FEDERAL COURT OF AUSTRALIA

Szepesvary v Weston (Trustee), in the matter of Szepesvary (Bankrupt) [2016] FCA 1464

ORDERS

THE COURT ORDERS THAT:

1.    The interlocutory application dated 2 November 2016 is dismissed.

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

REASONS FOR JUDGMENT

BROMBERG J:

1    A sequestration order was made against the estate of the applicant (“Mr Szepesvary”) by the Federal Circuit Court on 4 February 2014 (“sequestration order”). By an originating application dated 21 September 2016 (“originating application”), Mr Szepesvary applied to this Court for orders that the bankruptcy notice served on him be set aside, that the creditor’s petition filed by ACM Group Limited (“ACM”) be set aside, that the sequestration order be set aside and that his bankruptcy be annulled under s 153B(1) of the Bankruptcy Act 1966 (Cth) (“the Act”).

2    By an interlocutory application (“the interlocutory application”) dated 21 October 2016, Mr Szepesvary sought the following interlocutory relief:

1.    Bankruptcy notice 163230 issued by the Official Receiver on 16 July 2013, which was served on Aaron Szepesvary on 25 July 2013, be set aside under section 30(1)(b) of the Bankruptcy Act 1966 (Cth) on the ground that the Applicant has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order pursuant to paragraph 40(1)(g) of the Bankruptcy Act 1966 (Cth).

2.    The Respondent, Paul Gerard Weston, pay the costs of and incidental to the proceeding.

3    On 26 October 2016 I conducted a Case Management Conference and heard and determined the interlocutory application. In support of his application for interlocutory relief, Mr Szepesvary had filed submissions dated 21 October 2016. The submissions stated that Mr Szepesvary sought an order that the bankruptcy notice issued against him be set aside. The submissions addressed the Court’s jurisdiction and power to set aside a bankruptcy notice as well as what was contended to be the appropriate principles which should guide the exercise of the Court’s power. The submissions did not address why interlocutory relief should be ordered.

4    Mr Szepesvary had also filed an affidavit dated 21 October 2016 in support of his interlocutory application. Again, the affidavit was addressed to the grounds upon which Mr Szepesvary contended the bankruptcy notice should be set aside. The affidavit did not address why an interlocutory order should be made to set aside the bankruptcy notice.

5    On 26 October 2016, I made orders dismissing the interlocutory application and requiring Mr Szepesvary to pay the respondent’s costs of that application.

6    By an interlocutory application dated 2 November 2016 (“the recusal application”), Mr Szepesvary sought that “the docket judge disqualify himself on the ground of ostensible bias”. As I am the docket judge, I take that to be an application that I recuse myself from further hearing and determining Mr Szepesvary’s originating application. There is a further or alternative order sought that I rescind the orders I made on 26 October 2016. An affidavit made by Mr Szepesvary on 2 November 2016 (“the affidavit”) was relied upon by Mr Szepesvary in support of the recusal application.

7    On 29 November 2016, I heard the recusal application and determined to dismiss it. These are my reasons for dismissing that application.

8    Mr Szepesvary’s contention that I should recuse myself is based upon the manner in which I dealt with and determined the interlocutory application on 26 October 2016. That hearing was recorded and a transcript of it is available. My reasons for dismissing the interlocutory application appear on the transcript. Mr Szepesvary has not exhibited the transcript to his supporting affidavit nor, when asked, did he indicate that he desired an opportunity to have access to the transcript. In so far as he relied on what occurred at the hearing of the interlocutory application on 26 October 2016, Mr Szepesvary’s affidavit states this:

    On 26 October 2016 in the hearing of the Application, his Honour on first glance of the Application said that he could not understand where it fits into the proceeding.

    I referred his Honour to my affidavit and submissions and asked if I could read from them to clarify. His Honour said “it is not necessary”.

    His Honour said that I was “putting the cart before the horse”.

    In conclusion his Honour said the application could only proceed if ACM owed money to me prior to being made bankrupt.

9    Beyond those observations, the affidavit included Mr Szepesvary’s conclusions as to what he perceived had occurred. Mr Szepesvary stated:

    It was apparent that his Honour had mistaken the Application for a cross-claim.

