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Bank of Credit and Commerce International SA v. Munwar Alli & Ors  EWHC Ch 463 (3rd December, 2001)
IN THE HIGH COURT OF JUSTICE
B e f o r e :
MR JUSTICE LAWRENCE COLLINS
BANK OF CREDIT AND COMMERCE INTERNATIONAL SA Claimant
(In compulsory liquidation)
MUNWAR ALI Defendants
and other former employees of BCCI
Miss Emma Saunders of Messrs Lovells appeared for the Liquidators.
Ms Aimee James of Messrs Finers Stephens Innocent appeared for Mr I Zafar.
HTML VERSION OF JUDGMENT
AS APPROVED BY THE COURT
Crown Copyright ©
Mr Justice Lawrence Collins
- On July 2, 2001 I was nominated by the Vice-Chancellor, Sir Andrew Morritt, to hear all claims/applications to which BCCI or its liquidators are parties. The only substantive matter which at present I am due to hear involves preliminary issues relating to the liability of employees included in case management to share liability for costs incurred in connection with substantial litigation concerning the affairs of BCCI. The liability is claimed to arise on a general principle that those whose cases are progressed as a result of the expenditure of costs in the litigation should contribute to those costs.
- On May 18, 2001, Lightman J., who was then the assigned judge, made a provisional order giving directions for the determination of the preliminary issues relating to cost sharing. It was provisional in the sense that any party could apply to the court for the order to be amended or revoked. The order provided for a date to be fixed to hear any applications to that effect, and to order the hearing date for determination of the preliminary issues. July 9, 2001 (by which time I had become the assigned judge) was scheduled as the date at which representations were to be heard on whether the order of Lightman J was to be made definitive. At the hearing on July 9 the order of Lightman J was made definitive, and subsequently February 18, 2002 was fixed for the hearing of the preliminary issues relating to cost sharing.
- Shortly before the hearing on July 9 a question was raised on behalf of the former employees as to whether it would be appropriate for me to deal with the cost sharing determination in view of the fact that some of the employees had sued Price Waterhouse (as auditors to BCCI) and that the firm of solicitors, Herbert Smith, in which I had been a partner until immediately before my appointment had acted and was acting for Price Waterhouse in connection with that litigation. Reference was made on behalf of the employees to the decision of the Court of Appeal in Locabail (UK) Ltd v Bayfield Properties Ltd.  QB 451, which concerned several applications for leave to appeal from decisions which were alleged to be vitiated by bias or apparent bias. One of those decisions was a judgment given by me when I was sitting as a deputy judge, and raised the issue of the relevance of Herbert Smith acting in unconnected matters against the husband of one of the parties.
- Herbert Smith is a large firm of solicitors in the City of London, with more than 150 partners, of whom more than 50 specialise in litigation. I was a partner in that firm from 1971 until September 29, 2000, and I was head of the litigation department between 1995 and 1998. I was aware that the firm acted for Price Waterhouse in claims by the liquidators of BCCI, which have been settled, but I was not personally involved in that litigation. I was not aware, until the matter was raised in these proceedings, that the firm acted for Price Waterhouse in connection with claims by employees, or indeed that there were any such claims.
- Subsequently, about 80 employees asked that I should disqualify myself. I fixed today, December 3, 2001, as the date on which I would hear any applications in connection with that request. Two firms of solicitors acting for former employees which raised this issue on behalf of their clients have indicated that the objection will not be pursued, and more than 20 of the unrepresented employees have withdrawn their objection. There are more than 50 who have raised objections and not withdrawn them, although none has made a formal application to that effect. I do not know if any of them is a claimant in the proceedings by employees against Price Waterhouse. In these circumstances I considered that it was appropriate to hold the hearing today, in order for objections to be put and for me to rule on them. I give this judgment following that hearing, at which none of the employees who have not withdrawn their objections appeared.
- On July 6, Messrs Beale & Co, acting for the employees whom they represent, wrote to the court:
“We have no reason to suppose at this stage that any question arises as to the independence of Mr Justice Collins affecting his becoming the case management judge on this matter. However, in order to remove any doubt and in view of the number of represented and unrepresented employees we invite the judge to clarify any involvement that he may have had directly or indirectly through his practice at Herbert Smith in relation to the liquidation of BCCI. In particular we are aware that Messrs Herbert Smith act for Price Waterhouse in an action commenced by employees who are also party to case management. This action has been stayed pending the outcome of the claims by the employees against BCCI.
