Royal Guardian Mortgage Management Pty Ltd v Nguyen

1. [1]

   BASTEN JA: The appellant, Royal Guardian Mortgage Management Pty Ltd (“RGMM”), was established in October 2000 as a mortgage originator and manager. Its business, relevantly for present purposes, involved the approval of loan applications received from members of the public seeking funds on the security of a mortgage. As a mortgage originator, RGMM was “accredited” by particular non-bank credit providers. It was remunerated by way of a commission paid on settled loans.

2. [2]

   The respondents, Beth Ngoc Nguyen and Ian Stolyar (who were at all relevant times a married couple) were employed by RGMM under separate contracts of employment, Ms Nguyen as a general manager and Mr Stolyar as a senior manager. Ms Nguyen’s employment with RGMM commenced on 12 March 2001 and terminated on 30 August 2005. (She continued to work for a related company, Royal Mortgage Management Pty Ltd (“RMM”) from 1 September 2005 until June 2006.) Mr Stolyar commenced employment with RGMM on 14 May 2001, his employment terminating on 16 June 2005.

3. [3]

   On 29 April 2010 the appellant commenced proceedings against both Ms Nguyen and Mr Stolyar (who may be collectively referred to as “the respondents”) seeking damages for breach of their contracts of employment. Briefly stated, the basis of the claim was that RGMM did not pay commissions to loans introduced by employees, but only where the introducer was an independent broker. It was alleged that the respondents, in breach of their obligations of good faith, channelled loan applications through independent entities associated with them, thereby obtaining commissions in excess of $2 million which would otherwise not have been paid.

4. [4]

   The respondents not only denied the wrongdoing alleged, but brought a cross-claim against RGMM for bonuses and shares in the profits of the company to which they said they were entitled, but which had not been paid.

5. [5]

   The claims and cross-claims were heard by Adams J in the Common Law Division, the trial running from 20-29 May 2013. A lengthy and detailed judgment was delivered one year later. The claims by RGMM were dismissed and each of the respondents obtained a judgment on the cross-claims in amounts which, with interest, were, in round terms, $1.9 million in favour of Ms Nguyen and $970,000 in favour of Mr Stolyar. [1] Orders in those amounts were entered on 24 September 2014. Costs orders in favour of the respondents were entered two days later.

Issues on appeal

1. [6]

   The grounds of appeal may be grouped in three categories, namely, (a) complaints of procedural unfairness and apprehended bias, (b) challenges to findings with respect to the terms, obligations and alleged breaches of the contractual arrangements between the parties (primarily alleging errors in fact finding) and (c) challenges to the calculation of damages.

2. [7]

   The factual basis for the allegation of procedural unfairness rested upon the frequency and nature of the involvement by the trial judge in the cross-examination of Mr Tomazin (the principal witness for the appellant) and the cross-examination of Ms Nguyen. In addition to procedural unfairness, this conduct was said to give rise to a reasonable apprehension of bias, though not actual bias.

3. [8]

   There was a second basis for alleging an apprehension of bias, namely an association between the trial judge and Bruce McClintock SC (senior counsel for the respondents), which resulted in the judge engaging Mr McClintock to represent him in defamation proceedings instituted by the judge, albeit a matter entirely unrelated to the present proceedings.

4. [9]

   Identification of the issues raised on the appeal leads to a significant question as to how they should be addressed. On one view, convenience would dictate that the conventional challenges, at least in relation to the contractual arrangements and the breaches of contract, should be addressed first. That is because an assessment of the nature and significance of the judge’s interventions in the course of the trial are not readily assessed, absent a detailed understanding of the issues. On the other hand, the High Court has stated that the issue of bias (and by extension procedural unfairness) should be addressed first. In Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd, [2] a case involving a substantive claim relating to copyright in architectural plans, Gummow ACJ held that the Full Court of the Federal Court had fallen into error by dealing first with the substantive issues and then with the alleged appearance of bias on the part of the trial judge. He continued: [3]

5. [10]

   Callinan J expressed the same view in language similar to that of Gummow ACJ. [4] The same principle was articulated in the joint reasons of Kirby and Crennan JJ: [5]

6. [11]

   The suggestion of the appellant being put to an “election” is troubling. No authority was cited for that proposition, nor was it adopted by other members of the Court. The rationale appeared in the following statement that a defect in the administration of justice should not go unremedied. However, there is no defect until the Court finds it to be so and in principle (as discussed below) the parties can waive such a defect. [6] Indeed, “election” assumes that to be the case.

7. [12]

   The appellant was not put to an election in the present case, although no doubt it could have been raised with the parties after judgment was reserved, if that had been thought necessary. (The Court is not aware of any case where an election was imposed.) It is not necessary to pursue the question of election further, because, to the extent that the appellant is entitled to succeed on substantive issues, those issues turn to a large extent on questions of credibility, which cannot be resolved in this Court and which will, inevitably, call for a retrial.

8. [13]

   There is, however, a separate issue which will arise if claims of procedural unfairness or apprehension of bias are upheld. Because there will necessarily be a retrial, the matter will return to the trial court, possibly without any comment upon the validity or otherwise of the substantive grounds of appeal. Thus, a challenge based on a reasonable apprehension of bias (as opposed to actual bias), even if upheld, may be seen as casting no doubt upon the findings made by the trial judge as properly made on their merits. On the other hand, whenever a matter is remitted for a retrial, it is preferable that the appellate court restrict its assessment of the evidence to matters necessary to the finding of error.

Procedural unfairness

1. [14]

   Appellate challenges to trial judgments, based on complaints of excessive intervention by the trial judge in the course of the hearing are never easy to evaluate. Appellate reasoning has, on occasion, appeared to conflate different principles. On other occasions, the quest for a principled approach appears to have led to unnecessary categorisation. However, it is not in doubt that different considerations will apply to a judge only trial, in contrast to a trial with a jury. Similarly, different considerations will apply to judicial intervention in the course of an opening or final submissions, as compared to intervention in the questioning of witnesses. The present case was a civil trial without a jury and the interventions complained of came in the course of the evidence given by the principal witness for the appellant (Mr Tomazin) and the principal witness for the respondents (Ms Nguyen).

2. [15]

   Further, colourful language does not always elucidate principle, particularly when taken out of context. Speaking of a judge who himself conducts the examination of a witness, Lord Greene MR said in Yuill v Yuill, [7] “he, so to speak, descends into the arena and is liable to have his vision clouded by the dust of the conflict.” In R v T, WA [8] Kourakis CJ said of this passage:

3. [16]

   The image of a melee in a dusty amphitheatre is so far from the reality of the court room that it should be abandoned. However, the explanation given by the Chief Justice suggests that appellate intervention on this ground may be rare. Yet there will be circumstances when appellate intervention is not only justifiable, but necessary. Quite apart from doubts as to the capacity of the judge to assess demeanour in such circumstances, there are important institutional characteristics at stake, as helpfully identified by Lord Brown in Michel v The Queen. [9] In such a case, as Lord Brown explained by reference to the position of the appellant: [10]

4. [17]

   Lord Brown continued, referring to the judge’s role: [12]

5. [18]

   These statements are not merely aspirational; they describe the judicial function. Nor is the problem necessarily analysed as one involving an appearance of pre-judgment. The idea that the judge must maintain the appearance of impartiality, by maintaining an appropriate degree of detachment, are essential aspects of his or her function as the officer presiding in the court. Nor is it just a matter of maintaining his or her capacity to assess the demeanour of witnesses, although that is undoubtedly important. As noted by Lord Greene MR in Yuill v Yuill, in the passage to which reference has already been made, “the demeanour of a witness is apt to be very different when he is being questioned by a judge from what it is when he is being questioned by counsel”.

6. [19]

   As explained by Vanstone J in Lockwood v Police, [13] “the intervention may make it impossible for defence counsel to properly present the defence, or it might impede a witness in giving his account in such a way as to do himself justice.” Indeed, pressure from the judge (even if not consciously applied) may result in a witness making concessions which would otherwise not have been made. Whether or not the concession was justified in a particular case will not readily be assessable, especially by the judge who obtained it. Most people will seek, to some degree, if not to ingratiate themselves with, at least to avoid antagonising, the person in authority with the power to determine the fate of their litigation.

7. [20]

   It is this aspect of the problem which may properly be characterised as a potential breach of procedural fairness, rather than a form of pre-judgment. That distinction was articulated by the High Court in RPS v The Queen. [14] In joint reasons, Gaudron ACJ, Gummow, Kirby and Hayne JJ stated: [15]

8. [21]

   The ground of appeal relied upon as demonstrating a denial of procedural fairness contained the following particulars:

9. [22]

   As demonstrated by Ward JA, a perusal of the transcript reveals that these particulars were made good. [16] Interventions may be found on almost every page of the transcript, some involving antagonistic and argumentative cross-examination of Mr Tomazin, others providing an opportunity for Ms Nguyen to explain potentially damaging evidence. I agree with the conclusion reached by Ward JA that these interventions rendered the trial unfair. [17]

Waiver

1. [23]

   The next question is whether the failure of senior counsel for the appellant to take issue with the interventions constituted a form of “waiver”, thus precluding the appellant from challenging the judgment on this ground.

2. [24]

   The concept of “waiver”, as applied in this context, is by no means easy to state. Most of the cases in which the concept has been developed and applied involved an apprehension of bias. Not all bias cases involve pre-judgment, but those that do are closest to the concept in its application to procedural unfairness of the kind under consideration. Thus in Vakauta v Kelly [18] the High Court was called upon to consider whether references by the trial judge to the defendant’s doctors as “that unholy trinity”, being part of the “usual panel of doctors who think you can do a full week’s work without any arms or legs” and whose “views are almost inevitably slanted in favour of the [insurer] by whom they have been retained, consciously or unconsciously” demonstrated a reasonable apprehension of bias. [19] However, speaking generally, and not with respect to those particular remarks, the joint reasons of Brennan, Deane and Gaudron JJ stated: [20]

3. [25]

   That statement should not, however, be read out of context: it was not applied in the circumstances of the case itself. Thus, the joint reasons continued, having noted that there had been no clearly stated objection when the statements were made: [21]

4. [26]

   There are, therefore, two significant features of Vakauta which need to be borne in mind in the application of the principle regarding waiver. First, there was a precise point in time at which the appellant could have identified an element of pre-judgment, when there was a reasonable opportunity to object. Secondly, the judgment itself may revive the earlier appearance of bias, in which case, there being no further opportunity to take objection, the ground is available on appeal.

5. [27]

   In other cases, of which the present is an example, no inference as to bias or indeed unfairness can be reached at a specific point in time. As Kirby and Crennan JJ noted in Concrete: [22]

6. [28]

   In applying the stated principles to the case, the joint reasons noted that there was nothing in the remarks of the trial judge “taken individually, or considered cumulatively” which gave rise to a reasonable apprehension of bias. [23] In a similar vein, Callinan J noted that the Full Court of the Federal Court “was right in determining this issue to look not only at the course of the trial, but also at the reasons for judgment, and to read them together to see whether the cumulative effect was one of apparent bias.” [24]

7. [29]

   That statement was consistent with the following observations of Toohey J in Vakauta: [25]

8. [30]

   Applying those principles to the present case, there are three obstacles in the way of a conclusion that, by failing to object, counsel for the appellant effectively waived his client’s right later to take the point that the trial had been unfair.

9. [31]

   The first difficulty is the identification of a point in time at which objections should have been taken, absent which any right of appeal based on the unfairness of the trial was deemed to have been waived. Counsel is not generally expected to maintain a running commentary on how the judge is handling a trial, nor should such conduct be encouraged. While it is possible to say at the end of the trial that there has been unfairness, that, as in the present case, will be an evaluative assessment made on the basis of the course of the trial taken as a whole, even if it is not necessary for that purpose to refer to the judgment. The unfolding situation is quite different from one where a single incident, or known association, is relied upon. [26]

10. [32]

    Secondly, it could hardly be said that counsel for the appellant stood by, taking no point about unfairness, and saving the challenge for an appeal in the event that his client’s case was dismissed. It was clear that senior counsel for the respondents, whose cross-examination of Mr Tomazin was regularly interrupted, sought on occasion to recover control of the process, unsuccessfully. It would have been awkward, to say the least, for senior counsel for the appellant to intervene in his opponent’s cross-examination to object to the course being taken by the judge. Even supposing that course should have been taken at some point, it does not follow that the appellant’s right to a fair trial was “waived” because its counsel did not intervene.

11. [33]

    Thirdly, the full extent to which the risks associated with the judge’s interventions were to materialise was not apparent until the judgment was delivered. Whether or not he had pre-judged issues, he found in several respects that Mr Tomazin’s evidence was dishonest. He did that, despite expressly disavowing reliance on Mr Tomazin’s demeanour. However, the difficulty of judging Mr Tomazin’s demeanour (and hence credibility) was partly a result of his own constant interventions in the cross-examination. In effect, Mr Tomazin was deprived of the opportunity to satisfy the judge by his demeanour in the course of cross-examination, free from judicial intervention, that he was entirely honest. On the other side of the coin, the judge accepted the evidence, particularly of Ms Nguyen, of whom he formed a “generally favourable view”. Again, the appellant was deprived, through interruptions of the cross-examination of Ms Nguyen, of the opportunity to persuade the judge to a different view.

12. [34]

    In these circumstances, waiver was a false issue: it could not be said that there was some inescapable point at which counsel for the appellant had either to request the judge to desist from his intrusive interventions, or to abort the trial, absent which no complaint of unfairness could be raised on appeal. The trial was unfair and the judgment must be set aside on that ground.

Apprehension of bias

1. [35]

   In R v T, WA, Kourakis CJ acknowledged “the subtlety of the distinction between the bias ground and the dust of conflict ground as I have articulated it.” [27] It will be recalled, that the Chief Justice identified the “dust of conflict” ground as conduct demonstrating a compromised capacity to adjudicate on the issues raised at trial. Although it may be possible that both grounds are satisfied in a particular case, it is also possible that a particular case is better judged by reference to one ground than the other. In any event, a ground more broadly identified as the unfair trial ground is also more clearly distinguishable from an apprehension of bias than the more limited concern about a compromised capacity to adjudicate.

2. [36]

   An example of circumstances where there may be an unfair trial, but no necessary element of pre-judgment, is continual disruption of the orderly flow of evidence on both sides of the record. On one view that occurred in the present case, in so far as the interruptions occurred both in the evidence of Mr Tomazin and that of Ms Nguyen. On the other hand, although it is true that many interruptions were neutral, many were not. Further, on balance, the interruptions in the questioning of Ms Nguyen tended to be sympathetic rather than antagonistic.

3. [37]

   There was an argument that the various interventions, especially when viewed in the light of the findings in the judgment, some of which may be characterised as glaringly improbable, might have led an intelligent lay observer to be satisfied that the judge might not have determined the case impartially on the basis of the evidence presented. However, it is sufficient that the appeal be disposed of on the basis that the interventions were so extensive as to prevent the fair and orderly presentation of the evidence, with the result that the appellant did not enjoy a fair trial according to law.

4. [38]

   Some of the authorities reveal a willingness to accord a trial judge significant leeway in his or her interventions in circumstances where counsel are conducting the trial ineptly, potentially causing significant delays and prolongation of the hearing and themselves disrupting the orderly presentation of evidence. It is appropriate to add, although it hardly needs saying given the experienced counsel involved on each side at trial, that this was not such a case.

5. [39]

   On occasion appellate courts have also been sympathetic in circumstances where the trial judge appears to have been confronted by a witness who was prevaricating and failing to answer proper questions. Again, a reading of the transcript does not suggest there was any such element in the present case and, in any event, a display of judicial frustration with a particular witness is fraught with danger.

