The increased proliferation of regulatory actions in recent times, in the wake of ASIC’s “why not litigate” approach to enforcement in response to the Financial Services Royal Commission, has led to a growth in the number of related class actions and other civil matters flowing from those regulatory proceedings.
Where related proceedings follow the determination of a regulatory action (either by judgment of the court or a court-approved settlement), or they are being conducted and case managed in parallel with that action, overlapping legal and factual issues give rise to the question of whether it is desirable for the sake of efficiency in the use of the court’s resources and the avoidance of undue delay, excessive cost and inconsistent outcomes on same or similar issues in dispute, to allocate the related proceedings to the same docket or trial judge.
Such an approach raises the spectre of judicial bias, and in particular apprehended bias, as the basis for an application for disqualification and the need to reallocate those related matters to a different judge. The risk of bias is triggered by the concern whether the same judge can navigate a path of impartiality in the face of evidence and submissions from both the regulatory action and the related proceedings.
Apprehended bias was addressed in the decision of the Full Court of the Federal Court of Australia in GetSwift Limited v Webb  FCAFC 26 (5 March 2021) in terms of the subconscious influence of extraneous information received by the primary judge in the prior regulatory proceeding.This is an issue in-house lawyers will need to take into account when considering litigation risk that involves an exposure to regulatory enforcement.
Unlike actual bias, apprehended bias has traditionally been a topic fraught with questions of degree and nuance, the resolution of which turns on the legal fiction of the hypothetical fair-minded lay observer’s perceptions of the judicial decision-making in question. The importance of the issue of apprehended bias is highlighted by the fact that the Australian Law Reform Commission was provided with Terms of Reference to undertake an inquiry into the laws relating to judicial impartiality and bias insofar as they are issues that are highly relevant to the fundamental principles of procedural fairness and judicial independence which ensure that justice is both done and seen to be done and public confidence in the administration of justice is maintained.
Judicial bias generally
Any litigant before an Australian court has the fundamental right to a hearing by a judge who is independent and impartial.Upon being sworn in, the oath that Australian judicial officers take includes a promise to “do right to all manner of people according to law without fear or favour, affection or ill will”. For this reason, the common law in the past treated judicial recusal or disqualification as antithetical to that oath “to administer impartial justice”.
If potential bias becomes apparent in a matter, judges will usually make disclosure to the parties informally. The judge may consider that he or she should decline to hear the matter, and a substitute judge will be arranged. If the judge does not recuse himself or herself, it will then be open to the party potentially aggrieved by the apparent bias to make an application for disqualification or waive the right to do so.
Judges may also disclose within their judgments the potential for bias to arise should the judge have to hear certain evidence again or evidence from the same witness (where credit findings have been made) in subsequent related proceedings (Leach v Commonwealth  FCA 158, which was decided three days before GetSwift).
Types of judicial bias
In relation to an application for disqualification, two different types of bias may be alleged: actual or apprehended. Actual bias requires proof that a decision-maker in fact approached the issues with a closed mind or had prejudged them such that he or she was “so committed to a particular outcome that he or she will not alter that outcome, regardless of what evidence or arguments are presented” (Minister for Immigration and Multicultural Affairs v Jia  HCA 17; (2001) 205 CLR 507).
Apprehended bias requires consideration of “whether, in all the circumstances, a fair-minded lay observer with knowledge of the objective facts might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the question.
The legal policy rationale behind this is the legal principle that “justice should not only be done, but should also be seen to be done”, thus upholding confidence in the administration of justice.
There are four generally recognised categories of reasonable apprehension of bias:
- interest, where some direct or indirect interest in the proceedings, whether pecuniary or otherwise, gives rise to an apprehension of prejudice, partiality or pre-judgment;
- conduct, where conduct, either in the course of or outside the proceedings gives rise to an apprehension of bias;
- association, where the apprehension of prejudgment or other bias results from some direct or indirect relationship, experience or contact with a person or persons interested in, or otherwise involved in, the proceedings; and
- extraneous information, where knowledge of some prejudicial but inadmissible fact or circumstance gives rise to an apprehension of bias.
The legal test for apprehended bias involves both the identification of what mightlead a judge to decide a case other than on its legal and factual merits and then the articulation of the logical connection between that factor and the feareddeviation from the course of deciding a case impartially on its merits.