We should be grateful if the judge would clarify the extent of his involvement in matters relating to the liquidation of BCCI.”
- On the same day the following reply was sent on my behalf:
“Mr Justice Lawrence Collins was until September 29, 2000 a partner in Herbert Smith. He was aware that the firm acted for Price Waterhouse in connection with BCCI, but had no involvement whatsoever in the matter, and was not aware until your fax that there were claims against Price Waterhouse by employees.”
- At the hearing on July 9 I drew attention to the exchange of correspondence, and Mr I Jacob on behalf of certain of the employees indicated that he had not had time to take instructions from his clients, and therefore reserved his position. At the hearing Mr Iqbal Zafar raised the question of my interest and was invited to address any questions in writing to my clerk. On July 17 the following fax was sent by Mr Zafar:
“I shall be grateful if you will kindly advise whether the Honourable Mr. Justice Collins had a financial interest in Herbert Smith when he was a partner?
If Mr. Justice Collins does not presently have any financial interest please let me know when this ceased.”
- A reply was sent on August 1:
“The position is that Mr Justice Lawrence Collins had, and continues to have, the normal financial interest which a partner and an ex-partner would have in a major firm of solicitors.”
- On September 13, Messrs Finers Stephens Innocent wrote, on behalf of Mr Zafar, as follows:
“Mr Iqbal Zafar has instructed us that he may join the action being brought by the former BCCI employees against Price Waterhouse and on this basis, has expressed strong concerns as to the judge’s appointment as the assigned Judge in this matter. He has therefore instructed us to formally invite Mr Justice Collins to withdraw from hearing this case. Mr Justice Lawrence Collins will of course be familiar with the case of Locabal [sic] v. Bayfield ... and on the basis of that judgement we would ask that he considers our client’s request to withdraw from hearing this matter.
We would submit that since Mr Justice Lawrence Collins has only recently replaced Mr Justice Lightman as the assigned Judge any inconvenience which may be caused to the various parties by the Judge’s withdrawal would be minimal.”
- A reply was sent on September 27:
“Your letter of 13 September 2001 has been shown to Mr Justice Lawrence Collins. If you wish to take the matter further, on the basis that the facts would disclose a real danger or reasonable apprehension of bias in relation to the cost-sharing determination, you should invite the comments of the solicitors for the liquidators and of the Treasury Solicitor and make an application to the Judge without delay after liaising with the other interested parties and with the Chancery Listing Officer.”
- In the course of September 2001 78 unrepresented employees wrote letters to the liquidators in similar form, one of the points being:
“I would respectfully request that Mr Justice Collins should recuse himself as it would be prudent that he did so in view of his continuing financial interest in Herbert Smith who act for Price Waterhouse (BCCI’s external auditors) and he now knows that BCCI employees have sued Price Waterhouse for damages, This litigation is pending in the High Court. I WOULD WISH YOU TO CONVEY MY REQUEST TO MR JUSTICE COLLINS.”
- On October 8, the Treasury Solicitor’s office wrote to Messrs Finers Stephens Innocent:
“I have spoken with the Amicus Curiae. He does not consider that it can be said that there is any real danger or reasonable apprehension of bias in Mr Justice Collins hearing the cost-sharing determination.”
- On November 9, Messrs Beale & Co wrote to the court:
“To enable us to form a view on this matter we would be grateful if the following matters could be clarified:-
(a) Whether Mr Justice Lawrence Collins as a partner in Herbert Smith received a share of the profits from billing already made in relation to work carried out by Herbert Smith acting for Pricewaterhouse, in the litigation with the BCCI employees whether or not Mr Justice Lawrence Collins had any personal involvement. We understand the Judge’s answer to this question to be that he had no personal involvement, but that he did receive a share of such profits. We would be grateful for confirmation that this is correct.
(b) Whether there are any outstanding Herbert Smith bills which have yet to be paid in respect of the period prior to 29th September 2000 relating to the Pricewaterhouse/Employees’ litigation and whether Mr Justice Lawrence Collins will receive any proceeds from such bills.
