsel. It is invariably an exhortation for assistance, even when it is expressed in apparently emphatic terms.

37    Secondly, the fair-minded lay observer is assumed to know the actual circumstances of the case: Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 at 87.

38    Thirdly, the fair-minded lay observer will note the possibility of a change in the evidentiary position between earlier and later proceedings: see, for example, British American Tobacco Australia Services Ltd v Laurie (2011) 242 CLR 283 at [145] (“Laurie”).

39    Fourthly, the fair-minded lay observer will also recognise that a professional judge is capable of departing from an earlier expressed opinion.

23    In Concrete Pty Limited v Parramatta Design & Developments Pty Ltd (2006) 229 CLR 577 at [112] Kirby and Crennan JJ said:

Sometimes judicial interventions and observations can exceed what is a proper and reasonable expression of tentative views. Whether that has happened is a matter of judgment taking into account all of the circumstances of the case (Antoun v The Queen (2006) 80 ALJR 497 at 502 [22]; 224 ALR 51 at 57 per Gleeson CJ; at 503-504 [27-30]; 58-59 per Kirby J; at 508-509 [56-57]; 65 per Hayne J; at 517 [81]; 76 per Callinan J). However, one thing that is clear is that the expression of tentative views during the course of argument as to matters on which the parties are permitted to make full submissions does not manifest partiality or bias (Bienstein v Bienstein (2003) 195 ALR 225 at 232 [34] per McHugh, Kirby and Callinan JJ).

THE ARGUMENT FOR MS ZHAI

24    It is convenient to deal with the argument for all of Ms Zhai’s grounds of appeal together.

25    Ms Zhai contended that the second step in the two step process described in Ebner 205 CLR at 345 [8] must be taken because the primary judge had expressed adverse credit findings against her when making the freezing order in Luo (No 1) [2014] FCA 1296 at [18]-[21], [40]-[41]. She argued that such cases are in a different category from those in Ebner 205 CLR 337. Ms Zhai relied on his Honour’s criticism of her, particularly in Luo (No 1) [2014] FCA 1296 at [19] when rejecting the truthfulness of her explanation of the 2014 transactions, which she contended was in strong terms, including his Honour’s view that:

… there is more than a good chance that what is involved here is not a loan at all, but an attempt on [her] part to remove her assets away from the potential of Mr Luo’s judgment, and to do so in a disguised fashion.

26    Ms Zhai contended that where the judge had expressed clear views about her credit in interlocutory proceedings, the fair minded observer might apprehend that subsequently, he might not be inclined to depart from those views in the determination of the substantive case. She argued that this was so because any objective lay observer might reasonably apprehend that, as a matter of human nature, a judge who had found that a state of affairs existed or who had come to a clear view about a party’s credit, subsequently might not be inclined to depart from it.

27    In essence, Ms Zhai contended that she had established the first step of the two step test, and so, the primary judge should not have continued to entertain the case or to have delivered his reserved judgment. She argued that an informed lay observer might reasonably apprehend that, because his Honour had considered Mr Luo’s new allegations of fraud or ‘judgment proofing’ while judgment was reserved, that consideration might adversely affect his Honour’s deliberations when assessing the separate evidence in the substantive case in preparing his reserved judgment. Ms Zhai also argued that his Honour’s conduct gave rise to a reasonable apprehension of bias because he had embarked on the interlocutory hearing rather than sending it to another judge.

CONSIDERATION

28    Ms Zhai’s arguments should be rejected.

29    First, the test in Ebner 205 CLR at 344-345 [6]-[8] did not apply solely to cases in which the judge might have had a financial interest. The High Court propounded a test of general application, as is evident from its subsequent consideration by appellate and other courts, including in the passage we have cited above from Laurie 242 CLR at 311-312 [139]-[14].

30    Secondly, Ms Zhai made no complaint when the application to plead fraud was first raised, argued and determined. Indeed, no such complaint was open then, as it is not now. It is not appropriate to raise, after the event, a complaint that the primary judge should not have heard an application but should have referred it to another judge: Vakauta v Kelly (1989) 167 CLR 568 at 572 per Brennan, Deane and Gaudron JJ. For the same reasons as their Honours explained, in our opinion the primary judge should have been asked to consider an application for him to refer the matter to another judge before Ms Zhai, without objection, allowed him to embark on the hearing now complained of.

31    It is also significant that Ms Zhai did not ask the primary judge to refer either of the interlocutory applications to another judge to be heard after allegations of fraud were first raised. She took the risk that he would consider those allegations in the interlocutory proceeding and it was some time after the freezing order decision, made on 27 November 2014, that she made the application for recusal. Whether it was made orally or in writing, Ms Zhai has been unable to say (no application is in the appeal book), but it was not made before 18 December 2014, being the date on which she filed written submissions seeking his Honour’s recusal. By that time, his Honour had given reasons for making the freezing order against Ms Zhai. The fact that no such application was made before that time is consistent with a reasonable lay observer, who was properly informed as to the nature of interlocutory proceedings, understanding that the judge could make interlocutory findings of a provisional nature without those findings having any effect on his final conclusions as to credibility of witnesses in the main proceedings.