    His Honour was not open to persuasion. There was nothing I could say or do to change his preconceived views. What was said led [sic] my case to be decided other than on its legal and factual merits.

    His Honour was wrong and incorrect.

    His Honour’s approach to the hearing of the application was not fair or impartial.

    His Honour erred in law and fact.

10    Additionally, in oral submissions, Mr Szepesvary contended that my understanding of the counterclaim raised may have been confused with a cross-claim and that I was wrong to assume that it was necessary for ACM to have owed money to Mr Szepesvary prior to him being made a bankrupt.

11    The leading authority in relation to apprehended bias remains Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337 wherein, at [6], Gleeson CJ, McHugh, Gummow, and Hayne JJ set out the test as follows:

… a judge is disqualified if 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.

12    Their Honours continued (at [8]) as follows:

The apprehension of bias principle admits of the possibility of human frailty. Its application is as diverse as human frailty. Its application requires two steps. First, it requires the identification of what it is said might lead a judge (or juror) to decide a case other than on its legal and factual merits. The second step is no less important. There must be an articulation of the logical connection between the matter and the feared deviation from the course of deciding the case on its merits. The bare assertion that a judge (or juror) has an "interest" in litigation, or an interest in a party to it, will be of no assistance until the nature of the interest, and the asserted connection with the possibility of departure from impartial decision making, is articulated. Only then can the reasonableness of the asserted apprehension of bias be assessed.

13    Mr Szepesvary is not legally represented and, without wishing to be disrespectful, the submissions made on both 26 October and 29 November 2016 by him and on his behalf by his partner Ms Ozdil, were confusing and difficult to follow.

14    In the main, the matters upon which Mr Szepesvary relied in support of the recusal application went to the correctness of the orders I made on 26 October 2016. It may be that much of that was directed to Mr Szepesvary’s alternative claim, to which I will return. But insofar as it was directed to the contention that I should recuse myself from further dealing with his originating application, any error I may have made does not of itself support a contention of apprehended bias. Judges may err and sometimes do. The mere fact that a judge erred in relation to one application does not suggest that the judge will fail to bring an impartial mind to the resolution of other issues or other applications yet to be determined.

15    It is also apparent that Mr Szepesvary’s submissions are really addressed to why he contends the orders I made on 26 October 2016 are vitiated by ostensible bias. However, the question before me is not whether the determination of the interlocutory application is vitiated by bias but whether I should now recuse myself because a fair minded observer might reasonably apprehend that I might not bring an impartial mind to the resolution of the questions which remain to be determined, namely, Mr Szepesvary’s claims for final relief. I appreciate, however, that the manner in which I dealt with and determined the interlocutory application may be relevant to that question.

16    It is necessary then to briefly address what occurred on 26 October 2016. As the transcript records, I dismissed the interlocutory application because I came to the view, having heard and read the submissions of Mr Szepesvary and those of the respondent, that the interlocutory application was misconceived. At the outset of the proceeding I explained to Mr Szepesvary that he was seeking the same relief—the setting aside of the bankruptcy notice—in the interlocutory application that was also sought by him by way of final relief by the originating application. It is apparent from the transcript that Mr Szepesvary had no understanding of the difference between interlocutory relief and final relief. It was in that context that I sought an explanation from Mr Szepesvary of the purpose of the interlocutory application. I was told that the interlocutory application was “a counterclaim”. Later I was told that the interlocutory application was designed to bring a counterclaim against ACM seeking damages for loss incurred by Mr Szepesvary as a result of being declared a bankrupt. Any observations I made about the “counterclaim” were directed to a counterclaim against ACM of the nature explained to me by Mr Szepesvary. That is the context in which the remarks attributed to me by Mr Szepesvary, albeit inexactly, and set out at [8] above were made.

17    It may be the case that what Mr Szepesvary really sought to do by way of his claim for interlocutory relief was to add an additional ground in support of his claim for final relief that the bankruptcy notice be set aside. That ground is specified in the interlocutory order that was sought as follows:

… that the Applicant has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order pursuant to s 40(1)(g) of the Bankruptcy Act 1966 (Cth).