(c) Whether there is any Herbert Smith work in progress relating to the Pricewaterhouse/Employees’ litigation for the period prior to the 29th September 2000 which is unbilled and which may be billed in the future from which Mr Justice Lawrence Collins will receive any proceeds.
(d) Whether Mr Justice Lawrence Collins is entitled to share in the proceeds of any future work by Herbert Smith for work carried out by the firm after 29th September 2000 in the Pricewaterhouse/Employees litigation. This question is put to identify whether he has any continuing right to benefit from the firm’s involvement in this litigation.”
- On November 9 the following reply was sent on my behalf:
“As regards question (a), your understanding is correct. So far as the other questions are concerned, to the extent that matters are within the knowledge of Mr Justice Lawrence Collins disclosure has been made, and he has nothing to add. He is not aware whether, in respect of the period prior to his retirement, bills rendered remain unpaid or work in progress remains unbilled, and does not consider that it would be appropriate to make enquiries.”
- On November 22 and 23 respectively Messrs Beale & Co and Messrs Finers Stephens Innocent wrote to say that their clients were not proposing to make any application that I should disqualify myself.
III Applicable principles
- The law has been authoritatively set out by the Court of Appeal in two recent decisions, Locabail (UK) Ltd v Bayfield Properties Ltd.  QB 451 and Director General of Fair Trading v The Proprietary Association of Great Britain, unreported, December 21, 2000.
- Locabail concerned several cases in which it was argued that the judge below was disqualified. One of those cases was an application for permission to appeal from a judgment given by me as a deputy judge in proceedings by a financial institution against a Mrs Emmanuel for possession of a house. Mrs Emmanuel claimed an equitable interest in the house by reason of promises which she said had been made by her husband, Mr Emmanuel, and upon which she had acted. It emerged in the course of the trial that Herbert Smith had acted for a client in wholly unrelated proceedings (including the presentation of a bankruptcy petition) against Mr Emmanuel.
- The Court of Appeal drew a distinction between cases in which bias was effectively presumed, and where it gave rise to automatic disqualification, on the one hand, and cases on the other hand where a judge was disqualified because it was shown that there was a danger of bias. There was automatic disqualification where the judge was shown to have a personal interest in the outcome of litigation: Dimes v Properietors of Grand Junction Canal (1852) 3 HL Cas 759; R v Bow St Metropolitan Stipendiary Magistrate, ex p Pinochet (No. 2)  1 AC 119. In such a case the judge was is improperly acting as a judge in his own court: see Locabail at 472.
The test for apparent bias
- By the time Locabail was decided there had been some discussion of the appropriate test to be applied to determine whether a judge should be disqualified on the basis of apparent bias. In R v Gough  AC 646 it was held that the test was whether there was a real danger of bias, rather than the test whether there was a reasonable suspicion of bias. Lord Goff of Chieveley said (at 670): “….for the avoidance of doubt, I prefer to state the test in terms of real danger rather than real likelihood, to ensure that the court is thinking in terms of possibility rather than probability of bias.” This test was applied by the Court of Appeal in Locabail.
- Courts in Scotland, South Africa, and Australia have held that the test is not that of the real danger of bias, but one of reasonable suspicion or reasonable apprehension of bias: see Doherty v McGlennan, 1997 SLT 444; Moch v Nedtravel (Pty) Ltd 1996 (3) SA 1; Webb v The Queen (1994) 181 CLR 41. As the Court of Appeal in Locabail noted (at 477), the only practical difference between the tests is that the actual knowledge of the judge is more directly relevant for the purposes of the former test. In Director of Fair Trading v The Proprietary Association of Great Britain (the Medicaments case), the Court of Appeal was invited to hold that the test in R v Gough was no different in reality from the “reasonable apprehension of bias” test favoured in Scotland and most other common law jurisdictions. It was also submitted that if it was different, it had to be discarded in favour of the reasonable apprehension test in the light of the Human Rights Act 1998 as that was the test applied by the European Court of Human Rights. The decisions were, principally, Piersack v Belgium (1982) 5 EHRR 169; De Cubber v Belgium (1984) 7 EHRR 236; Hauschildt v Denmark (1989) 12 EHRR 266; Borgers v Belgium (1993) 15 EHRR 92; and Gregory v United Kingdom (1997) 25 EHRR 577.