Apprehended bias – communications with one counsel

1. [40]

   There was a second ground of appeal relating to apprehended bias, based on the relationship between the trial judge and counsel for the respondents. The factual background to this issue has been recounted by Ward JA and need not be repeated. [28]

2. [41]

   There are three aspects of this matter which are troubling. The first is that the judge sought to have a private conversation with one counsel to the exclusion of the other on the first day of the trial, albeit with the consent of the other, but without revealing the subject matter of the proposed discussion. Given that there had been reference to the judge’s defamation proceedings in the course of the exchanges at morning tea, it might be inferred that that was the proposed topic, but, if so, then the subject matter could readily have been disclosed. The fact that it was not (and still has not been) identified leaves the topic of discussion as a matter for speculation on the part of the hypothetical lay observer aware only of the facts as revealed in the evidence.

3. [42]

   Secondly, the request made on 22 May 2014 that both senior counsel attend at the delivery of judgment, together with the conversation which occurred in the corridor after judgment had been delivered on 28 May, revealed that the trial judge had been intending to brief senior counsel for the respondents in relation to his own defamation proceedings at some stage whilst judgment was reserved. The email exchanges revealed that a mediation had been planned at a teleconference on 8 May, and it may be inferred from an email of 20 May from the solicitor for the judge that an intention had already been formed to brief Mr McClintock for the mediation. The evidence certainly did not reveal any private communications between the judge and Mr McClintock between morning tea on the first day of the trial and the date on which judgment was delivered. Although the respondents had an interest in preserving the judgment against this particular challenge, they did not respond to the ground of appeal, nor supply any further evidence, for example as to the absence of any contact between the judge and counsel in the period identified.

4. [43]

   On this material, I agree with Ward JA that, taken in isolation, it has not been demonstrated that the fair minded lay observer might have taken the view that the judge might not decide the case impartially on the evidence presented at trial.

5. [44]

   The third issue requires a cumulative assessment of this information together with the extensive interventions in the trial which tended to be favourable to the respondents and critical of the evidence of the appellant’s principal witness. Again, I agree with Ward JA that it is unlikely that, even on the test of possibilities, the lay observer might link all of the material so as to form the relevant view as to possible pre-judgment. However, because of the earlier finding, it is not necessary to reach a firm conclusion in this regard.

Challenge to factual findings

1. [45]

   If the reasoning set out above as to the unfairness of the trial, as to which more than one view is undoubtedly open, were not to be accepted, then I would agree with the reasoning and conclusions of Ward JA in respect of the grounds of appeal challenging the credibility findings.

2. [46]

   Where the findings of fact depend upon the oral evidence of the witnesses given at trial, it is necessary to give full weight to the advantages enjoyed by the trial judge in assessing the testimony.

3. [47]

   This Court has commented on more than one occasion on how the language adopted in Fox v Percy [29] should be understood by a court exercising its statutory functions on an appeal by way of rehearing, pursuant to s 75A of the Supreme Court Act 1970 (NSW). That case is often cited in submissions as authority for the proposition that a challenge to factual findings must depend upon a finding of error based on “incontrovertible facts or uncontested testimony”, [30] or that the decision at trial is “glaringly improbable” or “contrary to compelling inferences” in the case. [31] However, it is not correct to read that language as imposing a gloss upon the powers conferred by the statute. It is clear that such language was not intended to exclude intervention by the appellate court in circumstances where error could otherwise be demonstrated. [32]

4. [48]

   Although one may properly describe those findings identified by Ward JA as erroneous as being contrary to compelling inferences or even, perhaps, glaringly improbable, there are two further reasons why this Court is entitled to and should hold those findings to be erroneous. First, it follows from the matters identified above going to the unfairness of the trial that the trial judge did, in the language of Kourakis CJ, deprive himself of the capacity to make sound judgments as to the credibility of the contending testimony. Secondly, as demonstrated by Ward JA, the reasoning by which particular findings were made (and particularly in reference to the findings that Mr Tomazin was dishonest) was unpersuasive.

Costs

1. [49]

   Senior counsel for the respondents asked the Court to reserve the question of costs. In the event, it is difficult to see any reason why costs would not follow the event; the Court can assume an application would be made under the Suitors' Fund Act 1951 (NSW). Because further expense should be avoided if possible, the Court should order that the costs in this Court be paid by the respondents and that they should have a certificate under the Suitors' Fund Act. If some different order is sought, the parties have the usual 14 days to file a notice of motion seeking to vary that costs order, or to agree a different outcome.

Orders

1. [50]

   The judgment of the trial judge of 28 May 2014 and the consequential orders made on 24 September 2014 and (in relation to costs) 26 September 2014 should be set aside. The respondents must pay the appellant’s costs in this Court and should have a certificate under the Suitors' Fund Act. Both the claims by the appellant and the cross-claims by the respondents must be reheard. Costs of the first trial should be in the discretion of the judge hearing the retrial.

2. [51]

   WARD JA: The appellant, Royal Guardian Mortgage Management Pty Limited (RGMM), is a company described as a “wholesale aggregator”. At the relevant time, its mortgage lending business involved the aggregation of loan applications submitted to it by intermediate financial advisors and mortgage brokers (the introducing brokers) and the referral of those applications to another entity, Royal Guardian Mortgage Corporation Pty Limited (RGMC). RGMC was “accredited” with various lending institutions and would in effect place the aggregated loans with the ultimate lenders (sometimes referred to as funders). RGMM, apparently in some informal arrangement with RGMC, the details of which were not made clear, operated its business through or with the benefit of the accreditation secured by RGMC from the respective lenders.

3. [52]

   With minor exceptions such as loan applications submitted by members of its staff, RGMM did not receive loan applications directly from borrowers, unlike RGMC, which had what was described as a retail (as opposed to wholesale) operation.

4. [53]

   RGMM received from the lenders both upfront commissions, calculated as a percentage of “settled loans” per month, and “trail” commissions, calculated as a percentage of the borrower-paid interest on the loan book per month. It also received loan application fees from the borrowers. It paid the introducing brokers a percentage of the upfront commissions it received, as remuneration for the referral of the loan applications to it. It also paid introducing brokers a percentage of the trail commissions.

5. [54]

   It was RGMM’s practice to enter into accreditation agreements with introducing brokers. Some of those accreditation agreements were in evidence and the respondents accepted that from at least around 2005 it was standard practice (RGMM says it was a requirement) that those accreditation agreements provide for introducing brokers to hold insurance.

6. [55]

   RGMM employed the respondents (a married couple, Ms Nguyen and Mr Stolyar) from around 2001 to 2005, as General Manager and Senior Manager respectively. Their roles may broadly be described as including developing and maintaining relationships with introducing brokers so as to enlarge RGMM’s business, and performing “underwriting” functions in relation to the loan applications referred to RGMM by introducing brokers (which functions included assessing the loan applications for compliance with the relevant lender’s requirements).

7. [56]

   Mr Tomazin was a director and founder of RGMM and founder of RGMC. In June 2005, after some tension had arisen between Mr Tomazin’s business partners and the respondents, Mr Stolyar resigned from RGMM. He nevertheless continued to refer loan applications to the company for a period of time.

8. [57]

   In August 2005, a new company, Royal Mortgage Management Pty Limited (RMM), was established. Its function seems to have been understood as the same as that of RGMM. Ms Nguyen’s description of the RMM arrangement was that it was one under which RGMM continued to trade under a new company name. Ms Nguyen became a director and shareholder of that company and it is not disputed that she was for a time employed by it.

9. [58]

   By June/August 2006, Ms Nguyen had ceased to perform any work for either RGMM or RMM. Ms Nguyen returned to employment with the mortgage originator for whom she had previously worked, Mortgage Portfolio Management Pty Limited (MortgagePort).

10. [59]

    In early 2007, Mr Tomazin and Ms Nguyen (somewhat informally over a dinner at which Mr Stolyar was present) discussed an arrangement pursuant to which she might return to work for RGMM. Nothing, however, eventuated from their preliminary agreement to that effect.

11. [60]

    In 2010, RGMM commenced proceedings against the respondents, seeking damages for the alleged breach by them of their respective employment contracts and of the statutory duty they owed to it as employees pursuant to s 182 of the Corporations Act 2001 (Cth).

12. [61]

    The breaches were alleged to have occurred between 11 February 2003 and 12 May 2005 (statement of claim at [10]) and related to the respondents’ involvement in the referral of certain loan applications (the Dibelle referrals) to RGMM. The Dibelle referrals were made, first, under the business name “Dibelle Finance” which was registered to Ms Chahine, a then friend of Ms Nguyen, and, later, through a company, Dibelle Financial Services Pty Limited (Dibelle Financial Services), the sole shareholder and director of which was Mr Stolyar’s mother (Mrs Faina Stolyar). I will refer to the introducing brokers for the Dibelle referrals as the “Dibelle entities” although Dibelle Finance was not an entity as such; rather, it was a business name under which the respondents referred loan applications “indirectly” (i.e., not in their own names) to RGMM from around 2004 until the incorporation of Dibelle Financial Services.

13. [62]

    At the hearing the respondents did not dispute that they performed the broking work for the Dibelle referrals. Mr Stolyar’s evidence was that Dibelle operated by “word of mouth”. Mrs Faina Stolyar gave evidence that she introduced many potential borrowers to her son. The respondents initially denied, but ultimately conceded, that they had received significant financial benefits from the making of those referrals. Of the money paid to the Dibelle entities in commissions by RGMM (around $2m in total), a not insubstantial amount was credited to the benefit of the respondents’ mortgage account. Mr Stolyar ultimately accepted that it was in the order of about $300,000-$500,000. He characterised these payments variously as being by way of gift or as a tax free loan. (RGMM argued that the fact that no tax was paid by the respondents on that income was a matter adverse to their credibility.)

14. [63]

    A critical dispute at trial was whether Mr Tomazin was aware of any association or connection between the respondents and the Dibelle entities at the time when RGMM was receiving the Dibelle referrals and paying the introducing broker commissions to the Dibelle entities in respect of those referrals. Mr Tomazin denied any such awareness but the primary judge determined this issue in favour of the respondents.

15. [64]

    RGMM alleged that it had suffered loss and harm as a result of the respondents’ breaches because, had the respondents made the Dibelle referrals to it directly, rather than causing them to be made through the Dibelle entities, RGMM would not have been obliged to pay, and would not have paid, broker commissions to the Dibelle entities and would not have been obliged to pay any equivalent amount to the respondents (statement of claim at [16]).

16. [65]

    However, RGMM’s position, as explained at the hearing of the appeal, was that, had the Dibelle referrals been made directly to it through the respondents as employees of RGMM, those loan applications would then have been referred to another broker for processing (because of the perceived conflict of interest in the respondents processing for approval loan applications they had themselves referred to RGMM) (T 19.21) (see also Mr Stolyar’s description at [36] of his affidavit of 24 October 2012). I interpose that if that were the case, then brokers’ commission would presumably still have been paid to that other entity in respect of the referrals and the only difference would seem to be whether or not the respondents were entitled to a bonus in respect of those referrals. However, while RGMM seemed to accept that proposition in the course of argument in this Court (T 19.17-43), it was not asked to make any express concession in that regard and did not do so.

17. [66]

    An issue also seems to have arisen during the trial (though this was not part of RGMM’s claim as pleaded) as to whether the Dibelle referrals were in large part comprised of applications by entities that had already been the subject of loan referrals to RGMM (and hence were not new referrals introduced through the efforts of the Dibelle entities). Such a complaint presumably went to the question of whether any bonus would strictly have been payable in respect of those loans under the terms of the respondents’ respective employment contracts. However, Mr Tomazin’s position seems to have been that, from a practical point of view, bonuses (to either Ms Nguyen or Mr Stolyar) were paid on all loan referrals (whether or not brought to RGMM as part of their respective portfolios). Hence this point of distinction seems moot.

18. [67]

    In any event, what RGMM claimed, by way of loss and damage suffered as a result of the respondents’ alleged breaches, was the sum of $2,093,124.36 that it had paid as commission to the Dibelle entities (statement of claim at [22]).

19. [68]

    The respondents denied the alleged breaches and in turn cross-claimed for damages for alleged breaches by RGMM of their respective employment contracts and other agreements with RGMM. Their cross-claims related to the alleged non-payment of bonuses and profit shares to which they claimed to be contractually entitled under various agreements. Ms Nguyen claimed entitlement to a share of profits extended to the profits of both RGMM’s business and those of RMM, in each case after her employment with RGMM had ceased in 2005. Mr Stolyar claimed for bonuses which extended to a time after he had resigned from RGMM but during which time he was still referring loan applications to RGMM.

20. [69]

    RGMM denied liability to pay the bonuses and profit shares claimed by the respondents. It also successfully pleaded a Limitation Act 1969 (NSW) defence in relation to causes of action or damages accruing prior to 20 June 2005.

21. [70]

    As to the claimed bonuses, RGMM maintained (though this was not expressly pleaded in its defence to cross-claim) that any entitlement of the respondents to the payment of bonuses had been satisfied by payments made by it at their direction to a company known as Bethian Enterprises Pty Limited (Bethian). The respondents denied this. They asserted that the Bethian payments were management fees payable under a separate management agreement between RGMM and Bethian and hence that the making of those payments (which were almost but not quite in the same amount as the claimed bonuses) did not discharge RGMM’s liability under their employment contracts to pay bonuses. As to the claim for profit share, RGMM contended that no liability had arisen and alternatively, in the case of Ms Nguyen, that her breach of the employment contract precluded an entitlement to profit share.

22. [71]

    The primary judge found for the respondents on their cross-claim and against RGMM on its claim (Royal Guardian Mortgage Management Pty Limited v Nguyen [2014] NSWSC 665). His Honour awarded damages in favour of Ms Nguyen in the amount of $1,092,947 (plus interest subsequently calculated at $837,066.91) and in favour of Mr Stolyar in the amount of $545,767 (plus interest subsequently calculated at $425,989.74).

23. [72]

    RGMM appeals from his Honour’s decision on various grounds, including denial of procedural fairness and apprehended bias, and seeks orders setting aside his Honour’s judgment and remitting the matter for a new trial. In the context of the grounds of appeal asserting a denial of procedural fairness/apprehended bias, RGMM has sought leave to adduce further evidence pursuant to s 75A(7) of the Supreme Court Act 1970 (NSW).

Background

1. [73]

   It is convenient at this stage to provide the following further summary of the chronology of events and the content of the various employment contracts.

2. [74]

   Mr Tomazin established RGMC in 1998 and RGMM in 2000. He was a director of RGMM and held approximately half the shares in that company. His business partners were Mr Pusic and Mr Pondelak, who each held shares in the company.

3. [75]

   Prior to her employment with RGMM, Ms Nguyen was employed as Credit Manager at MortgagePort, a mortgage manager for residential home loans funded by a particular lender ([20] of her first affidavit made 29 October 2012). Ms Nguyen’s evidence ([27] of that affidavit) was that Mr Tomazin approached her in late 2000 and informed her that he wanted her to run a new company he had set up; that it would deal only with brokers; and that his aim was to increase the overall volume of the group’s business.

4. [76]

   The significance of increased business volume, as noted by the primary judge at [4], was that the greater the value of loans referred by an originator or introducing broker (the “book”), the lower the wholesale cost of the loans and hence the higher the “margin” available to the mortgage manager on the final interest rate to the borrower. One advantage of a higher margin was that it enabled a reduced interest rate to be offered to the borrower and hence enabled the mortgage originator or manager to compete more effectively for business. Ms Nguyen’s evidence was that Mr Tomazin told her in December 2000 that his aim with RGMM as a wholesale company was to “increase the overall business volume” so that he could get a lower delivery rate from the funders and that, in this way, RGMC (an unrelated company but one that he controlled and in which he held a large shareholding) would be more profitable.

5. [77]

   By letter dated 18 December 2000, on the letterhead of RGMC, Mr Tomazin wrote to Ms Nguyen offering her a senior management position “within our firm” at a salary of $75,000, plus superannuation, “with a generous commission structure for any directly referred successful Applicants”. The description “our firm” was somewhat misleading since Ms Nguyen’s employment contract, headed “Executive Employment Agreement” and dated 12 March 2001 was not with RGMC but, rather, with RGMM. The explanation for this seems to be that Mr Tomazin did not generally distinguish between the companies he saw as part of the so-called “Royal Guardian” group. For present purposes nothing turns on this discrepancy.