The question is not whether a decision-maker’s mind is blank — namely the absence of any predisposition or inclination for or against an argument or conclusion— but whether it is open to persuasion (Jia, –). Judicial bias raises the question whether there is sufficient rather than absolute impartiality.
While the hypothetical lay observer is not assumed to have a detailed knowledge of the law, the character or ability of a particular judge, or any of the evidence relied upon or to be relied upon, he or she would understand the judicial process and knows that judges are under strong professional pressures to act with integrity and impartiality. To assess whether bias is reasonably apprehended, the hypothetical observer would take the trouble to inform himself or herself, to the extent necessary to make a fair judgment, of what might occur in the process confronting a fact-finding judge given the context in which it is to occur. In applications for disqualification, context is everything and whether the hypothetical observer might reasonably apprehend a lack of impartiality with respect to the decision to be made is largely a factual one.
One of the key tensions in this area of the law stems from the extent to which recognition can be given to “the reality that a judge is expected to be able to have regard to what is relevant and to discard the irrelevant, the immaterial and the prejudicial” by virtue of the judge’s training, professional habits, self-discipline, experience and judicial oath.
It is important to note that applications for disqualification should not be made or determined lightly and the party asserting bias carries a heavy onus to firmly establish substantial grounds.
Such applications are not about a party’s preference that the matter be referred to a different judge, but “whether the Court is properly constituted according to law” irrespective of the party’s preference.
ASIC enforcement action and class action
On 5 March 2021, the Full Federal Court in GetSwift heard an appeal in relation to a disqualification application made on the basis of apprehended bias. The application was made in a class action proceeding brought by Raffaele Webb against both GetSwift Limited and Joel Macdonald, its managing director (Webb Proceeding). The primary judge in the Webb Proceeding was also the primary judge in related civil penalty proceedings brought by ASIC against GetSwift and a number of GetSwift’s directors (ASIC Proceeding).
The Webb Proceeding concerned allegations of continuous disclosure contraventions, false or misleading statements and misleading and deceptive conduct by GetSwift and its managing director in relation to announcements issued by GetSwift to the ASX regarding 16 agreements entered into between GetSwift and various customers. The ASIC Proceeding concerned essentially the same causes of action pleaded in the Webb Proceeding regarding 13 customer contracts. Both proceedings dealt with largely the same course of events and underlying facts.
At the time of the GetSwift appeal, the status of these proceedings was as follows:
- the ASIC Proceeding was heard by the primary judge from 15 June 2020 to 15 July 2020, followed by closing submissions on 14August 2020 and 30 September 2020, and judgment was reserved;
- the hearing of the Webb Proceeding was due to commence on 15 September 2020 before the same primary judge, but the hearing was vacated in the light of the disqualification application made on 11 August 2020; and
- the primary judge indicated that he would not deliver judgment in the ASIC Proceeding until he had heard the Webb Proceeding, and would then deliver judgments contemporaneously in both proceedings.
Critical matters and key questions
The primary judge was faced with having to make findings on contentious factual matters that were common to both proceedings. This was in circumstances where:
- there was a core body of documentary evidence common to both proceedings and the judge expressed the view that it was highly likely that factual issues would be determined by reference to those documents;
- by the time of the hearing of the Webb Proceeding, the judge would have been in possession of a substantial body of evidence (the written and oral evidence of 30 to 33 lay witnesses and the opinion evidence of an expert witness) and views about that evidence and the parties’ written and oral submissions, all from the ASIC Proceeding and which would be extraneous to the evidence required to make findings in the Webb Proceeding;
- when preparing judgment in the ASIC Proceeding, the judge will be in possession of extraneous information from the Webb Proceeding in the form of opinion evidence from at least four expert witnesses, views about that evidence and the parties’ written and oral submissions; and
- there are differences as to the lay and expert evidence in each proceeding.
This context gives rise to the following key questions:
- what is the hypothetical fair-minded lay observer’s understanding of the primary judge’s ability to discard extraneous information; and
- whether the hypothetical fair-minded lay observer might reasonably apprehend that the primary judge might not bring an impartial mind to the resolution of the issues in the Webb Proceeding by reason of his having heard, considered and formed views about the evidence and arguments in the ASIC Proceeding.