- The Court of Appeal summarised the principles to be derived from the cases in the European Court of Human Rights as follows: (1) if a judge were shown to have been influenced by actual bias, his decision must be set aside; (2) where actual bias had not been established the personal impartiality of the judge was to be presumed; (3) the Court then had to decide whether, on an objective appraisal, the material facts gave rise to a legitimate fear that the judge might not have been impartial, and if they did, then the decision of the judge must be set aside; (4) the material facts were not limited to whose which were apparent to the applicant, and were those which were ascertained upon investigation by the court; (5) an important consideration in making an objective appraisal of the facts was the desirability that the public should remain confident in the administration of justice.
- The Court of Appeal concluded that the approach came close to that in R v Gough, except that the European Court of Human Rights considered that, when determining whether the material circumstances give rise to a reasonable apprehension of bias, it was applying an objective test to the circumstances, not passing judgment on the likelihood that the particular tribunal under review was in fact biased. The Court of Appeal concluded:
“When the Strasbourg jurisprudence is taken into account, we believe that a modest adjustment of the test in Gough is called for, which makes it plain that it is, in effect, no different from the test applied in most of the Commonwealth and in Scotland. The Court must first ascertain all the circumstances which have a bearing on the suggestion that the Judge was biased. It must then ask whether those circumstances would lead a fair-minded and informed observer to conclude that there was a real possibility, or a real danger, the two being the same, that the tribunal was biased.”
Relevance of judge’s statement as to knowledge
- In Locabail it was said (at 477) that a reviewing court was not necessarily bound to accept the statement of the judge as to what he or she knew at any relevant time, but there could be no be no question of cross-examining or seeking disclosure from the judge. But the reviewing court would not pay attention to any statement by the judge concerning the impact of any knowledge on his mind or his decision. If the statement of the judge about his knowledge was, objectively viewed, cogent, then that was the basis on which the reasonable onlooker, or the court personifying the reasonable onlooker, would ask whether there was any real danger of bias. If the statement of the judge was, objectively viewed, an improbable one, then that is how the reasonable onlooker would approach it. In the Medicaments case it was said that, in considering whether there was a real danger or reasonable apprehension of bias, the material circumstances would include any explanation given by the judge under review as to his knowledge or appreciation of those circumstances. Where that explanation was accepted by the applicant for review it could be be treated as accurate. Where it was not accepted, it became one further matter to be considered from the viewpoint of the fair-minded observer. The court did not have to rule whether the explanation should be accepted or rejected. Rather it had to decide whether or not the fair-minded observer would consider that there was a real danger of bias notwithstanding the explanation advanced. The Court of Appeal noted that the “reasonable apprehension” test was a much more appropriate test when the judge to whom objection was taken had to rule on the objection. In such a situation it would be invidious for the judge to rule on whether there was a danger that he might actually be influenced by partiality.
Approach to objections
- Judges have a duty to sit in any case in which they are not obliged to disqualify themselves, but they must disqualify themselves if there are reasonable grounds on the part of a litigant for apprehending that the judge will not be impartial. It is important that judges discharge their duty to sit and do not, by acceding too readily to suggestions of appearance of bias, encourage parties to believe that by seeking the disqualification of a judge, they will have their case tried by someone thought to be more likely to decide the case in their favour: President of the Republic of South Africa v South African Rugby Football Union, 1999 (4) SA 147, at 177; Re JRL, ex p CJL (1986) 161 CLR 342, 352.
- In Locabail the court said that if an objection was made, it would be the duty of the judge to consider the objection and exercise his judgment upon it, but “he would be as wrong to yield to a tenuous or frivolous objection as he would to ignore an objection of substance” at 479. In my judgment, it is particularly important for the judgment to be exercised in accordance with this principle in a situation where a judge has been designated to sit in a defined group of cases, such as those relating to a particular insolvency, such as BCCI. There are a number of such substantial matters, and only a limited number of judges in the Chancery Division to deal with them. There must be a substantial reason if the assigned judge is to be disqualified and the burden of the matter is to be placed on another judge.
- In view of the fact that certain employees have themselves or through solicitors withdrawn objections, and that the liquidators have indicated that they have no objections, I should add that objection is precluded by a clear and unequivocal waiver, made with full knowledge of all relevant facts: Locabail 481.
