Express Law No. 328

Background

At first instance, the primary judge disqualified himself from further hearing a civil penalty proceeding after making adverse credibility findings about a witness at the ‘liability stage’ where the same witness was to be called at the ‘penalty stage’ of the proceeding.

The primary judge approached the question on the basis any judge would be disqualified for apprehended bias if required to assess the credibility of a witness for a second time. This requirement was seen to arise as a matter of course, regardless of whether the second assessment occurred in the same proceeding or in different proceedings, and regardless of the nature of the proceeding.

The essence of the appeal by the Australian Securities and Investment Commission (ASIC) was that the primary judge failed to identify the logical connection between the adverse credibility findings at the liability stage and the feared impartiality at the penalty stage, nor the reasonableness of that fear.

Reasoning of the Full Federal Court

The Full Federal Court unanimously rejected any absolute proposition that a ground for disqualification will always arise where a judge is required to assess the credibility of a witness for a second time.

The majority (Bromwich J and Colvin J, each writing separately) allowed the appeal and found the primary judge erred in disqualifying himself from further hearing the civil penalty proceeding.

The majority found there was a material difference between circumstances where a judge is expected to bring a ‘fresh mind’ to the question required to be decided and where a fair-minded lay observer would not expect the determination of a matter to be conducted as a separate fresh adjudication.

Where a civil penalty proceeding is conducted in 2 stages, the fair-minded lay observer would be aware of the particular nature of the successive hearings and would understand that views formed at the liability stage would be required to be carried forward in determining the appropriate pecuniary penalty.

Properly informed of the relationship between the impugned liability findings and the determination of the appropriate pecuniary penalty, a fair-minded lay observer would not apprehend the adverse credibility findings meant the primary judge might not be able to bring an impartial mind to the determination of penalties.

Perram J dissented. His Honour found the primary judge was correct to disqualify himself. While an adverse credit finding would not automatically be a ground for disqualification, the primary judge could have expressed the conclusions reached in more moderate language. His Honour generally encouraged judges to exercise restraint when making express credibility findings in a liability judgment. Bromwich J and Colvin J each identified problems with judges adopting such an approach.

Implications

The principles outlined by the majority in this decision ought to be kept in mind when dealing with apprehended bias in any proceeding involving successive hearings of a single adjudicative nature.

If ASIC had been unsuccessful, there may have been widespread implications for the conduct of civil penalty proceedings. At first instance, the primary judge noted the issues raised by his decision might require a new Federal Court protocol for the hearing of civil penalty proceedings, or might even require legislative intervention. As ASIC was successful, these issues do not arise.

SunshineLoans Pty Ltd is seeking special leave to appeal the Full Court’s decision in the High Court.

Text of the decision is available at: https://www.judgments.fedcourt.gov.au/judgments/Judgments/fca/full/2025/2025fcafc0032

Tim Begbie KC and Lucy Cameron (AGS In-house Counsel) appeared for ASIC in the appeal.