6. [78]

   In her employment contract, Ms Nguyen’s position was described as that of “General Manager with the Company [RGMM]” (Recital 2). Her appointment as general manager was for a period of two years unless terminated in accordance with the provisions of the agreement (cl 2.1), and was subject to a probation period of two months (cl 3.1). Her duties were somewhat generically specified (in cl 4.1) as including but not limited to: work “normally conducted by a General underwriter”; work “normally conducted by a relationship manager”; and “any office work which the Company may reasonably ask [her] to do even though it does not fit with the normal duties of her position”.

7. [79]

   Clause 4.3 obliged Ms Nguyen, in performing her duties, to serve RGMM faithfully and diligently and to exercise all due care; to refrain from acting or giving the appearance of acting contrary to the interests of RGMM; to use her best endeavours to protect and promote RGMM’s good name and reputation; and to perform her duties to the best of her ability.

8. [80]

   Relevantly, cl 6.3 provided as follows:

9. [81]

   On 14 May 2001, Ms Nguyen’s husband, Mr Stolyar, also commenced employment with RGMM. He was employed with the designation “Senior Manager”. His employment contract was in substantially the same terms as that of Ms Nguyen, including the same entitlement to a monthly bonus of 0.25% of the sum of settled loans if he brought his own “portfolio (clientele)” to the company and the total sum of settled loans from such portfolio in a calendar month was not less than one million dollars (cl 6.3).

10. [82]

    On or around 23 May 2001, Bethian was incorporated. The respondents were directors and equal shareholders of the company. According to the respondents, Bethian and RGMM entered into an accreditation agreement in June 2001 (the respondents signing on behalf of Bethian and Mr Tomazin on behalf of RGMM). No such document was produced at the hearing. (As will become apparent, this was one of a number of crucial documents on which the respondents relied and of which there was no physical evidence of their existence.) Ms Nguyen deposed in her first affidavit of 29 October 2012 that she had been given a copy of the Bethian accreditation agreement and had placed it in a drawer in her office at Campsie but that she did not then have a copy in her possession and did not know where it was located ([71]). Mr Stolyar also gave evidence of the Bethian accreditation agreement in his affidavit (at [39]-[41]).

11. [83]

    The existence of a Bethian accreditation agreement seems to have had at best a peripheral relevance; in that, if Mr Tomazin knew of and acquiesced in the referral of loans through Bethian, it would arguably cast doubt on his denial of a similar arrangement with the Dibelle entities. However, as will become apparent, the respondents’ own evidence suggested that when Mr Tomazin, or his business partners, learnt of a Bethian loan referral it caused sufficient concern on their part as to a perceived conflict of interest that this was raised with one or both of the respondents by Mr Tomazin (see [98] below). This may explain why, as Ms Nguyen deposed, Bethian did not introduce many clients to RGMM.

12. [84]

    In February 2002, each of the respondents signed a further employment agreement with RGMM. The recitals to those agreements recorded that the parties had agreed to terminate the first employment contract and to sign this new agreement. In Ms Nguyen’s case, she was still described as “General Manager” of the company and her duties were similarly described (though this time by reference to work normally conducted by a “senior underwriter” not “general underwriter” and by a “relationship underwriter” not “relationship manager”) (cll 4.1.1, 4.1.2). It is not suggested that there was any relevant difference in her roles under the successive employment agreements.

13. [85]

    In the respondents’ February 2002 employment contracts, the remuneration clause, instead of simply specifying an annual salary of $75,000 as their contracts previously had done, tied the level of salary to the total sum of settled loans from portfolios brought in by the employee, there described as the “Executive”. The new remuneration clause in Ms Nguyen’s contract, cl 5 provided as follows:

14. [86]

    Clause 5 in Mr Stolyar’s contract was in the same terms (even down to the obvious typographical error in the numerical specification of the salary in cl 5.1) but included an entitlement to a fully maintained company vehicle, the fuel costs for which Mr Stolyar was to bear (cl 5.4).

15. [87]

    Clause 6.3 contained a bonus provision largely in the same terms as before but with a threshold in each case of $2m of “settled loans” from his or her portfolio in a calendar month (in Mr Stolyar’s case there was a typographical error in that the words “one million dollars” were not changed but in numerical terms the amount was specified as $2m and there is no challenge to the primary judge’s finding that the relevant sum was $2m).

16. [88]

    Relevantly, the amount specified as the monthly bonus was in each case stated to include GST: in Ms Nguyen’s contract by the parenthetical addition, after the words “shall be 0.25%”, of “(plus GST)”; in Mr Stolyar’s contract by the parenthetical addition “(and GST)” after the specified percentage. It seems to have been accepted at the hearing that no GST would ordinarily be payable on a bonus payment of this kind to an individual employee.

17. [89]

    According to Ms Nguyen, she became aware in about July 2002 that one of RGMM’s introducing brokers had been approached by someone on behalf of Mr Tomazin, in what she considered to be an attempt to have that broker become directly accredited to RGMC ([93] of her first affidavit). She deposed that she raised this issue with Mr Tomazin and that she told him that she wanted RGMM to trade under a new name so that there was a distinction between RGMM and RGMC ([96]). Ms Nguyen went on to depose that in about October 2002 she had a further conversation with Mr Tomazin about that issue and that she told him that if he did not agree to her proposal she could not see how their working relationship could continue. According to Ms Nguyen, Mr Tomazin then said that he would offer her, in addition to her 0.25% bonus, a profit share arrangement and shareholding at a later date to “tie [her] in” ([97]).

18. [90]

    It seems that the profit share arrangement to which Ms Nguyen deposed Mr Tomazin had offered in October 2002 was formalised in November 2002. On 1 November 2002, Mr Tomazin, together with each of the respondents, signed letters varying the terms and conditions of the respondents’ existing February 2002 employment contracts.

19. [91]

    Ms Nguyen’s contract was varied to increase her salary, effective 1 October 2002, to $125,000 per annum, subject to RGMM “averaging $15 million in settlements per calendar month”. There was a further provision in relation to profit share (consistent with what Ms Nguyen said Mr Tomazin had offered her in October), as follows:

20. [92]

    The 1 November 2002 letters also included bullet point terms to the effect that the name of RGMM was to be changed to Precise Mortgage Management Pty Limited (PMM); that RGMM/PMM was (or were) to be separately accredited for all Macquarie Bank loans subject to its approval; that RGMM/PMM was (or were) to “go under RGMC banner for all Origin loans”; and for entry into a new employment contract in due course once a lease agreement for “the City office” was finalised. A similar variation letter was signed in respect of Mr Stolyar’s contract but without any such provision in relation to profit share.

21. [93]

    On their face, there was nothing to suggest that the 1 November 2002 letters were not intended to take effect in accordance with their terms. However, an issue at the trial seems to have been whether they gave rise to any binding variation of the employment contracts. Nothing turns on this because, as will be seen shortly, on 17 March 2003 the employment contracts for each of the respondents were again the subject of variation agreements.

22. [94]

    In December 2002, a loan application was signed in the names of Ms Nguyen and Mrs Faina Stolyar as joint borrowers for an amount of $500,000. Ms Nguyen deposed that a meeting took place on or around 10 December 2002 between Mr Tomazin and Mrs Faina Stolyar, for part of which she was present, when the loan application was signed ([104]). Mr Tomazin denied ever having met Mrs Faina Stolyar.

23. [95]

    The borrowing was stated in the application form to be for investment purposes, namely for the purpose of raising funds for a share portfolio. However, Ms Nguyen deposed in her first affidavit to having informed Mr Tomazin that she needed to apply for a loan with her mother-in-law for the purpose of Ms Nguyen and Mr Stolyar purchasing a place at Kirribilli ([103]).

24. [96]

    The signed loan application was therefore clearly inconsistent with what Ms Nguyen says she told Mr Tomazin as to the purpose for which that loan was sought. There seems to be no dispute by the respondents that the loan funds were in fact utilised in connection with a residential property purchase (not the acquisition of a share portfolio). Though a small point, this does indicate that Ms Nguyen was prepared, at least in that one instance, to sign a document misrepresenting the true nature of the transaction in question. (Although the point appears not to have been raised, it may be that the investment purpose was so stated in order to avoid the lending being governed by the Credit Code, which may have been a condition of lending approval.)

25. [97]

    According to Ms Nguyen, in December 2002/January 2003 ([105], [106]) Mr Tomazin told the respondents that his business partners wanted to create another wholesale company called Royal Mortgage Direct (RMD) to deal with small introducers. Ms Nguyen says she objected to this and that she said she would not work under those conditions. According to her, Mr Tomazin asked her if she wanted to compete with them (i.e., presumably, his business partners) as well as with her retail clients; said that he did not care where the business came from as long as it all came to RGMC; and said that it was fine if she competed with them “as long as we keep it all within the Royal Guardian family and under RGMC accreditations”. (I emphasise the latter words because Ms Nguyen’s evidence of this conversation suggests that Ms Nguyen was aware of Mr Tomazin’s concern to maintain RGMC’s accreditation with lenders; an issue that later became relevant when the question of potential conflict of interest arose.) Mr Tomazin denied having made any such proposal.

26. [98]

    Ms Nguyen then deposed that in around late January 2003 an issue arose as to a perceived conflict of interest on the part of Mr Stolyar (again consistent with a concern at any perceived conflict of interest in the respondents processing their own loan referrals). Ms Nguyen says that at that time one of Mr Stolyar’s principal roles at RGMM was as credit manager responsible for verifying information in a loan application and recommending approval and, in that capacity, Mr Stolyar had processed a loan application that had been referred to RGMM by Bethian ([108]).

27. [99]

    According to Ms Nguyen, when this issue arose Mr Tomazin suggested that she get a friend or family member to be the face of another new company in place of Bethian which would be accredited with RGMM for her direct deals; said that he did not care to whom the commission was paid as long as the new company was not treated more favourably than any other brokers and she brought in the business; said that the cost to RGMM must be the same; and told her that the arrangement was to be kept secret from his two business partners ([109]). Mr Tomazin similarly denied such a proposal.

28. [100]

    The Dibelle Finance business name was registered on 31 March 2003. Ms Nguyen deposed to the circumstances in which that occurred; in effect as the result of a business proposal put to her friend, Ms Chahine ([115]-[116]). The respondents do not appear to have disputed that Ms Chahine’s involvement was simply to provide a “shopfront” and that they were the ones who performed the broking work involved in referrals from Dibelle.

29. [101]

    Ms Chahine, a hairdresser by occupation, swore an affidavit shortly before she died in which she deposed that she had never carried on a business in the name of Dibelle Finance or Dibelle Financial Services; had never been a loan broker or carried on a business in the mortgage or finance industry; and had never received any money from or in respect of Dibelle Finance. She deposed that Ms Nguyen had told her that she and her husband wanted to open an account in her name; that they would just use her name; and that she would not have to do anything.

30. [102]

    Ms Chahine and Mr Stolyar were joint signatories on the Dibelle business bank account. Ms Chahine’s assertion that she had never received any money from or in respect of Dibelle Finance was shown to be incorrect. Nevertheless there was nothing to suggest that she had herself ever performed any broking work under the Dibelle trading name or referred any loans to RGMM.

31. [103]

    Ms Nguyen’s evidence was that Ms Chahine signed an accreditation agreement with RGMM on behalf of Dibelle Finance at a meeting with Mr Tomazin in or about early February 2003 and that Mr Stolyar had witnessed the signatures of Ms Chahine, Ms Nguyen and Mr Tomazin ([117]). Mr Stolyar deposed ([76]) that he had witnessed Ms Chahine “fill out” and sign the RGMM accreditation agreement “which she sent to RGMM”. He did not depose to any meeting at which he was present with Ms Chahine and Mr Tomazin.

32. [104]

    Ms Chahine’s affidavit did not address whether any such meeting had taken place but the notion of her knowingly signing such an accreditation agreement seems implausible if her affidavit evidence is taken at face value. That said, it is also not inconsistent with her affidavit evidence that she may have signed a document which in fact was (or purported to be) an accreditation agreement on the understanding expressed in her affidavit that the respondents just wanted to “use her name”.

33. [105]

    Mr Tomazin denied signing any such agreement and denied meeting Ms Chahine. No copy of the alleged Dibelle Finance accreditation agreement was produced at the trial. Ms Nguyen, however, deposed to subsequent conversations with Mr Tomazin as to how well the Dibelle arrangement was working for her ([120] of her first affidavit).

34. [106]

    Ms Nguyen deposed (in her second affidavit at [18]) that in or around February 2003 she had a conversation with Mr Tomazin in which he agreed to her proposal that he pay to Bethian “a management fee of 0.25% of that monthly amount [RGMM’s minimum monthly upfront fee of 1% from the funders for all net settlements] in lieu of a 25% shareholding in RGMM”. She maintained in cross-examination that this was a sum distinct from and additional to the bonus of 0.25% on all settled loans.

35. [107]

    The existence of any such agreement was hotly contested. In Ms Nguyen’s first affidavit, after referring to the Bethian accreditation agreement, she also deposed (in what his Honour later noted was said “almost [as] an aside”) that:

36. [108]

    It was in her second affidavit that Ms Nguyen recounted for the first time the February 2003 conversation she said she had had with Mr Tomazin. This conversation was there seemingly defined as the “Bethian Management Agreement”. There was no express reference to any document recording such an agreement nor as to what had happened to any such written agreement (unlike the evidence set out in Ms Nguyen’s earlier affidavit as to the Bethian accreditation agreement – a difference that his Honour nevertheless considered pointed against the conclusion that Ms Nguyen had fabricated her evidence as to the management agreement). Not surprisingly, it seems that up until Ms Nguyen’s cross-examination it was assumed by RGMM’s legal representatives that the alleged Bethian management agreement was an oral agreement. The first time the existence of a written document of this kind was referred to was during Ms Nguyen’s cross-examination. No copy of any document recording any such agreement was in evidence at the trial.

37. [109]

    There was no suggestion that any management services were actually provided by Bethian. However, Ms Nguyen explained the rationale of the alleged management agreement as being that it was in lieu of her being given a 25% shareholding in RGMM as a reward for helping to build up the RGMM “book” ([18] of her second affidavit).

38. [110]

    Mr Tomazin denied that RGMM ever entered into a mortgage management agreement (or accreditation agreement) with Bethian ([99]). There was, however, reference in the accounts of RGMM (on which the primary judge placed weight in reaching his overall conclusion that the respondents’ version of events should be preferred) to the payment of commission to Bethian. Under the heading “Expenses” (see for example the accounts for the year ending 30/6/04) there were separate items referable to “partners”, “directors” and “Bethian”. These items were separate from the item for “salaries”.

39. [111]

    There were also in evidence copies of what were referred to as Recipient Created Tax Invoices (RCTIs) which were prepared by RGMM and addressed to Bethian, in which payment of commission (which Ms Nguyen identified as the management fee – [21]-[22] of her second affidavit) to Bethian was recorded. Those Bethian RCTIs referred variously to “net settlement” and “upfront commission” (“@ 0.25%”). They also included GST.

40. [112]

    On 17 March 2003, each of Ms Nguyen and Mr Stolyar signed further letters of variation in respect of their employment contracts. In Ms Nguyen’s case, the 17 March 2003 letter repeated that which had been the subject of the first two bullet points in her November 2002 variation letter but omitted the further terms relating to the change of company name, Macquarie Bank accreditation and the like. In the case of Mr Stolyar, his salary was again said to be increased to $125,000 effective 1 October 2002 but this time there was no condition that RGMM average any particular amount in settlements per calendar month. There was again no provision relating to profit share of the kind that appeared in the variation to Ms Nguyen’s contract.