- I have no information about which employees are suing Price Waterhouse, but for the purposes of this judgment, I shall assume that those employees who have not withdrawn their objections are among those employees who are suing Price Waterhouse. Consequently, this case has two features in common with Locabail and one feature which is different. The common features are that in each case the objection is based on the fact that Herbert Smith was acting in unrelated proceedings against one of the parties, and that in each case I had no involvement in those proceedings and was unaware of them until the objection was made. The distinction is that in Locabail I was still a partner in Herbert Smith when the application was made that I should set aside the judgment which I had already given. In the present case I had ceased to be a partner in Herbert Smith prior to my appointment as a High Court judge, and there is therefore no question of Price Waterhouse being regarded in any sense as my client.
- I do not consider that there is any basis on which it could be argued that this is a case for automatic disqualification. In Locabail it was argued that Herbert Smith (and therefore I also as a partner) had an interest in Mrs Emmanuel losing the case, because it might increase the assets of Mr Emmanuel available to his creditors, including the clients of Herbert Smith in the other case, and that thereby Herbert Smith might increase its fees or its goodwill with its client. The Court of Appeal held that in order to attract the consequence of automatic disqualification, something more must be present than the tenuous connection between the success of the firm in an individual case on the one hand and the goodwill of the firm and the level of profit on the other. In the present case, it could possibly be said that Price Waterhouse have an interest in the employees being ordered to pay costs, because that might make them less able to fund litigation against Price Waterhouse. But that could not give a partner in the firm representing them a financial interest in their success. In any event, that possibility could not affect my position, as a former partner in the firm representing Price Waterhouse. It is not even arguable that I have a financial or other interest in the success or failure of the proceedings against PriceWaterhouse.
- In Locabail it was held that the fact that Herbert Smith had acted in unrelated proceedings against the husband of the litigant did not disqualify me on the broader ground of apparent danger of bias. It was held that the question was whether, in the light of my actual knowledge at the time of hearing and of any other relevant facts established by the evidence, there was a real danger of bias. The point that the clients of Herbert Smith might have an interest in the failure of the defence of the wife to the claim for possession was not one which would immediately occur to even an informed reader of the press cutting which was produced in the course of the trial and revealed the Herbert Smith proceedings against the husband, and did not occur to me, or to the wife or her lawyers. The interest in fees earned by Herbert Smith was as tenuous and insubstantial for the purposes of the test as it was for the purpose of establishing that the judge had a sufficient pecuniary or proprietary interest in the outcome of the litigation to attract automatic disqualification.
- For the purposes of this case, I have to apply the modified test enunciated in the Medicaments case, namely, whether the circumstances are such as to lead a fair-minded and informed observer to conclude that there is a real possibility or a real danger of bias.
- An objective observer of these proceedings would be deemed to know these matters: (a) the parties with an interest in the current proceedings are the liquidators of BCCI, represented and unrepresented employees, and the Legal Services Commission; (b) Price Waterhouse are not parties, directly or indirectly; (b) Herbert Smith acted for Price Waterhouse in proceedings by the BCCI liquidators, and act for Price Waterhouse in proceedings by some employees; (c) I was a partner in Herbert Smith until September 2000, when I ceased to be a partner on my appointment to the High Court bench; (d) I was aware that Herbert Smith acted for Price Waterhouse in connection with the claims by the BCCI liquidators, but I personally had no involvement in BCCI matters while I was a partner, and was not even aware that there were proceedings against Price Waterhouse by employees until it was raised in these proceedings; (e) I was designated as assigned judge in BCCI matters in July 2001 and am due to hear the substantive costs sharing preliminary issues in February 2002; (f) those employees who are legally represented, and who have raised objections or questions concerning my independence have indicated that they will not make any application for me to disqualify myself; (g) the liquidators and the amicus curiae have confirmed that in their view the facts do not give rise to any reasonable apprehension of bias.
- I do not consider that any reasonable onlooker would consider, in the light of those matters, that there could be any real possibility or real danger of bias in relation to the costs sharing determination. The crucial points are that Price Waterhouse are in no sense a party to the present proceedings, that I did not represent them in the action by employees, and that I am no longer a partner in the firm which represented them. Wholly different considerations would of course apply in relation to the proceedings by employees against Price Waterhouse, if they were to come before me. This is not therefore a case in which I should accede to the request on the part of some employees that I should disqualify myself.
© 2001 Crown Copyright
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