32    Thirdly, an urgent interlocutory hearing for freezing orders, whether pursued before, during or after a trial, necessarily invites the judge to form and express some view as to whether the applicant for the relief has established, on the interlocutory material, a sufficiently arguable case that there is a risk of dissipation of assets. Ordinarily, any such view will only be an interlocutory one arrived at on the basis of affidavit evidence led on the relevant application. This was not a case like Livesey v New South Wales Bar Association (1983) 151 CLR 288 which held that a fair minded lay observer might reasonably apprehend that the judge might not bring an impartial mind to the resolution of later proceedings in circumstances where the judge had previously found a state of affairs to exist or come to a clear view about a witness’ credit. There had been no such occurrence in this instance. Here, a fair minded lay observer would expect that, after hearing or receiving final submissions at the conclusion of the trial, the judge might well have formed some view on the credit of witnesses whom he had seen give oral evidence. But that cannot be equated to a perception of pre-judgment of the outcome of the trial by the judge. His Honour had not prejudged the trial; he had heard the trial and his task was to decide it on a final basis.

33    Ms Zhai’s complaint about his Honour’s observations in Luo (No 1) [2014] FCA 1296 at [7] that he had seen both Ms Zhai and Mr Luo in the witness box and that Mr Luo’s solicitor had become suspicious of her, has no substance. We see no error in the way in which the primary judge correctly addressed those complaints on the subsequent recusal decision (Luo (No 4) [2015] FCA 32 at [13]-[14]).

34    Ms Zhai did not argue that the determination of an application for a freezing order prior to the trial, which relied upon evidence that might turn on likely or possible dissipation of assets, could be distinguished from a situation where the trial judge had been asked to consider such an application after the trial but before delivery of final reasons for judgment. It is very likely that after a judge has heard the trial, he or she will have formed some view about the witnesses’ credit.

35    We do not consider that the hearing of the application to amend the pleading, even to add the claim of fraud, with or without an application for a freezing order, could have created in the circumstances of these proceedings a reasonable apprehension of bias. The mere fact that one adversary raises pejorative allegations against another in litigation does not make, and could not possibly alone allow, a fair minded lay observer to contemplate that a judge might think that the making of those allegations in some way reflected upon the credit of the person attacked. The informed fair minded lay observer must be taken to have knowledge that the judge who is hearing the matter is a professional judge and that judges hear cases involving all manner of allegations by one party against another all the time. The task of the judge is to determine whether the allegations have been established on the evidence. The fair minded observer would know that the judge hears the case and decides, on the evidence, whether an allegation has been proved and the judge will not be influenced merely because the allegation was made: Laurie 242 CLR at 311-312 [139]-[140].

36    The primary judge carefully assessed the arguments that Ms Zhai advanced and correctly rejected them. Nothing in his Honour’s several interlocutory reasons or hearings exhibited what reasonably might be apprehended as any predisposition to an outcome of the substantive case or the possibility of unfairness. The informed lay observer would appreciate the context in which his Honour’s passing reference to the opportunity he had had to observe the witnesses at trial was expressed after the trial and his receipt of final submissions and that, even at that stage, he did not express a view on the trial evidence.

37    The informed lay observer would be aware that professional judges hear questions that arise in the course of proceedings in which they are required to consider evidence and other material. Those questions can involve allegations, evidence, material or argument that may be prejudicial to, or critical of, a party or a witness. This observer would also be aware that, whether or not the same allegation, evidence, material or argument is before him or her in the substantive proceedings, which the judge has yet to decide, he or she will put that matter out of his or her consideration when making a decision of a final nature on the evidence and submissions relevant to that decision.

38    Judges reject pejorative matter tendered as evidence routinely and hear submissions about allegations, evidence or arguments that are couched in robust, pejorative language. But, the lay observer must be credited with the common sense of being aware that a professional judge will put out of his or her mind the matter that is not legally open to be considered by him or her in deciding the substantive case: Laurie 242 CLR at 311-312 [139]-[140].

39    If this were not so, a party could assert that, merely because the judge had seen or heard, but rejected, inadmissible but highly prejudicial material as evidence in the case at hand, he or she thereupon was disqualified from continuing to hear the case. The lay observer would appreciate that a professional judge, unlike a lay person, must be able to ignore such material or pejorative allegations because the very responsibility of having to see the material or allegation in order to rule on its admissibility or correctness requires the judge to be trusted to ignore what is not admitted into evidence or relevant to his or her carrying out of the judicial task that the judge is then in the course of performing.

40    Here, Ms Zhai’s argument amounts to the proposition that the fair minded lay observer might reasonably consider that the judge might be influenced in arriving at his decision in the substantive proceedings by not considering only the evidence and submissions that were relevant, but rather by extraneous factors that were before him in one or two interlocutory applications. In our opinion, there is no reasonable possibility that the informed fair minded lay observer might reasonably have formed a view that the primary judge might have prejudged, or not been impartial in his consideration of, the result of the final hearing in the circumstances of this case. The fair minded lay observer would have expected, we would interpolate, correctly, that, as a professional judge, his Honour would put out of his mind what he had heard or said on the interlocutory applications when he later came to decide the substantive case on which he had previously reserved his final decision.

CONCLUSION

41    For these reasons the appeal must be dismissed with costs.

Associate:

Dated:    15 October 2015