41. [113]

    The next relevant point to note in the chronology is that, according to Ms Nguyen, in around July/August 2004, Mr Stolyar said to her that the arrangement with Ms Chahine was not working out and that he did not really trust Ms Chahine. She said that he proposed that his mother (Mrs Faina Stolyar) “buy out” Ms Chahine. Ms Nguyen deposed that she then had a conversation with Mr Tomazin as to the proposal that the Dibelle “book” would be sold to Mr Stolyar’s mother and said that he asked her to arrange for another accreditation agreement to be signed ([127]). Mr Tomazin denied that conversation ([137]) and said that he was overseas from late July/early August 2004 to 3 October 2004.

42. [114]

    Ms Nguyen also deposed to the preparation (by her and Mr Tomazin together) of the accreditation agreement for Dibelle Financial Services (which was incorporated and registered on 21 October 2004 with Mrs Stolyar as its sole director and shareholder – under her maiden name of Faina Lutsker) and to a meeting in October 2004 at which the agreement was signed by Mrs Stolyar and Mr Tomazin in the presence of the respondents ([128]-[130]). Mr Tomazin denied the alleged Dibelle Finance accreditation agreement and denied ever having met Mrs Stolyar. He deposed that he was in Slovenia at the relevant time ( [138]-[140]).

43. [115]

    Ms Nguyen deposed that around the start of April/May 2005, Mr Tomazin’s two business partners conducted an audit of loan files that were awaiting settlement ([133]-[134]). Mr Tomazin agreed that his partners had commenced an audit of RGMM loan files in or about May 2005 and said that he helped complete the audit in late May 2005 which was when he first realised that “there was an issue with the introducer Dibelle” ([141]). Ms Nguyen further deposed that at around the start of June 2005 she was approached by Mr Pondelak who queried her about Dibelle ([135]).

44. [116]

    On 10 June 2005 (at a time when Mr Tomazin said he was overseas), Mr Pusic and Mr Pondelak issued a letter to Ms Nguyen suspending her employment and requesting information in relation to Dibelle. She says she called Mr Tomazin; that he told her to continue working; and that she did so.

45. [117]

    Following this, Mr Stolyar, by letter dated 16 June 2005, resigned from RGMM effective immediately. Mr Tomazin’s account is that the letter of resignation was signed by Mr Stolyar after he had already been given a termination notice ([146]) and that this was “[t]o keep the brokers, prevent disruption and to keep the fiasco from funders and the mortgage insurers”. The resignation letter referred to an agreed waiver of cl 14.1 of Mr Stolyar’s February 2002 employment agreement as long as he introduced “all me [sic] residential mortgage deals exclusively to [RGMM] for the 3 months period ending 16 September 2005”. (That arguably provides the explanation for the continued referral of loan applications by Mr Stolyar to RGMM at least up until September 2005.)

46. [118]

    After Mr Tomazin returned from his overseas trip (the dates of which were the subject of prolonged cross-examination at the hearing, in light of inconsistent statements in his two affidavits about this), RMM was registered (on 19 August 2005) with Ms Nguyen and Mr Tomazin as directors and shareholders. Ms Nguyen commenced working for RMM in September 2005. Mr Tomazin’s evidence (in explanation for his preparedness for Ms Nguyen to continue working for him after, according to him, he had just become aware of the “Dibelle issue”) was, at least in part, that Ms Nguyen had told him that she had nothing to do with Dibelle and that it was a “front company for Ian [Stolyar] so that he could bring in big clients from the city and get paid commissions” ([143]).

47. [119]

    According to Ms Nguyen, in March 2006 there was a conversation between Mr Tomazin, Mr Stolyar and Ms Nguyen in which Mr Tomazin said that his partners wanted to be part of RMM and that if she sold them her shares he would finalise all the money that RGMM and RMM owed her in bonuses and profit share. She deposed that she said she wanted $110,000 for the shares ([146]). By letter dated 6 March 2006, Ms Nguyen wrote to Mr Tomazin that:

48. [120]

    On 9 March 2006, Ms Nguyen signed a transfer of her shares in consideration of the sum of $110,000 stated to have been paid to her by Mr Pondelak. She ceased to be a director (according to the ASIC records, on 9 March 2006). By 9 June 2006 she had either resigned from or had in any event ceased work for RMM.

49. [121]

    In February 2007, after a dinner between Mr Tomazin and the respondents, Mr Tomazin and Ms Nguyen signed a handwritten document headed “Preliminary Agreement bw T Tomazin & B Nguyen” which set out terms of a proposal for Ms Nguyen to return to work with or for RGMM. Those terms included: a salary of $150,000 and superannuation; “0.25% & GST for all settlements (Securitised)”; “Beth to maintain full operational control”, and a profit share arrangement. The document also appeared to contemplate that Mr Stolyar would receive a percentage of income earned on non-securitised products and of existing clients of RMM and RGMM. Nothing eventuated from this so-called “preliminary agreement”.

50. [122]

    Proceedings were commenced on 29 April 2010 by RGMM. There were no demands in writing, at any time up to 2012, by the respondents for payment of outstanding bonus or profit share entitlements, though Ms Nguyen claims that she raised the issue of outstanding amounts with Mr Tomazin on a regular basis and Mr Stolyar also deposes to having raised similar concerns. The first claim in writing for those amounts seems to have been in the amended cross-claim filed by the respondents on 20 June 2012.

51. [123]

    The hearing took place in May 2013. Judgment was handed down on 28 May 2014. The subject matter of the application to adduce further evidence goes in part to what occurred immediately after judgment was handed down. I will consider the application for leave to adduce that evidence in due course (see [151]-[155] below). For the purposes of the chronology, I simply note that it relates to what was said by the primary judge (out of Court) to the parties’ legal representatives during the first day of the hearing (as to personal defamation proceedings then on foot in which his Honour was the plaintiff) and, after judgment was handed down, as to his intention “now” to retain Mr McClintock SC, who had appeared at the hearing for the respondents, to act for him in those defamation proceedings. Those conversations form part of the basis on which RGMM now maintains its apprehended bias claim.

Primary judgment

1. [124]

   His Honour’s ultimate conclusion (stated at [185]) was that, on the “crucial” issues in the case, he accepted the respondents’ evidence rather than that of Mr Tomazin and that tendered on behalf of RGMM. His Honour’s reason for that conclusion is encapsulated in his statement that, overall, he had formed the view that the respondents’ account of their relationship with Mr Tomazin from its commencement to its conclusion “made more sense and integrated the objective elements more coherently and persuasively than Mr Tomazin’s [account]” ([185]).

2. [125]

   His Honour attached particular significance in this regard to the circumstances surrounding the “so-called” Bethian management agreement and “the Dibelle accreditation”. His Honour concluded that the explanations of the respondents, and Ms Nguyen in particular (of whom he said he had formed a “generally favourable view” – [193]), should be accepted ([185]).

3. [126]

   Having thus summarised his overall conclusion, his Honour then set out (from [186]) in more detail the reasoning that underpinned that conclusion.

4. [127]

   In essence, his Honour’s reasoning process was that: having regard to the credit findings made as to the respondents (particularly his favourable view of Ms Nguyen but also his favourable view of Mrs Faina Stolyar) and to the accounting treatment of the payments by RGMM to Bethian, he accepted the respondents’ evidence as to the factual issues in dispute in relation both to the existence of the Bethian management agreement and to the Dibelle entities’ accreditation agreements. On the basis of those findings (and expressly disavowing reliance on Mr Tomazin’s demeanour), his Honour concluded that Mr Tomazin was a dishonest witness whose evidence on those matters should be rejected ([190]). His Honour also said that the adverse view he had formed of Mr Tomazin’s credit on those issues necessarily impinged on the other matters in issue.

5. [128]

   Thus, it was to a large extent because his Honour believed the respondents’ evidence as to the existence of the Bethian management agreement and Dibelle accreditation agreements that he concluded that Mr Tomazin’s evidence was dishonest (and, when he later came to consider the issue of costs, that RGMM had knowingly commenced proceedings that were without foundation).

6. [129]

   Of the two matters to which his Honour attached particular significance in reaching his overall conclusion, his Honour addressed first the Bethian management agreement.

7. [130]

   His Honour considered that there were a number of matters which invited scepticism in relation to the respondents’ claim in this regard: namely, the way in which the existence of the Bethian management agreement had been disclosed by Ms Nguyen; the fact that the respondents had not insisted on documentation of the claimed outstanding bonus payments; and the failure of the respondents to produce any of the crucial documents. As to the last, his Honour expressed the view that the non-production of the Bethian accreditation agreement, the Bethian management agreement and the Dibelle accreditation agreements “strongly suggested” that they never existed ([186]).

8. [131]

   On the other hand, his Honour considered that the accounting treatment of the payments to Bethian gave significant support to Ms Nguyen’s account of events.

9. [132]

   His Honour (from [188]-[194]) made findings as to the credit of the main witnesses from each side. As to the respondents, his Honour said that the differing accounts they gave of important conversations or interactions with Mr Tomazin formed a significant part of his assessment of their veracity ([188]). His Honour considered that it was unlikely that there would have been such differences had the respondents’ accounts been fabricated. As to Mr Tomazin, as already noted his Honour concluded that “because of findings … made as to certain issues”, particularly Dibelle and Mrs Faina Stolyar, Mr Tomazin had not stated the truth about those issues ([190]).

10. [133]

    At [193], his Honour concluded, on the balance of probabilities, that the Bethian management agreement (providing for the payments described by Ms Nguyen) had been entered into and that the payments made to Bethian were made under its terms as a fee distinct from the bonuses to which Ms Nguyen and Mr Stolyar were entitled. His Honour said that he did so “largely for the reasons … already mentioned when dealing with the surrounding facts”.

11. [134]

    His Honour then said that his conclusion in this regard was influenced by two considerations.

12. [135]

    First, the generally favourable view his Honour had formed of Ms Nguyen as a witness on the one hand and the adverse view his Honour had formed of Mr Tomazin’s honesty on the other. Referring in particular to the Dibelle accreditation issue, his Honour said that he was not prepared to accept the truthfulness of Mr Tomazin’s evidence as to any matter of significance except where it was supported by independent evidence ([193]).

13. [136]

    Second, his Honour invoked the principle articulated in Jones v Dunkel [1959] HCA 8; (1959) 101 CLR 298 arising from the failure of RGMM to adduce evidence which his Honour expected would have been available if the case that it propounded on the Bethian management/bonus issue were as Mr Tomazin had asserted. His Honour nevertheless added that, even if it were not for this second matter, he would have been satisfied that the Bethian management agreement existed and that Mr Tomazin had not told the truth about it. Hence the drawing of an adverse inference on this issue was not determinative of the question as to the existence of the Bethian management agreement. That conclusion thus squarely rested on the significance of the reference in the RGMM accounts to “commission” in relation to Bethian and his Honour’s adverse view of Mr Tomazin’s honesty (which in turn was based on the findings made as to the Dibelle accreditation agreement and his Honour’s acceptance of Mrs Faina Stolyar’s account in relation thereto).

14. [137]

    As to the alleged accreditation agreement with Dibelle Financial Services, his Honour was satisfied (on the balance of probabilities to the Briginshaw standard (Briginshaw v Briginshaw [1938] HCA 34; (1938) 60 CLR 336 at 361)) that such an agreement was executed. He rejected Mr Tomazin’s evidence (which he said was dishonest) as to both the loan application in 2002 and the accreditation agreement with Dibelle Financial Services ([200]).

15. [138]

    As to the position before the Dibelle Financial Services accreditation agreement (when Ms Chahine was registered as the holder of the Dibelle Finance business name), while his Honour considered the existence of such an accreditation agreement not directly relevant to the pleaded cases he noted that the conflicting evidence raised issues about credibility and said that he was minded to accept the respondents’ evidence rather than Mr Tomazin’s on this issue as the “more probably truthful” ([202]).

16. [139]

    His Honour did not directly address the question whether the respondents’ conduct, as complained of by RGMM, was a breach of their respective employment contracts. His Honour considered that it was not necessary to consider that issue, given that he was satisfied that Mr Tomazin was at all times “well aware” not only that commissions were being paid to Dibelle but also that it was the respondents’ vehicle for obtaining brokers’ commissions in respect of loans sought by individual borrowers ([195]).

17. [140]

    As to the cross-claim, his Honour upheld (at [204]) the Limitation Act defence as being unanswerable and as limiting the claim for bonuses due and profit share to sums due on and from 29 April 2004. (There is no challenge to this conclusion.)

18. [141]

    His Honour concluded (at [205]-[206]) that the variation to Ms Nguyen’s employment agreement on 1 November 2002 (repeated in the 17 March 2003 variation) was effective conditionally to increase her salary and entitle her to “profit share for any profits over $210,000 per annum as from 1 July 2002” with a set off for losses against future profits.

19. [142]

    His Honour construed cl 6.3 of Ms Nguyen’s amended employment contract as meaning that if the employment ended before the end of the relevant financial year, Ms Nguyen was entitled to a 25% share of the profit attributable to the period of employment, provided that it exceeded the proportion of $210,000 attributable to that period ([207]). His Honour considered that this construction would make sense also because the business was, broadly speaking, steady and exhibited little volatility.

20. [143]

    At [208] his Honour concluded that the effect of the variation was that, if RGMM made a profit of $210,000 (disregarding directors’ fees), Ms Nguyen would be paid 25% of the profit after tax, disregarding the payment of “rent” to RGMC but counting all other “conventional” outgoings, including the directors’ fees. At [209] his Honour held that Ms Nguyen’s profit share was to be calculated on the basis of those amendments.

21. [144]

    As to Mr Stolyar, his Honour concluded that, although he continued to refer loans to RGMM (or RMM) after his resignation on 16 June 2005, he was not otherwise employed by RGMM. His Honour nevertheless said (at [210]):

22. [145]

    His Honour proceeded to give judgment for the respondents on their cross-claim and against RGMM on its claim. His Honour stood over the question of costs to be dealt with after further submissions.

23. [146]

    In a separate judgment published on 26 September 2014 (Royal Guardian Mortgage Management Pty Limited v Nguyen (No 2) [2014] NSWSC 1327), his Honour dealt with the question of costs on the papers. His Honour there identified the relevant finding that he had made as being that:

24. [147]

    His Honour went on to say that it followed from the above finding that the commissions paid by RGMM (to Dibelle) were not extracted in breach of the respective employment contracts. His Honour concluded that, therefore, the statement of claim “did not have an honest basis” and that RGMM, through Mr Tomazin, knew that to be the case ([6]).

25. [148]

    His Honour also concluded that there was no proper basis for defending the cross-claim in respect of bonuses or in respect of Ms Nguyen’s claimed profit share ([7]). His Honour stated that he had not found that Mr Tomazin’s evidence on the issue as to the existence of the Bethian management agreement was dishonest (though I interpose to note that that would seem to have been the effect of what was said in the last sentence of [193] in the principal judgment). However, his Honour then said he considered that it followed, from the finding that the Bethian management agreement existed (and that Mr Tomazin had executed it), that in the absence of a reasonable possibility that his evidence of denial might be a failure of recollection or confusion “or some such explanation” then his evidence was dishonest ([7]). His Honour proceeded so to find, being of the view that a failure of recollection was not “as a matter of reality” an available explanation for Mr Tomazin’s evidence. His Honour thus found that there was no proper basis for defending the cross-claim in respect of bonuses.

26. [149]

    His Honour further found that, in circumstances where RGMM’s case on the profit share claim relied on Ms Nguyen having been in breach of her contract of employment for the conduct alleged against her in the statement of claim, the defence against this aspect of her cross-claim also had no honest basis ([7]).

27. [150]

    His Honour concluded that the respondents must be entitled to indemnity costs, RGMM “knowing full well that it had agreed to the arrangement, the non-existence of which was fundamental to its claim” ([9]). His Honour ordered costs on that basis from 24 March 2011, being the date on which an initial Calderbank offer was made by the respondents (that offer of settlement having been rejected by RGMM). (It seems his Honour would have been inclined to order indemnity costs from an earlier time but did not do so as this had not been sought by the respondents.)