Resolution of the key questions
The Full Federal Court found that:
- the hypothetical observer would be aware of the commonality of issues and the fact that there are differences in the evidence relied upon and to be relied upon in each of the proceedings;
- irrespective of the judge’s views on the significance of the documentary evidence that is common to both proceedings, the hypothetical observer is not assumed to expect the documentary evidence to be necessarily preferred if there is a conflict between the documentary and lay evidence;
- irrespective of the judge’s views on the significance of the expert evidence in the ASIC Proceeding and the expert evidence proposed to be adduced in the Webb Proceeding (on the issue of materiality for the purposes of the continuous disclosure claims), the hypothetical observer would understand that expert evidence is relevant, would assist the judge and “might be a substantial aspect of the determination of the largely overlapping issues in dispute in each proceeding“; and
- the hypothetical observer might apprehend that the primary judge might be unable to keep the evidence of various expert witnesses compartmentalised so as to not influence his decision, at least subconsciously, in either proceeding.
In all of these circumstances, the Full Federal Court held that:
“The hypothetical observer… might apprehend that it might be diffıcult for any person, even a professional judge, confronted with different and potentially conflicting evidence and submissions in different proceedings (albeit proceedings directed to the same underlying transactions and issues) to decide the Webb proceeding without the contamination of the extraneous information. As a result the hypothetical observer might reasonably apprehend that the judge might be influenced subconsciously by the extraneous information [relevant to the ASIC Proceeding] in deciding the issues in the Webb proceeding.”
Although the hypothetical observer is taken to understand that a judge has the ability to discard the irrelevant, the immaterial and the prejudicial, and decide cases solely on the legal and factual merits of the material that is in evidence, the Full Federal Court held that the human frailty of the decision-maker and the subconscious effect that extraneous information might have in influencing a judge’s final decisions will nevertheless be material from the hypothetical observer’s perspective.
The Full Federal Court was careful to clarify that the primary judge considered the various issues in deciding not to disqualify himself and was properly and selflessly motivated by a desire to achieve great economies if one docket judge could case manage and hear both the regulatory proceeding and the class action when they involve the same underlying facts.
The Webb Proceeding was referred to the National Operations Manager for the allocation of a new trial judge while the primary judge continued with the ASIC Proceeding which he had already heard and for which judgment was reserved.
Australian Law Reform Commission Inquiry
Highlighting the topicality of judicial bias including apprehended bias, the Australian Law Reform Commission has recently been asked to undertake a review of the laws relating to impartiality and bias as they apply to the federal judiciary, to report by 30 September 2021. The Terms of Reference for the ALRC Inquiry note:
- the importance of maintaining public confidence in the administration of justice for all Australians;
- the importance of ensuring that justice is both done and seen to be done in Commonwealth courts and tribunals; and
- the fundamental principles of procedural fairness, including that decision-makers must be independent and impartial.
The ALRC Inquiry is to consider what reforms are necessary or desirable, in particular in relation to the following matters:
- whether the existing law about actual or apprehended bias relating to judicial decision-making remains appropriate and sufficient to maintain public confidence in the administration of justice;
- whether the existing law provides appropriate and sufficient clarity to decision-makers, the legal profession and the community about how to manage potential conflicts and perceptions of partiality; and
- whether current mechanisms for raising allegations of actual or apprehended bias, and deciding those allegations, are sufficient and appropriate, including in the context of review and appeal mechanisms.
The need for reform of the current procedures for determining issues of bias reflects the conundrum of having judges decide disqualification motions in respect of themselves at first instance. In GetSwift, the Full Federal Court said that this “appeal shows that it may be more prudent for an independent mind (or minds) to consider disqualification applications on some occasions” and “this approach may assist to promote confidence in the legal system, which after all is a key rationale for the apprehended bias rule”.
Whether the procedures to determine claims of bias have kept pace with the changing scope of the law will be an important consideration for the ALRC. Former Chief Justice of the High Court of Australia, Sir Anthony Mason, has expressed the view that the current practice of self-disqualification was justified when the only question was whether a judge was actually biased, however, this justification no longer holds now that the bias rule is concerned equally with whether a reasonable apprehension of bias exists. Sir Grant Hammond, former judge of the Court of Appeal of New Zealand, has written that if:
“we assume… an intergalactic jurist on a fact-finding mission around our galaxy, it is diffıcult to see how such a jurist would not feel bound to report this feature of recusal jurisprudence as being strange to the point of perversity.”