18    Of course, as a matter of process, that course was also misconceived but if that is what Mr Szepesvary really intended, it serves, perhaps, to explain his apprehension. I suspect that he considers that on 26 October 2016, I made observations about the merit of such a ground when I did not.

19    In any event, even if I had expressed a view or an inclination about such a ground that would not justify a conclusion that a fair-minded lay observer might reasonably apprehend that I might not bring an impartial mind to the resolution of either that ground or any other ground relied upon by Mr Szepesvary in support of his claims for final relief. That follows from what Jessup, Buchanan and Wigney JJ said in ResMed Ltd v Australian Manufacturing Workers’ Union (2015) 232 FCR 152 at [33] and [35]:

[33]    In Re JRL; Ex parte CJL (1986) 161 CLR 342 (JRL), Mason J, in a passage which has since been cited on very many occasions, said (at 352):

It seems that the acceptance by this Court of the test of reasonable apprehension of bias in such cases as Watson and Livesey has led to an increase in the frequency of applications by litigants that judicial officers should disqualify themselves from sitting in particular cases on account of their participation in other proceedings involving one of the litigants or on account of conduct during the litigation. It needs to be said loudly and clearly that the ground of disqualification is a reasonable apprehension that the judicial offıcer will not decide the case impartially or without prejudice, rather than that he will decide the case adversely to one party. There may be many situations in which previous decisions of a judicial officer on issues of fact and law may generate an expectation that he is likely to decide issues in a particular case adversely to one of the parties. But this does not mean either that he will approach the issues in that case otherwise than with an impartial and unprejudiced mind in the sense in which that expression is used in the authorities or that his previous decisions provide an acceptable basis for inferring that there is a reasonable apprehension that he will approach the issues in this way. In cases of this kind, disqualification is only made out by showing that there is a reasonable apprehension of bias by reason of prejudgment and this must be “firmly established”: Reg. v. Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group; Watson; Re Lusink; Ex parte Shaw. Although it is important that justice must be seen to be done, it is equally important that judicial officers discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour.

(Emphasis added.) (Footnotes omitted.)

…

[35]    In Helljay Investments Pty Ltd v Deputy Commissioner of Taxation (1999) 74 ALJR 68; 166 ALR 302, Hayne J, sitting as a single judge also referred to the passage from JRL and then said (at [12]):

[12]    The principles about apprehension of bias must be understood in the context of a judicial system founded in precedent and directed to establishing, and maintaining, consistency of judicial decision so that like cases are treated alike and principles of law are applied uniformly. The bare fact that a judicial offıcer has earlier expressed an opinion on questions of law will therefore seldom, if ever, warrant a conclusion of appearance of bias, no matter how important that opinion may have been to the disposition of the past case or how important it may be to the outcome of the instant case. Fidelity to precedent and consistency may make it very likely that the same opinion about a question of law will be expressed in both cases. But that stops well short of saying that the judicial offıcer will not listen to and properly consider arguments against the earlier holding. As Lush J said in Ewert v Lonie:

Every reasonable man knows that consistency in decision is one of the aims of judicial or quasi-judicial institutions, but if he is exercising his quality of reasonableness he does not suppose that a tribunal will refuse to entertain or will fail to give proper attention to a submission opposed to its former decision merely because it is so opposed. In this case, the reasonable onlooker might have thought that the appellants would not have much chance of succeeding, but this is not the same thing as feeling or believing that they would not get a proper hearing. It is not a characteristic of the law’s reasonable man either to be irrationally suspicious of every institution or authority or to think that every cynical appraisal represents an absolute truth.

The “fair and unprejudiced mind” which must be brought to bear upon the determination of litigation is, as the Court said in R v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group, “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”.

(Emphasis added.) (Footnotes omitted.)

20    For those reasons, I declined Mr Szepesvary’s application that I should recuse myself.

21    Furthermore, there is nothing to support the alternative application made by Mr Szepesvary that I should rescind the orders I made on 26 October 2016. The correctness of those orders is capable of being challenged through an appeal and no basis has been put as to why either as a matter of power, merit or discretion the orders should be set aside by me. I note, in that respect, that the orders made are the subject of an application for leave to appeal made by Mr Szepesvary which is yet to be determined.

Associate:    

Dated:    6 December 2016