Application for leave to adduce further evidence

1. [151]

   RGMM’s application to adduce further evidence can be dealt with relatively shortly. It was not opposed by the respondents. The evidence comprised the affidavit of Senior Counsel who had appeared for RGMM at the hearing (Mr MW Young SC), as well as certain email correspondence obtained on subpoenas issued to Mr McClintock SC and the lawyers acting for the primary judge in the defamation proceedings, respectively.

2. [152]

   In his affidavit, Mr Young deposed to a conversation with the primary judge on the morning of the first day of the hearing (in which his Honour referred to personal defamation proceedings to which he was a party) and to his Honour’s request to have a private conversation with Mr McClintock on a “private matter unrelated to the hearing”, to which Mr Young said there was no opposition. He also deposed to a conversation between the primary judge and the parties’ legal representatives in the corridor after judgment was delivered in which his Honour referred to the earlier conversation in chambers relating to the defamation proceedings and said words to the effect that his Honour “now” intended to brief Mr McClintock in those defamation proceedings.

3. [153]

   The documentary evidence obtained on subpoenas served on Mr McClintock and his instructing solicitors, respectively, was:

4. [154]

   Leave to adduce the further evidence should be granted. This was evidence that was either not of its very nature in existence at the time of the hearing (namely, the evidence as to the conversation following delivery of judgment and of the potential “holding” by Mr McClintock of the date for mediation in the defamation proceedings, as well as the making of the request that Senior Counsel attend when judgment was delivered) or was evidence the significance (or potential significance) of which could only reasonably be appreciated after the judgment and as a result of the conversation with Counsel outside court (namely the evidence as to the private conversation between Counsel and the primary judge on the first day of the hearing as to the existence of personal defamation proceedings).

5. [155]

   For the reasons that I set out in due course, however, this evidence does not either alone or in context with the complaint of procedural unfairness lead to a conclusion that there was a reasonable apprehension of bias on the part of the primary judge.

Appeal

1. [156]

   The appeal grounds fall into two groups: first, the complaints as to procedural unfairness and apprehended bias (grounds 1 and 2) and, second, the complaints as to errors of law and challenges to the factual findings (grounds 3-22).

2. [157]

   Grounds 1 and 2 of the notice of appeal are as follows:

3. [158]

   Although there is a degree of overlap in respect of these grounds, they are separate grounds of appeal and should be dealt with as such.

4. [159]

   In essence, RGMM’s complaint as to a denial of procedural fairness is that there was excessive judicial intervention in the course of the hearing. In particular, though not exclusively, RGMM complains of the primary judge’s conduct during the course of Mr Tomazin’s cross-examination.

5. [160]

   Although RGMM also contends that this conduct created an apprehension of bias and relies (at ground 1(e)) on the inference that his Honour found an intention at some point from the start of the trial to retain Mr McClintock as his own barrister, ground 1 is not in terms put as a complaint of apprehended bias. In other words, whether or not the nature or level of judicial intervention is found to have given rise to a reasonable apprehension of bias, RGMM argues, as I understand it, that the hearing miscarried due to a denial of procedural fairness arising from the primary judge’s intervention in the course of the hearing.

6. [161]

   Before turning to a consideration of the transcript, it is convenient to refer to various of the cases in which the issue of excessive judicial intervention has been the subject of consideration.

7. [162]

   The starting point is to note the respective roles of judge and counsel as discussed in the English Court of Appeal some half a century or so ago. In Yuill v Yuill [1945] P 15; [1945] 1 All ER 183 Lord Greene MR said (at 20):

8. [163]

   Some decade or so later, in Jones v National Coal Board [1957] 2 QB 55 at 63-64, Denning LJ said:

9. [164]

   In Galea v Galea (1990) 19 NSWLR 263 the issue arose in the context of a complaint as to the judge’s questioning of the party against whom judgment was later given. In that case, an application for disqualification of the judge had been made and rejected at the hearing. Kirby A-CJ (with whom Meagher JA agreed) relevantly summarised the guidelines in complaints of excessive judicial interference as follows (at 281-282):

10. [165]

    His Honour had earlier said (at 278), in a passage to which the respondents drew attention, that:

11. [166]

    The principles articulated in Galea were considered more recently in the Full Court of the Supreme Court of South Australia in R v T, WA [2014] SASCFC 3; (2014) 118 SASR 382 by Kourakis CJ. His Honour, in a case involving intervention by a judge sitting without a jury in a criminal trial, identified three basic grounds on which excessive judicial intervention would give rise to a miscarriage of the trial, those being (see [38]):

12. [167]

    His Honour phrased the “dust of conflict ground” in terms of compromising the capacity of the judge to adjudicate on the basis that it could only ever be a matter of speculation for an appellate court as to whether a judicial officer’s vision was in fact “clouded by the dust of conflict”. His Honour said (at [39]):

13. [168]

    At [40], Kourakis CJ acknowledged that many interventions will attract a consideration of both the bias and dust of conflict grounds but accepted that there would be some interventions which, even though they did not suggest pre-judgment, nevertheless showed that the judicial officer had lost the advantage of judicial detachment which he or she would otherwise have enjoyed as a judge adhering to the common law adversarial method of trial.

14. [169]

    In this Court, the issue of judicial intervention was considered in Ellis v R [2015] NSWCCA 262. There, the Court (Bathurst CJ; R A Hulme and Garling JJ) noted the dangers resulting from excessive intrusion by a trial judge in adversarial proceedings as including the inability of a judge who has “descended into the arena” properly to assess the demeanour of a witness and the possibility of creating the impression of pre-judgment. The Court emphasised that the ultimate question is always whether the intervention was unjustifiable and resulted in a miscarriage of justice.

15. [170]

    Relevantly, in Ellis the Court said (at [65]):

16. [171]

    Finally, I note that in Michel v The Queen [2009] UKPC 41; [2010] 1 WLR 879, Lord Brown, delivering judgment for the Privy Council, identified the ways in which judicial intervention might lead to a miscarriage of justice as including not only interventions that prevent counsel from properly presenting the case but also interventions that prevent the relevant party (there, the defendant) from doing himself or herself justice in the giving of his or her evidence; as well as interventions that deny the basic right underlying the adversarial system of trial, namely that of having an impartial judge to see fair play in the conduct of the case. Lord Brown noted (at [31]) that “[t]he core principle, that under the adversarial system the judge remains aloof from the fray and neutral during the elicitation of the evidence, applies no less to civil litigation than to criminal trials”.

17. [172]

    Lord Brown acknowledged that the judicial officer could properly “clear up ambiguities” and “clarify the answers being given” but said (at [34]) that:

18. [173]

    In the present case, RGMM prepared an appendix of transcript references in respect of instances where it is said there was judicial interference in the cross-examinations of Mr Tomazin and Ms Nguyen, respectively, and in oral submissions went through a number of those instances. I have nevertheless (as urged by Senior Counsel for the respondents) carried out my own review of the whole of the transcript, from which I make the following observations in no particular order.

19. [174]

    First, the judicial interventions commenced at a very early stage in the proceedings (a matter of some relevance given the comments made in Galea as to the stage at which the judge intervenes). Indeed the first intervention came before the start of cross-examination of the first witness (T 82), when the General Manager of RGMC, Mr Stariha, having given his name, address and occupation in chief, was asked by his Honour:

20. [175]

    His Honour’s first interventions during the other witnesses’ evidence also generally commenced at an early stage. In Mr Tomazin’s oral evidence the first intervention came in the course of examination in chief while Mr Tomazin was explaining certain corrections to his affidavit (see T 113-119), and was not limited to the asking of questions in clarification of the corrections but included comments by his Honour on answers given by Mr Tomazin to his Honour’s questions (T 118.36: “I don’t know that that’s an answer”; T 119.47: “That’s a start”). In Ms Nguyen’s evidence, the first intervention came when clarifying the name his Honour should use when addressing her and his Honour commented “Well that’s what you use for business is it?” (questions about which no complaint could be or was made) and then continued during examination in chief (see from T 240.6). In Mrs Faina Stolyar’s case the first questioning came at the start of her cross-examination (see T 419.49) and included questioning as to whether her husband was responsible for the handling of their finances (T 419). In Mr Stolyar’s case, his Honour again asked questions almost from the start of his cross-examination (commencing with what was clearly a question in clarification at T 449).

21. [176]

    Second, his Honour’s interventions continued at regular intervals throughout the whole of the oral evidence of every witness. On my review of the transcript there are relatively few pages on which judicial intervention of some kind or another in the course of the questioning of witnesses does not appear. That means, of course, that his Honour’s questioning was not confined to the witnesses called by RGMM, nor were his interruptions to, and intervention in, counsel’s role confined to that of RGMM’s Counsel (a fact that strongly points against there being any reasonable apprehension of bias).

22. [177]

    Third, it is clear that a large number of the interventions were in the nature of clarification, either of questions asked of the witnesses or of answers given by the witnesses, or to remove ambiguity or doubt. I do not propose to give an exhaustive list of the questions I have characterised as being in the nature of clarification. No doubt there might be debate as to the precise characterisation of various of the interventions in that regard.

23. [178]

    It is also pertinent to note that one cannot discern from the transcript the tone in which such questions were interposed (so, for example, questions commencing along the lines “no, you are being asked” (such as at T 91.26 in the cross-examination of Mr Stariha) or putting his Honour’s own comment on Counsel’s question, such as that (T 184.28) to Mr Tomazin “You’re not being asked about that. You’re merely being asked a chronological fact”.

24. [179]

    The latter example illustrates a further problem in that it appears to involve a mischaracterisation of the question that Mr Tomazin had been asked – that being not as to a chronological fact as such but as to his awareness that after the arrangements set out in the handwritten agreement of March 2007 Ms Nguyen had started working at MortgagePort.

25. [180]

    Leaving aside any complaint about the manner in which such interventions occurred, and perhaps also the complaint as to the volume of the interventions, there can be (and was) no complaint as to questions being put by the primary judge to the witnesses to remove doubt as to their understanding of what was being asked by Counsel or what the witnesses meant by particular answers.

26. [181]

    Fourth, and not far removed from the above category of questions, are questions which appear to be an attempt by his Honour to clarify in his own mind factual matters of potential relevance to the case he would have to decide. For example, his Honour asked questions of Mr Stariha as to the role of a broker (T 90.32-91.50); as to whether there was any special meaning, in Mr Stariha’s business, of the word “profits” (T 95.29); and as to whether accredited brokers were outside brokers (T 103).

27. [182]

    Again, it is unlikely that complaint could fairly have been made of questions of that kind. However, in some instances his Honour appears to have opened up lines of enquiry that had not at that stage been raised (and may or may not have been intended to be explored by Counsel for one or other of the parties). Significantly, an example of those instances includes the questioning by his Honour as to the preparation of the RGMM accounts; questioning that ultimately became of little or no importance to his Honour’s reasoning on the respondents’ bonus claim.

28. [183]

    In the course of Mr Tomazin’s cross-examination (see T 168.24), after Mr McClintock had taken Mr Tomazin to the description in the accounts of RGMM of payment of $1.19m as commission (not as bonus), his Honour commenced a line of questioning which, with only three questions interposed by Counsel, one of which his Honour in any event interrupted, went for about two and a half pages of transcript (T 168.24 - T 170.44) about the preparation of the RGMM accounts. That line of questioning commenced with the question “[s]o that must have been done by the accountant on the basis of material supplied to him by company? The accountant draws these accounts, does he not, or she?”, the answer to which his Honour almost immediately interrupted to pose the further question “[s]o it does so on the basis of materials supplied presumably by your in-house accountant, is that right?”, and then, after the witness accepted that proposition, “[s]o the accountant was given to understand that these sums were being paid to Bethian?”.

29. [184]

    The flavour of this line of questioning can be seen in the transcript (T 1/168.37 - T 1/169-45), in the course of which the primary judge paraphrased (at T 1/39) a question put earlier by Mr McClintock (at T 167.44) as to the legal basis on which Mr Tomazin asserted he had permitted $1.193m in the year ended 2004 and $1.2m in the year 2005 to be paid to Bethian. Mr Tomazin had answered that question by reference to cl 6.3 of the employment contracts. The question put by his Honour (as to why the payments would be characterised as being commission when there was no relationship between the two companies) might be what Mr McClintock’s question was driving at; it was not what he had actually asked. Moreover, it had been answered by Mr Tomazin, albeit that Mr McClintock had then pointed to a difficulty with that answer, namely that cl 6.3 was in the employment contracts with the respondents and that there was no employment (or agency) agreement with Bethian and it was not an active company for writing loans or introducing loans.

30. [185]

    More importantly, on the question of procedural fairness, by the time Mr Tomazin was being told by his Honour that he had not answered Mr McClintock’s question (at T 1/169.46), the role of questioner had been largely taken over by the primary judge. The line of questioning related to the basis on which an external accountant preparing RGMM’s accounts would have formed the view that the payments to Bethian should be described as commission. It might therefore be seen to be a little harsh to accuse the witness, in effect, of not answering a question that had not in terms been put to him and had been asked some 18 or so questions before.

31. [186]

    Moreover, at T 1/169.50, his Honour interrupted Mr Tomazin’s attempt to answer the question he had been accused of not answering. The questioning by his Honour continued through to T 1/170.45, in the course of which the primary judge told Mr Tomazin:

32. [187]

    At this point, Mr McClintock resumed the cross-examination, though with further comment by his Honour, including (at T 172.10) the comment that “Well, I think he has agreed they are commissions”, when what in fact Mr Tomazin had accepted was that the amounts were shown in the RGMM accounts as commission but that in his mind “it was their money and commission bonus was their income and we paid it” (T 171.49); and that he thought bonus and commission were one and the same (see T 169.47; T 171.23).

33. [188]

    The above passages also illustrate my fifth observation from the transcript, namely that (and this is accepted by Counsel for the respondents) there were a number of instances when the transcript reflects (by a dash) that his Honour had interrupted the witness (or the cross-examiner). I accept that it may be that there were instances where the dash might indicate that the two were talking over each other and there was one example where the transcript is unclear in that regard (there being no dash –T 148.47 and T 148.50) but can only sensibly be read as being that the two were speaking at once (see T 168-172). Moreover, some of the interruptions, such as that at T 169.50, can only be read as implying or conveying doubt or scepticism on the part of his Honour as to the answer that was being given.

34. [189]

    Sixth, while a number of the questions asked by his Honour could no doubt have been put, without objection, by Counsel, some of his Honour’s interventions involved putting a series of questions in one, which would surely have been objectionable had they in fact been put by Counsel, or where the questions involved commentary by his Honour and it was unclear what the witness was being asked. An example of the latter can be seen in the passage already extracted above (at T 170.4) when his Honour expressed his difficulty in thinking that any “significant and responsible and proper accounting practice” would not have made a particular notation in the books.

35. [190]

    Examples of multiple questions being put at once can be seen during the cross-examination of Mr Stariha (at T 99.48) about the use of the word “rent” in certain invoices. Following a question in which his Honour asked “[i]f what you say is correct [i.e., that the description of rent encompassed “cost recovery” including elements relating to payment of salaries for administrative staff, rather than simply rent payable for the premises in question] it follows that describing this total amount of rent is misleading”, answered by Mr Stariha with “As the one line, yes”, his Honour then asked:

36. [191]

    Similarly, the questioning by his Honour of Mr Tomazin as to why Mr Tomazin had not recounted in his affidavit what he said he had been told following a review of the files after the respondents left, namely that over 50% of the Dibelle clients had had a pervious loan with the Royal Guardian group, included the following (from T 131.45):

37. [192]

    His Honour then went on to press that point in the following eight questions, interrupting Mr Tomazin’s answers twice, which led ultimately to the following (at T 133.4-6):

38. [193]

    It is difficult not to conclude that, by this stage in the questioning from his Honour, Mr Tomazin may have felt driven to the concession he made above. In passing, I note that in the course of the questions posed by his Honour, he three times referred to the omission from Mr Tomazin’s affidavit being troubling; asked Mr Tomazin to explain it; referred to the “deflection of the clients” as “the pointy end of this charade” (following Mr Tomazin’s statement that the whole Dibelle set up of the business was a “cover up”); and asked Mr Tomazin “perhaps you could concentrate on my question, however” when Mr Tomazin appears to have been answering the very question that he had just been asked.