In the context of regulatory actions and related class actions or other civil proceedings, the Full Federal Court has confirmed that subsequent related proceedings should not be allocated to and heard by the same judge who has heard a regulatory action a short time before the hearing of the related proceedings, where there are different and potentially conflicting bodies of evidence and submissions and there is the risk of extraneous information.
In GetSwift, the court held that the primary judge who heard the ASIC Proceeding (ie. the regulatory action) should have disqualified himself and referred the Webb Proceeding (ie. the related class action) to the National Operations Registrar for reallocation to a different judge in the Federal Court’s Commercial and Corporations National Practice Area.
The court’s decision upholds the importance of judicial impartiality to the maintenance of public confidence in the administration of justice on the basis of a reasonable apprehension of subconscious bias arising from extraneous information. This was a case where the court concluded that the existing law required disqualification, “despite any countervailing issue of public policy and case management” that might have warranted the same judge case managing and hearing consecutively both the ASIC Proceeding and the Webb Proceeding in furtherance of the overarching purpose to achieve the efficient use of the court’s resources and the avoidance of undue delay, unnecessary cost-burden and inconsistent outcomes on same or similar underlying issues in dispute.
The issue of apprehended bias in GetSwift would be unlikely to arise if both regulatory and class action proceedings were heard and determined:
- concurrently (which would not be expected to occur save in exceptional circumstances); or
- consecutively by the same judge if the same evidence applied in each proceeding (which would ordinarily be unlikely).
To establish a reasonable apprehension of bias involves questions of degree and nuance and turns on the legal construct of the hypothetical fair-minded lay observer’s perceptions of the judicial decision-making in question. That hypothetical observer is attributed with certain knowledge, in particular that a judge is capable of putting aside what is irrelevant, immaterial and prejudicial. Where the alleged apprehended bias is occasioned by extraneous information, the legal test also asks whether the hypothetical observer perceives a risk that the judge might be influenced subconsciously by that extraneous information due to human frailty. The resolution of this tension is a factual question by reference to the context in which the relevant judicial decision-making occurs.
In GetSwift, the substantial volume of different and potentially conflicting evidence across two different proceedings, where the hearings were to be separated by merely two months (albeit directed to the same underlying transactions and issues), provided the basis for concluding that the hypothetical observer might reasonably apprehend the risk of subconscious bias.
However, the approach taken by the Full Federal Court raises issues for clarification that fall within the ALRC’s Terms of Reference:
- the court noted “a degree of artificiality” about attributing the hypothetical fair-minded lay observer with knowledge of the ability to put aside irrelevant and immaterial matters which “may obscure normative standards of behaviour determined by the Court itself”;
- when assessing the objective facts relevant to a disqualification application, greater clarity is needed in how a balance is to be struck between, on the one hand, the subconscious influence of extraneous information and the recognition of human frailty and, on the other hand, “a more robust approach [that] might be taken to the possibility of a judge… being influenced by extraneous information”;
- whether the risk of subconscious bias, occasioned by extraneous information from different and potentially conflicting evidence and submissions across two different proceedings, should be confined to situations where each proceeding is heard within close temporal proximity of each other; and
- where two proceedings involve different and potentially conflicting evidence and submissions that give rise to extraneous information and the hearing of each proceeding is not temporally proximate to the other but separated, for example, by a period of years during which the judge has heard many other unrelated matters:
- whether the risk of a reasonable apprehension of subconscious bias is to be regarded as averted or more effectively mitigated by a judge’s “ability to consider and ultimately decide each case solely on the evidence and argument led in that proceeding”; and
- whether the principle of impartiality and the importance of upholding confidence in the administration of justice should override case management considerations and “a pragmatic or cost-benefit approach to the work of a judge” having regard to the “exigencies of modern litigation” and “modern judges responding to a need for more active case management”.
These aspects of the legal test for apprehended bias and the jurisprudence on judicial bias more generally will need to be revisited once the ALRC’s report is available later this year. Further guidance on the metes and bounds of the test may also emerge when the appeal in Charisteas v Charisteas (which involved apprehended bias on the grounds of conduct and association based on undisclosed communications between primary judge and the respondent’s counsel) is heard and determined by the High Court of Australia later this year.
The author is grateful for the assistance of Christian McDowell in preparing this article.
This article was first published in Inhouse Counsel, Vol 25 No 2, May 2021.