39. [194]

    Seventh, there were instances where his Honour engaged in debate or discussion with Counsel as to the relevance of a line of questioning, or as to the nature of the case that was being put, while the witness remained in the witness box in the course of cross-examination (c.f. during the cross-examination of Mr Stolyar in which Mr Young’s request that he go outside was acceded to – T 495). So, for example, in the discussion (at T 280/281) as to group certificates, his Honour asked various questions of Mr Young; then (somewhat ironically given the present complaint) said he would bully Mr McClintock equally; and suggested that if the respondents “were not diddling the Tax Commissioner” the group certificates would show that and it would be “game set and I should have thought match”. The fact that the discussion took place in front of the witness appears to have elicited an attempt by Ms Nguyen to offer an explanation (T 281.45) at which point his Honour made clear that “she doesn’t get to make speeches. She answers questions” (T 282.13) (a response hardly partisan to Ms Nguyen, I note).

40. [195]

    See also the further discussion (at T 1/284.27-40) in the course of Ms Nguyen’s cross-examination, and in her presence, as to his Honour’s intention to take judicial notice that a group certificate must be submitted with a tax return, which led to the statement by his Honour as to his present view being that if Ms Nguyen’s income tax returns did not disclose bonuses he would infer that this was because it was not in the group certificate and that it was not in the group certificate because it was not paid (T 285.40), and the lengthy interruption of Ms Nguyen’s cross-examination at T 1/310/311, when his Honour pointed out areas that struck him as problematic for Mr Young’s case. See also the transcript at T 1/296.17; T 1/296.22 - T 1/297.42; and T 1/395.32.

41. [196]

    At one stage, his Honour appears simply to have ignored the intimation by Mr Young in the course of the cross-examination of Ms Nguyen that an explanation as to the relevance of her awareness of the structure of the loans should take place in the absence of the witness (T 1/261.43), though perhaps this was because the request was not pressed.

42. [197]

    That leads me to my eighth observation. There were two instances where Mr McClintock appears to have sought (unsuccessfully) to resume the conduct (or control) of the cross-examination, from which an inference can arguably be drawn as to the perception of the cross-examiner as to the judicial interruptions. So, for example, from T 1/145.20-33, there is an exchange arising out of cross-examination by Mr McClintock of Mr Tomazin as to the inconsistencies in his affidavits in relation to his overseas travel in 2005, at which point Mr McClintock seeks to “take this” but asks only two questions before the primary judge then intervenes again at T 1/146.1).

43. [198]

    Ninth, although I readily accept that the tone in which questions are asked or comments are made cannot be discerned when reading a transcript (a comment that applies equally to the submissions made for RGMM as to perceived impatience or testiness on the part of the primary judge and to the submissions made for the respondents to the effect that parts of the transcript should be read as being interventions in a joking way), there are some instances where it is difficult not to conclude that his Honour was being openly sarcastic or dismissive, or at least displaying scepticism or incredulity at answers given by particular witnesses.

44. [199]

    So, for example, while the earlier questioning of Mr Stariha as to the reason for the inclusion of the word “Royal” in the company name might well have been done in a jocular fashion, it is difficult to see the following questioning of Mr Tomazin as not involving at least a display of cynicism on the part of the primary judge. At the commencement of Mr Tomazin’s cross-examination, his Honour asked the following (T 1/121.14):

45. [200]

    While nothing turns on the reason for the choice of company name, the suggestion implicit in the above (that the company name was the product of some attempt by Mr Tomazin to associate the company, presumably misleadingly, with a large corporation such as Royal Guardian Insurance) can surely not have been one that would put a witness at ease.

46. [201]

    Other examples of seemingly sarcastic or dismissive comments include his Honour’s question of Mr Tomazin at T 1/227.19 (“Do you have any answer to that apparent mystery?”); the comments as to whether an accountant would have simply “tossed a coin” when determining what to call the payments to Bethian into the accounts (to which I have already referred); and in the course of the cross-examination as to Mr Tomazin’s travel arrangements, to which I have referred above but which continued on at some length, that an answer given by Mr Tomazin (“It’s partially incorrect”) meant that he “got halfway here and went back” (T 1/148.41). See also the questioning by his Honour from T 1/206.14-34 and the comment made by his Honour during Mr Tomazin’s cross-examination (at T 1/172.43), after Mr McClintock had obviously become concerned that Mr Tomazin was appearing tired:

47. [202]

    Another instance can be seen in the lengthy series of questions put by his Honour to Mr Tomazin on the evidence he had given as to the reason(s) for calling Ms Nguyen in 2007 while she was working for MortgagePort (T 1/195.41 - T 197.10) culminating in the following:

48. [203]

    Similarly, in the exchange between his Honour and Mr Tomazin at T 1/188.50/189.15, his Honour said:

49. [204]

    See also T 1/-228.11 as to the description of rent in the RGMC invoices to RGMM.

50. [205]

    In the course of questioning about the travel inconsistencies (T 1/148/149), his Honour can hardly be seen as anything other than expressing impatience when he said at T 1/149.36:

51. [206]

    Tellingly, perhaps, Mr McClintock then intervened and said he would give Mr Tomazin the opportunity “to answer the question that both I and his Honour asked”.

52. [207]

    The reference to rocket science is mirrored elsewhere in the transcript: where his Honour expressed the opinion to Mr Tomazin that a question he had put as to whether the financial issues had had an impact on the company’s bottom line “doesn’t strike me as very complicated” – T 125.49; where his Honour told Mr Tomazin (at T 1/202.24) that the point Mr McClintock was making was a very simple one and that “you don’t have to trouble yourself about it very much I should have thought”; and the comment that Mr Tomazin did not “have to be quite so defensive, these are straightforward matters” – at T 1/207.4, to which Mr Tomazin responded “I am agreeing with the gentleman”. At T 1/153.30, his Honour told Mr Tomazin “You’re being asked to face up to the logic of your own evidence”.

53. [208]

    Tenth, as I have already noted, there was interruption by the primary judge of both Counsel in the course of their respective examination and cross-examination of witnesses. To that can be added that his Honour showed no partisanship in the determination of objections to questions and in debating the relevance of particular matters to the issues in the case. See for example at T 1/139.14-34, where his Honour argued with Mr McClintock as to whether it followed from what Mr Stariha had said that something was simply a matter of guesswork (as opposed to an inference) and disallowed the question. Indeed, on one occasion his Honour implicitly castigated Mr McClintock for interfering in Mr Young’s cross-examination (see T 1/380.28 where his Honour advised Mr McClintock that if he wanted to give evidence then Mr Young could cross-examine him but “otherwise I suggest you refrain from the bar table”). That is hardly suggestive of bias in favour of the respondents’ legal representatives.

54. [209]

    Next, there are large tracts of the transcript – particularly in the cross-examination of Mr Tomazin, though not confined to this – where the questioning reads as though there is a “tag team” between the primary judge and the cross-examiner. For example, I refer to the passages at T 1/124/125, where there were lengthy interruptions in the cross-examination of Mr Tomazin on the topic of why he had not sued RGMM in 2005, when he said he had discovered that the Dibelle referrals included borrowers who had previously done business with RGMM; at T 1/128/133, where there was extensive questioning of Mr Tomazin by his Honour; from T 1/145/152 as to the issue of Mr Tomazin’s travel arrangements; from T 1/168/170 as to RGMM’s accounts; from T 1/175/177 as to Mr Tomazin’s conversation with Ms Nguyen in 2005 in relation to Dibelle; from T 1/184/185 in which his Honour put to Mr Tomazin that he did not “own the clients”; from T 1/186/190 as to the database allegation; from T 1/192/193; T 1/195/197; T 1/198/200 as to the conversation (and reason for the conversation) with Ms Nguyen in 2007; and the questioning by his Honour at T 1/206/207.

55. [210]

    It would hardly have been surprising if Mr Tomazin had formed the impression that his Honour was conducting the case (something expressly disavowed by the primary judge at T 1/209.1).

56. [211]

    Finally, as already noted, his Honour’s interventions were not limited to the evidence given by RGMM’s witnesses. His Honour also intervened in the questioning of each of Ms Nguyen, Mrs Faina Stolyar (though not as much) and Mr Stolyar (again exhibiting features of a tag team approach to the respective cross-examinations – see for example T 1/470).

57. [212]

    In the case of Ms Nguyen’s cross-examination, as already noted, his Honour intervened at T 1/296/297 to ask questions about the lack of reference to a written Bethian management agreement in her affidavit, and again at T 1/301/302 and 303, his Honour questioned Ms Nguyen directly on that issue. Senior Counsel for the respondents on this appeal argues that the passage of questioning at T 1/201/302 indicates that his Honour did not have a closed mind on the issue (with which I agree) and that his Honour was at least as strongly questioning her as he had done with Mr Tomazin (with which I disagree). It was not, for example, suggested to Ms Nguyen that his Honour was having any difficulty as to her candour, or that things would move on faster if she concentrated on his questions, or that she should answer questions “fair and square”, or that she need not be defensive. Rather, what his Honour did, at for example T 1/302.11, was in effect to anticipate what Mr Young would submit at the end of the case and ask Ms Nguyen what her answer was to that.

58. [213]

    Similarly, the respondents draw attention to the questioning of Ms Nguyen by his Honour from T 1/328.19 as to the substantial profit sharing between the respondents and Ms Chahine, which it is said involved the putting of propositions not favourable to Ms Nguyen’s case. Again however, that questioning was not accompanied by comments that, at least on paper, appear sarcastic or dismissive.

59. [214]

    On at least two occasions his Honour interrupted Ms Nguyen’s answers to tell her that she had not been asked for an explanation (see T 1/355.22 – “You haven’t been asked for an explanation, your answer is no”; T 1/245.50 “No, the answer is “no”; you don’t have to give an explanation unless you’re asked for one”). His Honour also corrected her when he considered that she was not answering the question Mr Young had asked at T 1/360.32.

60. [215]

    On various occasions his Honour clarified or rephrased questions for her (T 1/239.29, interrupting her answer to a question by her own Counsel to pose his own question; at T 1/246 to tell her what he thought Mr Young was really asking her; at T 1/246.35 to step in and rephrase the question; at T 1/247.3 to put the question another way; and at T 1/248.35 stepping in to rephrase a question Ms Nguyen had said was “really long”). At T 1/399.31, the closest that his Honour came to expressing scepticism of Ms Nguyen’s account, his Honour said “Had you entirely forgotten that, as at March 2006, about the bonuses that you were owed? Had you forgotten it?” (see also the questioning at T 1/410).

61. [216]

    In comparison, therefore, there are instances where the questioning by his Honour of Ms Nguyen seems at least on paper to have been favourably expressed in the sense of interpreting her answers consistent with a sympathetic disposition to her evidence (such as suggesting her evidence was that she felt a sense of betrayal), or assisting in “breaking down” questions for her (T 1/237), which may be contrasted with instances in his Honour’s questioning of Mr Tomazin which seems designed to elicit an unfavourable response to RGMM’s case. However, that is very much a matter of impression and overall I would not place weight on this factor.

62. [217]

    There can be no doubt that, as was accepted by Senior Counsel for the respondents in the context of the exchange between his Honour and Mr McClintock at T 1/139.11 - 33 (see T 88.28), the transcript revealed a predisposition on the part of the primary judge to intervene.

63. [218]

    That intervention was not limited to questions going to the clarification of ambiguity or misunderstanding. Nor was it intervention of the kind referred to in Galea, namely intervention at a later stage in the proceedings for the purpose of better comprehension of the issues and the balancing of the evidence of the witness concerned.

64. [219]

    While I have no doubt that the primary judge’s interventions were on the whole made in order to enable his Honour to obtain a thorough understanding of the matters in issue in the proceedings and the evidence that went both for and against those issues, it is in my respectful opinion unarguable that the primary judge (throughout the whole of the oral evidence adduced by both sides) descended into the arena and adopted the mantle of advocate. The proceeding became, to a significant extent, an inquisitorial hearing.

65. [220]

    I do not accept the submission for the respondents to the effect that the level of judicial intervention in this case is explicable by the modern expectation of more active involvement on the part of trial judges in today’s era of civil case management. There is a distinction between active case management by a trial judge and the assumption of the role of advocate in the proceedings. Further, while I accept that, in Galea, Kirby A-CJ referred to the growing acceptance of the utility of a judge expressing tentative views as a hearing develops so that counsel might have the opportunity to correct and to persuade before judgment (at [20]), the interventions in the present case went well beyond this.

66. [221]

    In my opinion there was procedural unfairness in the present case in that RGMM (as also for that matter were the respondents) was deprived of the opportunity to have a hearing conducted in accordance with the adversarial system where the judge remains “above the fray”. In other words, I consider that this is a case falling clearly within Kourakis CJ’s third “dust of the conflict” ground.

67. [222]

    That said, in Ellis the circumstance in which it was contemplated that procedural unfairness not of itself amounting to apprehended bias could cause a hearing to miscarry (there in the criminal context) was where a party was thereby prevented from properly presenting its case. The respondents, though accepting that there were numerous interventions by his Honour in the course of the hearing and acknowledging (at least implicitly) the undesirability as a general rule of judicial interruption of counsel’s cross-examination, nevertheless argue that the judicial intervention by his Honour was not such as to warrant appellate interference (whether or not there was a waiver, which I consider in due course). It is submitted that what was necessary was for RGMM to establish that the judicial questioning or pejorative comments created a real danger that the trial was unfair; that RGMM did not do this; and that RGMM in particular did not identify any specific respect in which the trial could be said to be potentially unfair.

68. [223]

    However, RGMM did point to the questioning by his Honour of Mr Tomazin as to the preparation of the RGMM accounts as being a matter critical to his Honour’s ultimate conclusion as to the existence of the Bethian management agreement (and hence the cross-claim by the respondents for unpaid bonuses).

69. [224]

    RGMM submitted that his Honour’s finding (that the description in RGMM’s accounts of the payments to Bethian as “commission” was the result of professional consideration based on information which was appropriately verified) was a conclusion based on his Honour’s own argumentative hypothesis (at T 1/169-170) that if RGMM’s accounts showed a payment as a “commission”, such a payment could not have in fact been the payment of a bonus. It submitted that his Honour exhibited an overbearing insistence on that hypothesis during the course of Mr Tomazin’s cross-examination (an hypothesis not accepted by Mr Tomazin). RGMM argued that this was an impermissible intervention by his Honour; that the evidence did not form a proper basis for his Honour’s conclusion at [78]; and that, even if it could have been the basis for such a conclusion, his Honour did not give consideration to the alternative conclusion based on the evidence, that the money paid to Bethian was the respondents’ bonuses. There is much force to that submission. This topic was one that was first raised by his Honour and it was the subject of prolonged questioning by his Honour.

70. [225]

    Other topics on which his Honour questioned Mr Tomazin, to which RGMM points in this regard, were: inconsistencies in the evidence of Mr Tomazin as to when he said he had had a conversation with Ms Nguyen in relation to Dibelle (T 1/145-151); the issue of Ms Nguyen ‘stealing’ RGMM’s client database (T 1/188-190); the purpose of Mr Tomazin’s telephone call to Ms Nguyen in February 2009 and the omission from his affidavit evidence of the additional reasons Mr Tomazin cited as reasons to call Ms Nguyen in February 2009 (T 1/192; 195); and the treatment of rent charged by RGMC to RGMM, which Mr Tomazin said was for all the services which RGMC provided to RGMM, in the course of which his Honour questioned the honesty of the accounting records (T 1/227-228).

71. [226]

    To adopt the words of Lord Brown in Michel, in the present case the primary judge interrupted the flow of cross-examination on numerous occasions; he was at times sarcastic and dismissive of Mr Tomazin’s evidence (and to a lesser extent of Mr Stariha’s evidence); he commented on the evidence of various of the witnesses while it was being given, and, if not displaying “profound disbelief”, on paper he certainly seems at times to have displayed a degree of scepticism of the evidence given by Mr Tomazin.

72. [227]

    The respondents nevertheless submit that it can be inferred, from the lack of objection by RGMM’s Senior Counsel during the course of cross-examination, that there was not a perception by Counsel of procedural unfairness at the hearing and hence, as I understood the argument, that it should not be concluded that there was procedural unfairness in the manner in which the hearing was conducted. While I accept that the lack of objection may indicate that there was no perception of procedural unfairness at the time on the part of RGMM’s Counsel, that alone does not persuade me (having closely reviewed the whole of the transcript) that there was no such unfairness. (I consider the question of waiver below (at [250]-[257]).)

73. [228]

    In particular, I see the unfairness to RGMM as lying in the fact that its principal witness was subjected to what amounted to extensive cross-examination by the primary judge. While any adverse effect this may have had on Mr Tomazin’s demeanour is not material in light of his Honour’s express disavowal of reliance on demeanour when making the findings he did as to credit, the disruption caused to the giving of Mr Tomazin’s evidence seems likely to have adversely affected RGMM’s ability properly to present its case. For example, it is evident from the transcript that there were occasions on which Mr Tomazin was confused during the process of questioning by both the primary judge and the respondents’ Counsel (such as when he asked the judge to “slow down” when being pressed as to inconsistencies in his affidavit evidence – see for example, at T 149.6 – and also during the questioning as to why he had not referred in his affidavit to a particular reason for contacting Ms Nguyen in 2009 - leading to the seemingly resigned answer that his Honour was right and he should have included that matter in his affidavit).

74. [229]

    I am therefore driven to conclude that, subject to the question of waiver, there was procedural unfairness in the conduct of the hearing at first instance which would warrant appellate intervention.

75. [230]

    RGMM goes further than this, however, and submits that the number and tone of his Honour’s interventions, taken cumulatively, would have required him to recuse himself for apprehended bias if such an application had been made. I disagree. Viewed as a whole, I am not satisfied that the test for apprehended bias (which I consider below) was met whether by reference to the level of intervention alone or to the dismissive way in which some of Mr Tomazin’s responses were treated. I think it is apparent that, in the main, his Honour’s interventions were an attempt to elicit precisely where the truth lay. Taken as a whole, they were not such as to indicate either pre-judgment or a closed mind. That, however, does not address the potential for unfairness given the inquisitorial nature of the intervention.

76. [231]

    As to the second ground, namely apprehended bias, there is no dispute between the parties as to the applicable test, that being as stated by the plurality in Ebner v Official Trustee in Bankruptcy [2000] HCA 63; (2000) 205 CLR 337 (at [6]), namely 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”.

77. [232]

    RGMM accepts that the test for apprehended bias requires, first, the identification of what it is said might lead the judge not to bring an impartial mind to the relevant question and, second, an assessment of the reasonableness of the asserted logical connection between that matter and the possibility of departure from impartial decision making. It also accepts that the hypothetical observer is taken to be a rational person who is neither complacent nor unduly sensitive or suspicious and to be someone who is aware of the oath or affirmation taken by judges and their judicial obligations more generally.

78. [233]

    It is submitted by RGMM, first, that the strong findings that Mr Tomazin was a dishonest witness ([193], [194], [200], [201]), when viewed in the context of his Honour’s “cumulative interruptions and argumentative cross-examination of Mr Tomazin”, give rise to an apprehension of bias; and that this, appearing as it did in the judgment, cannot be said to have been waived. In other words, it is submitted that adverse findings or comments made in the subsequent judgment created an apprehension of bias when considered together with the judge’s conduct at trial. I disagree.

79. [234]

    Generally speaking, it is not sufficient to establish bias simply by pointing to adverse findings even where, as here, they are strong adverse credit findings. As Campbell JA observed in Knaggs v Director of Public Prosecutions (NSW) [2007] NSWCA 83; (2007) 170 A Crim R 366 at [95] in the context of a claim of apparent bias:

80. [235]

    Even when considered with the level of judicial intervention that occurred in the present case, this does not create the impression of pre-judgment; indeed quite the reverse. Where his Honour had formed a preliminary view of particular matters he appears to have been at pains to raise that with Counsel in order to give them an opportunity to address the relevant issue(s).

81. [236]

    The second matter to which RGMM points is that to which the further evidence sought to be adduced on this application relates. Mr Young has deposed that at the morning tea adjournment on the first day of trial his Honour invited Counsel for the parties to morning tea, during which he referred to defamation proceedings that he had commenced, and that at the conclusion of morning tea the judge informed him that he wished to speak to Senior Counsel for the respondents about a private matter that was unrelated to the proceedings. His Honour did not indicate the subject matter of that proposed conversation (nor was he asked). Mr Young informed his Honour that he did not object to this. The content of the ensuing private conversation has not been disclosed.

82. [237]

    When the matter was subsequently listed for judgment, his Honour’s associate requested in advance the attendance on that occasion of Senior Counsel for both parties. That might have been explicable if it was likely that contentious issues were anticipated would arise on the delivery of judgment though whether that was the case here is largely speculation, there merely being a passing reference to this in the email sent by the associate to the parties but no transcript to suggest that when judgment was handed down any such issue was raised by the primary judge.

83. [238]

    Neither of the respondents’ Counsel was able to attend when judgment was delivered. Their solicitor did, as did Mr Young, appearing for RGMM. Mr Young deposed that, after the judgment was handed down, his Honour asked the legal representatives to see him briefly in the corridor behind the Court. His Honour then referred to the defamation matter that had been discussed during the morning tea on the first day of the hearing, and expressed his intention or desire to engage Mr McClintock as his Senior Counsel in the matter now that the judgment had been delivered. His Honour asked Mr Young if he saw any difficulty with that course. Mr Young said that he did not.

84. [239]

    RGMM submits that the inference arising from the above is that his Honour had formed an intention at some time in the period from the commencement of the hearing, or while the judgment was reserved, to engage Mr McClintock in his personal defamation proceedings or was giving consideration to the engagement of Senior Counsel.

85. [240]

    While I accept that an inference would readily be drawn (from the material on which RGMM relies and, in particular, the belief expressed by his Honour in the email correspondence produced on subpoena to the effect that Mr McClintock may have been “holding” the mediation date available) that at least during part of the time that the judgment was reserved such an intention had been formed, I do not accept that a fair-minded lay observer would infer that his Honour had formed the intention personally to retain Mr McClintock in the matter as at the commencement of the hearing. Nor can the point at which his Honour did so be determined. All that could reasonably be said is that, at least by the time the matter was listed for judgment, his Honour must have had such an intention or at least the possibility of briefing Mr McClintock in mind.

86. [241]

    RGMM does not submit that the formation of such an intention, by itself, necessarily gives rise to an apprehension of bias. RGMM points to what was said by Merkel J in Aussie Airlines Pty Limited v Australian Airlines Pty Limited (1996) 65 FCR 215 at 222, namely that:

87. [242]

    RGMM further accepts that a failure to disclose an association with a party, legal representative or witness involved in the proceedings does not give rise to an automatic right of disqualification. However, it submits that a failure to disclose may cast evidentiary light on the ultimate question of reasonable apprehension of bias since, in the words used in Aussie Airlines (at 221D-E), it may cause the impression that something was “wrong about it all”. It is noted that the Court there said that “[a] failure to disclose no matter how unwitting, can undermine public confidence in the integrity of, and the administration of justice by, the judicial officer or the tribunal concerned”.

88. [243]

    RGMM submits that the test for apprehended bias is satisfied having regard to: his Honour having apparently formed the intention during the trial or in the period in which judgment was reserved to engage Senior Counsel for the respondents to represent him in his private defamation proceedings or having at least considered so doing; his Honour’s conduct of the trial; and the finding by his Honour that Mr Tomazin was a dishonest witness. It submits that a reasonable lay observer might think that the trial judge might not have brought an impartial mind to the resolution of the competing evidence and issues in dispute at the trial. RGMM notes that, unlike the position in Michael Wilson & Partners Limited v Nicholls [2011] HCA 48; (2011) 244 CLR 427, here the primary judge was required to adjudicate on the evidence and to make credit findings on witnesses for the respective parties.

89. [244]

    The respondents for their part submit that the reasonableness of any suggested apprehension of bias is to be considered in the context of ordinary judicial practice. They again argue that in a modern trial a judge hearing a civil matter without a jury is expected to intervene in proceedings to ensure a just and expeditious trial.

90. [245]

    I would accept, for present purposes, that a reasonable fair minded lay observer, having the characteristics referred to above and knowing of Mr McClintock’s expertise in defamation matters, might reasonably infer (from the reference to the defamation proceedings at morning tea followed by the request that his Honour speak privately to Mr McClintock on an undisclosed subject unrelated to the proceedings then being heard by his Honour), that the topic of the relevant discussion was the defamation proceedings. Even so it is by no means an obvious inference that the observer would conclude that the discussion at that stage was about retaining Mr McClintock at some later date, particularly when in the morning tea discussion his Honour had identified another barrister who was then retained to act for him in the proceedings. Similarly, I am not persuaded that a fair minded lay observer might reasonably draw such an inference from the fact that in the post-judgment discussion there was a reference back to the topic of the morning tea discussion.

91. [246]

    In any event, there is simply no logical connection between his Honour considering the retainer of, and at some point forming an intention to retain, Mr McClintock to act for him in a personal matter and the possibility that his Honour would not conduct and decide the case before him in an impartial manner.

92. [247]

    As the respondents argue, there is no reason, for example, to think that the primary judge’s interventions might have arisen from a concern that Mr McClintock might not have accepted the brief to appear for his Honour, or that Mr McClintock might have worked any less diligently on the defamation matter but for those interventions. Indeed, not all of the interventions were favourable to Mr McClintock nor were they suggestive of any pre-disposition to find in his clients’ favour.

93. [248]

    I accept the respondents’ submission that a fair minded lay observer, even in light of the primary judge’s interventions during the hearing, could not reasonably have apprehended that a relationship or association of the kind here in question might have resulted in any deviation from the impartial resolution of these proceedings.

94. [249]

    Ground 2 fails for this reason.

95. [250]

    The principal submission by the respondents on the first two grounds is that RGMM has waived any right now to object to his Honour’s interventions, having been represented by Senior Counsel during the hearing who made no complaint about those matters.

96. [251]

    It is accepted by RGMM that no complaint was made at the hearing as to his Honour’s interventions in the course of cross-examination; nor was there any application for his Honour to disqualify himself. It is also accepted by RGMM that a failure to complain at trial is usually fatal to a ground of appeal that the trial miscarried because of apprehended bias or an absence of procedural fairness (referring to Vakauta v Kelly [1989] HCA 44; (1989) 167 CLR 568 at 572, 577, 587; Ball v McInerney [2014] NSWCA 331 at [90]).

97. [252]

    However, RGMM argues that no question of waiver arises when ostensible bias is apparent in the judgment and submits that, in assessing whether ostensible bias appears in the judgment, it is permissible to evaluate what was said in the judgment in the light of what had been said at the hearing (by reference to what was said in Vakauta v Kelly at 573, 579, 588). As to the issue of apprehended bias (which fails in any event for the reason set out above), RGMM submits that there can be no issue of waiver in this regard since Mr Young only became aware of the issue involving Senior Counsel for the respondents after the delivery of judgment.

98. [253]

    The respondents point out that in Vakauta v Kelly the judgment itself referred to the preconceived views held by the primary judge about the witness in question. It is said that the mere fact that in the present case his Honour preferred the evidence of the respondents over that of Mr Tomazin (and made strong adverse credit findings against Mr Tomazin) does not revive an apprehension of bias. The respondents submit that to hold otherwise would unfairly provide RGMM with an opportunity to wait to see whether the outcome of the proceedings was favourable to it before raising an objection the basis of which was already well known to it.

99. [254]

    In the present case, the fact that there was no objection at the time of the hearing to the manner and extent of his Honour’s interventions may well be explicable having regard to the difficulty of determining at what point the judicial intervention warranted such an objection (though by the time of the comment as to the difference being that of candour (see T 1/195.41 – T 197.10) that point must have been close) or by reference to the understandable disinclination of Counsel to risk putting the judge “off-side” by such an objection or to appear overly protective of a witness. However, a difficulty of that kind points to a forensic decision having been made not to raise the point. Ordinarily, parties are bound by the forensic decisions made in the course of proceedings.

100. [255]

     I have had some hesitation as to whether there was a waiver of the right to object to the procedural unfairness constituted by his Honour’s level of intervention during the hearing. The respondents argue that so to conclude would allow a party to leave such a point up his or her sleeve until the outcome of the proceedings was known. I have, however, had the benefit of considering Basten JA’s reasons for concluding that in the present case there was no waiver (see [30]-[34] above). I agree that, for those reasons, in the present case there was no effective waiver of the complaint as to the unfairness of the trial.

101. [256]

     As I have not found any apprehended bias, the question of waiver does not arise in that context. Had it arisen, I would have been of the view that there was no waiver at the stage of the morning tea conversation, since the topic of conversation was not known, and that there could have been no waiver by the time of the discussion after judgment was handed down, since any waiver at that point could only have been of a right of appeal and it is a moot point whether Mr Young would have had ostensible authority to waive a right of appeal at that stage.

102. [257]

     Accordingly, I consider that the judgment must be set aside on the ground of procedural unfairness.

103. [258]

     The remaining grounds of appeal raise issues as to a range of matters in respect of which it is contended that the primary judge erred in law or in the process of fact finding: as to the proper construction of the respondents’ employment contracts (grounds 3, 4, 6 and 7); as to whether there was an oral variation to the profit sharing arrangement between Ms Nguyen and RGMM (ground 10); as to whether the respondents were in breach of their employment contracts (grounds 8 and 9); as to the findings made in relation to the alleged Bethian management agreement (grounds 11-13) and the alleged Dibelle accreditation agreements (grounds 14-17); and as to the conclusions his Honour reached as to the damages to be awarded to the respondents (grounds 19-22).

104. [259]

     In light of the conclusion reached on ground 1, the matter should be remitted for re-trial. In those circumstances, there is a tension between the importance, emphasised by the majority of the High Court in Kuru v State of New South Wales [2008] HCA 26; (2008) 236 CLR 1 (Gleeson CJ, Gummow, Kirby and Hayne JJ at [12]), for an intermediate appellate court to consider whether to deal with all grounds of appeal and not just what is identified as the decisive ground; and the undesirability of this Court expressing views as to the remaining grounds of appeal when those matters will need to be considered afresh on the remittal of the matter to the Common Law Division.

105. [260]

     I note that in Kuru it was expressly recognised that there could be no universal rule in this regard and that in that case the question confronting this Court had not been one raising questions of apprehended bias or procedural unfairness such as would result, if successful, in a re-trial at first instance. In the passage extracted by Basten JA (at [10]) from Concrete Pty Ltd v Parramatta Design & Developments Pty Ltd [2006] HCA 55; (2006) 229 CLR 577 Kirby and Crennan JJ expressed the view that if apprehended bias was made out a re-trial would be ordered irrespective of possible findings on other issues, since even if the judge were found to be correct this would not assuage the impression that there was an apprehension of bias.

106. [261]

     In the present case, the argument against dealing in this Court with the remaining grounds of appeal in my opinion must prevail because here the substantive issues in dispute between the parties turned in a number of crucial respects (such as the breach of contract claim by RGMM and the cross-claim by the respondents for payment of bonuses/profit shares) on findings of credibility.

107. [262]

     Indeed, had I not concluded that there had been no waiver of the complaint as to the procedural unfairness of the trial, I would still have been of the view that the judgment should be set aside and the matter remitted for a re-trial on the basis that the credibility findings on critical issues were not sustainable on the reasoning of the primary judge. Hence I have concluded that, while accepting the desirability in the ordinary case of dealing at intermediate appellate level with all grounds of appeal, this is a case where such a course is not appropriate.

108. [263]

     That said, my reasons for the conclusion as to his Honour’s credibility findings should be stated and I set them out as follows by reference to the following grounds of appeal which expressly challenge the credibility findings (ground 13, which relates to the conclusion reached as to the existence of the alleged Bethian management agreement, and parts of grounds 14-16 and 18 relating to the alleged Dibelle accreditation agreements and RGMM’s knowledge of the Dibelle arrangements).

109. [264]

     The respondents relied on the existence of the alleged Bethian management agreement in answer to the basis on which RGMM had sought to defend their bonus claim, namely that the bonuses had been paid at the direction of the respondents to Bethian. Ms Nguyen’s evidence was that the amounts paid to Bethian were management fees due under a separate agreement and hence did not discharge RGMM’s obligation to pay the bonuses.

110. [265]

     As noted earlier (see [133]-[136] above), his Honour’s conclusion in the respondents’ favour on this issue was explained by reference to reasons that his Honour had “already mentioned” when dealing with the surrounding facts ([193]) and influenced by two considerations, the first of which was his generally favourable view of Ms Nguyen’s evidence and his adverse view as to Mr Tomazin’s honesty.

111. [266]

     Ground 13 of the grounds of appeal squarely challenges those credibility findings:

112. [267]

     In Baira v RHG Mortgage Corporation Limited [2012] NSWCA 387, Bathurst CJ emphasised (at [173]) the restraints on an appellate court in reviewing findings of a trial judge based on credit and said:

113. [268]

     Conscious of those appellate restraints, I have nevertheless concluded (for the reasons I set out at [278]-[285]) below) that his Honour’s finding that Mr Tomazin was a dishonest witness was not supported by the evidence and therefore that his Honour’s fact finding erred in this regard. Ground 13 is therefore made good.

114. [269]

     In Baira, at [175] Bathurst CJ went on to note:

115. [270]

     In the present case, the primary judge’s reasoning as to the dishonesty of Mr Tomazin is unsatisfactory for similar reasons to that which led Basten JA to criticise the not dissimilar reasoning in Baira (see [316]).

116. [271]

     Since the finding as to the existence of the Bethian management agreement was based to a large extent on findings influenced, as his Honour made clear they were, by the adverse findings as to Mr Tomazin’s dishonesty, I am forced to conclude that this is a case where the primary judge has misused his advantage of seeing and hearing the respective witnesses. Thus even if I had not been of the view that ground 1 was made out and a re-trial was required, I would have concluded that the finding as to the existence of the Bethian management agreement must be set aside and the matter must be remitted for rehearing on the respondents’ respective cross-claims.

117. [272]

     These grounds (together with ground 18) relate to the findings that formed the basis for the primary judge’s conclusion that there was no breach by the respondents of their contractual obligations to RGMM by reason of their involvement in the Dibelle referrals. They are as follows:

118. [273]

     As noted earlier, the process by which his Honour reached the conclusion that Mr Tomazin was aware of the respondents’ connection with the Dibelle entities involved, first, his acceptance of Mrs Faina Stolyar’s evidence that she had attended with the respondents when the Dibelle Financial Services accreditation agreement was executed by Mr Tomazin. His Honour considered that this was something about which Mrs Faina Stolyar could not be mistaken and, having considered her to be a truthful and reliable witness, his Honour did not accept she had fabricated her account with the respondents ([196]).

119. [274]

     His Honour then said that it followed, from that, that he rejected Mr Tomazin’s account. So much can be accepted. RGMM does not challenge his Honour’s acceptance of the evidence of Mrs Faina Stolyar. However, this is not (as the respondents submitted) fatal to the challenge made by RGMM to the finding of Mr Tomazin’s awareness of the Dibelle arrangement.

120. [275]

     His Honour at [197] noted that there were four significant matters that supported Mr Tomazin’s denial that the Dibelle entities were accredited but proceeded in effect to explain why those matters could be put aside or did not have sufficient force to lead to the acceptance of that denial (including, as to the third and fourth of those factors, his Honour’s acceptance of Ms Nguyen’s evidence based at least in part on his view of Ms Nguyen’s demeanour). Then, at [198], his Honour took into account matters that he considered were inconsistent with Mr Tomazin having a genuine belief that he had been deceived by the respondents.

121. [276]

     His Honour’s ultimate conclusion (at [200]) that Mr Tomazin’s evidence as to the 2002 loan agreement with Mrs Faina Stolyar and the Dibelle Financial Services accreditation agreement was dishonest was expressed as follows:

122. [277]

     That conclusion then fortified his Honour in the conclusion that there had been an earlier accreditation agreement when Ms Chahine was introduced to Mr Tomazin, though his Honour emphasised that his conclusion was not dependent on his view of Mr Tomazin as a dishonest witness. It is not, however, clear what informed his Honour’s conclusion as to the agreement with Ms Chahine other than the credibility of Mr Tomazin on the one hand and the respondents on the other, since there was nothing in writing in relation to that alleged agreement.

123. [278]

     The positive finding that Mr Tomazin was a dishonest witness is troubling. Since his Honour expressly disavowed reliance on demeanour as leading to that conclusion, one would assume this Court should be in as good a position as the primary judge to form a view as to that conclusion.

124. [279]

     Ultimately, the difficulty with his Honour’s conclusion is that it seems to have been based on nothing more than the fact that his Honour accepted the conflicting version of events given by the respondents and by Mrs Faina Stolyar; and therefore concluded that Mr Tomazin must have lied. The fact that one version of events is seen as more credible does not carry with it the necessary consequence that the person putting forward the less credible version must be lying. There is a difference between the rejection of a person's evidence and a finding that he or she deliberately lied.

125. [280]

     The respondents place emphasis on his Honour’s acceptance of Mrs Faina Stolyar’s credit, which as noted above has not been challenged. However, that evidence relevantly established only the execution of an agreement of which there was no copy before the Court. Even assuming that Mrs Faina Stolyar had given attention at the time to what she was being asked to sign and had recalled it accurately, her evidence does not establish that Mr Tomazin was aware that the respondents themselves (as opposed to Mrs Faina Stolyar, who was the sole shareholder and director and was using her maiden name for the purposes of registration of the company) were associated with the Dibelle entities, in the sense of performing work for the Dibelle entities and receiving substantial benefits from the Dibelle referrals.

126. [281]

     The evidentiary basis for his Honour’s conclusion that Mr Tomazin’s denial that he had met Mrs Faina Stolyar (not accepted by his Honour) was dishonest is not clear. It is not, for example, clear why that denial could not equally have been consistent with a mistaken recollection of events.

127. [282]

     The respondents submitted that his Honour’s conclusion that the denial was dishonest can be explained by reference to the fact that Mrs Faina Stolyar spoke heavily accented English and was someone who was related to senior employees of Mr Tomazin’s company. Apart from the fact that Mrs Faina Stolyar deposed in her affidavit that her ability to speak English was “constrained” there is little to enlighten the Court on that issue. Nevertheless, assuming her to have been an idiosyncratic and memorable witness in his Honour’s eyes, that says nothing as to whether she was someone that Mr Tomazin would necessarily have remembered meeting on two occasions some years before he gave evidence.

128. [283]

     In the absence of an understanding of the people with whom Mr Tomazin ordinarily dealt on a business basis, or his attitude to or interest in the relatives of his employees generally or with reference to the respondents in particular, it is difficult to see how the preference of one version of events as to the execution of the Dibelle Financial Services accreditation agreement with Mrs Faina Stolyar would lead inexorably to the conclusion that the proponent of the other version was giving knowingly false evidence. That conclusion was not in my opinion supported by the objective evidence, yet it was a large plank in the reasoning that led to the finding that at all relevant times Mr Tomazin was aware that the respondents were obtaining significant benefits through their association with the Dibelle entities (and it also had significant adverse consequences for RGMM in terms of the indemnity costs orders).

129. [284]

     Since the findings as to the existence and execution of the Dibelle accreditation agreements (of which there was no documentary evidence) are not of themselves sufficient to support a finding that Mr Tomazin had the requisite awareness that under the Dibelle accreditation arrangements the respondents were receiving substantial benefits, the challenge to the findings as to that aspect of the matter are made good.

130. [285]

     In those circumstances the credit-based findings in relation to the Dibelle issue (and hence the Bethian management agreement issue, which turned largely on the Dibelle finding) should be set aside. This is not simply a case where (in the words of Beazley JA, as her Honour then was, in Nominal Defendant v McLennan [2012] NSWCA 148 at [141]) an appellate court thinks that the probabilities of the case are against (or even strongly against) the relevant findings of fact but rather it is where it must, with respect, be concluded that the primary judge “failed to use or has palpably misused his advantage” (see Devries v Australian National Railways Commission [1993] HCA 78; (1993) 177 CLR 472 at 479). That conclusion would have the necessary consequence that the findings as to there being no breach of contract by reference to the respondents’ dealings with Dibelle (grounds 8 and 9) would also need to be set aside.

Conclusion

1. [286]

   For the reasons set out above the orders made by the primary judge on 24 and 26 September 2014 should be set aside and the matter remitted to the Common Law Division for re-hearing of both the claims by RGMM and the respondents’ cross-claims.

2. [287]

   Ordinarily, costs of the appeal would follow the event. In their written submissions the respondents sought to reserve argument on the question of costs until after the outcome of the appeal. In circumstances where is nothing to suggest that the ordinary order for costs would not be appropriate, I agree with Basten JA that costs should be ordered in favour of RGMM. If the respondents seek to vary that order it is open to them to apply so to do.

Orders

1. [288]

   In the circumstances I propose the following orders:

   1. (1)

      Appeal allowed.

   2. (2)

      Set aside the judgment for the defendants and the orders made on 24 and 26 September 2014 by Adams J.

   3. (3)

      Remit the proceedings to the Common Law Division for re-hearing.

   4. (4)

      Respondents to pay the appellant’s costs of the appeal. Costs of the proceedings at first instance to be dealt with by the judge re-hearing the matter in the Common Law Division.

   5. (5)

      The respondents to be given a certificate under the Suitors' Fund Act 1951 (NSW).

2. [289]

   EMMETT AJA: This appeal arises out of employment agreements between the Appellant, Royal Guardian Mortgage Management Pty Ltd (RGMM), on the one hand, and each of the Respondents, Beth Nguyen (Ms Nguyen) and Ian Stolyar (Mr Stolyar), on the other. Ms Nguyen was employed as the General Manager of RGMM’s mortgage lending business and Mr Stolyar was employed as a senior manager of that business. RGMM commenced proceedings in the Common Law Division of the Supreme Court against Ms Nguyen and Mr Stolyar, claiming damages by reason of alleged breaches of their employment contracts. RGMM claimed that Ms Nguyen and Mr Stolyar acted in breach of their employment contracts by causing referrals of potential borrowers through other parties (the Dibelle referrals), thereby being paid commissions to which they were not entitled.

3. [290]

   RGMM claimed that commissions in sums exceeding $2 million were paid in respect of the Dibelle referrals. Ms Nguyen and Mr Stolyar on the other hand, filed a cross claim seeking recovery of damages for alleged failure on the part of RGMM to pay them a share of profits earned by RGMM. Ms Nguyen and Mr Stolyar claimed to be entitled to sums totalling more than $3.6 million in respect of profit shares.

4. [291]

   On 24 September 2014, for reasons published on 28 May 2014, a judge of the Common Law Division (the primary judge) directed judgment for Ms Nguyen and Mr Stolyar on the claim made by RGMM. In respect of the cross claim, his Honour directed judgment for Ms Nguyen against RGMM in the sum of $1,930,013.91 and for Mr Stolyar against RGMM in the sum of $971,756.74.

5. [292]

   On 27 August 2014, RGMM appealed from the orders by the primary judge. An amended notice of appeal was filed on 13 March 2015. The grounds of appeal relied on by RGMM were, first, that his Honour failed to exercise procedural fairness, such that the trial miscarried in that the conduct of the primary judge gave rise to an apprehension of bias. The other grounds related to findings made and conclusions reached by his Honour in rejecting RGMM’s claim and in accepting the claims made by Ms Nguyen and Mr Stolyar.

6. [293]

   The complaint of procedural unfairness and miscarriage of justice are based on two matters. The first is the extent to which the primary judge interfered in the conduct of the trial by engaging in cross examination of witnesses, principally the principal witness called on behalf of RGMM. The second matter is that, shortly after giving judgment, the primary judge retained to act for him, in proceedings in which his Honour was personally involved, senior counsel for Ms Nguyen and Mr Stolyar. RGMM contends that an inference should be drawn that his Honour had discussed that possible retainer with senior counsel during the course of the trial.

7. [294]

   RGMM’s claim against Ms Nguyen and Mr Stolyar is that they placed themselves in a position where their personal interests were in conflict with their duties to RGMM as employees, by reason of their involvement in the Dibelle referrals. Their principal answer to the claim was that their arrangements were known to and were approved by RGMM. His Honour accepted that answer. The basis for his Honour’s conclusion in that regard depends very much on his Honour’s assessment of the credit and reliability of the principal witness for RGMM, Mr Anthony Tomazin.

8. [295]

   The claim by Ms Nguyen and Mr Stolyar against RGMM depended upon their claim that RGMM entered into a management agreement with Bethian Pty Limited, a company formed by them (Bethian). The existence of such an agreement depended upon the evidence of Ms Nguyen. In two affidavits sworn by her, she did not suggest that such an agreement was in writing. However, in the course of cross examination, she asserted that the management agreement was written. No document was ever produced and the explanation proffered by Ms Nguyen was hardly convincing. Nevertheless, the primary judge accepted that there was such an agreement, although his Honour made no findings as to its terms.

9. [296]

   It was common ground that substantial sums were paid to Bethian. RGMM contended that those payments were made in satisfaction of the profit share arrangement sued upon in the cross claims. Ms Nguyen and Mr Stolyar contended that their entitlement to a share in profit was calculated as 0.25% of total amounts lent by lenders as approved by RGMM. They asserted that the amounts payable under the management agreement were 0.25% of the net amounts so lent. In respect of the year ended 30 June 2015, “total settlements” amounted to $32,905,877, whereas “net settlements” amounted to $32,763,977. The difference of $141,900 is insignificant in the total.

10. [297]

    Having regard to the somewhat incredible evidence given by Mr Stolyar concerning the existence of a written agreement and the miniscule difference between “total settlements” and “net settlements”, I would have been disposed to conclude that Ms Nguyen and Mr Stolyar failed to establish, on the balance of probabilities, that they were entitled to receive a payment of profit share over and above the sums paid by RGMM to Bethian.

11. [298]

    I have had the advantage of reading in draft form the proposed reasons of Ward JA. I agree with her Honour’s conclusions, for the reasons proposed by her Honour. In particular, I agree with her Honour’s conclusions that, in the circumstances, there was a denial of procedural fairness, as a consequence of which the orders made by the primary judge must be set aside.

12. [299]

    It is therefore not necessary to deal with the other grounds raised in the appeal and cross-appeal. However, I would be disposed to conclude, even in the absence of the denial of procedural fairness, that there were errors on the part of the primary judge that would lead to the orders being set aside and the matter being remitted for retrial. Since there is to be a retrial on all issues, it is undesirable to express any conclusion on the evidence before his Honour.

13. [300]

    I agree with Ward JA that the appeal should be allowed, that the orders made by the primary judge should be set aside and that the proceedings should be remitted to the Common Law Division for re-hearing. I also agree that Ms Nguyen and Mr Stolyar should pay the costs of the appeal but should have a certificate under the Suitors' Fund Act 1951 (NSW). The question of the costs at first instance will be a matter for the Common Law Division on the re-hearing of the matter.