By Theresa Power and Dr David J. Townsend -
Key decisions
- Westpac Banking Corporation v Forum Finance Pty Limited (Apprehended Bias Application) [2022] FCA 981
- Carnival plc and Princess Cruise Lines Ltd v Karpik (The Ruby Princess) [2022] FCAFC 149
COURTS AND JUDGES
Principles of apprehended bias in the context of interlocutory judgment – witness cross-examined as to credit – adverse view formed of reliability as a witness – at least reasonable possibility witness would be called at trial.
Underlying proceedings were commenced by Westpac in July 2021 against Forum Finance Pty Limited (in liquidation) (‘Forum Finance’), Mr Bill Papas, Mr Vincenzo Tesoriero and related companies. Westpac claimed in the underlying proceedings that it was defrauded almost $300 million by Forum Finance in an alleged lease scheme that saw funds lent by Westpac to the Forum group of companies to fund the acquisition of equipment that Westpac alleged did not exist. Westpac alleged the funds instead were used by Mr Papas and Mr Tesoriero (both of whom founded Forum Finance) to fund a lavish lifestyle and bankroll a sprawling property empire.
Mr Tesoriero denied knowing anything about, or taking any role in, the alleged lease scheme. Mr Papas has also denied the allegations, however he has not returned to Australia from Greece and a warrant has been issued for his arrest.
The freezing order variation application
On 19 August 2022, Lee J, who had been the docket judge case managing the proceedings (and related proceedings brought by other banks who also claim to have been defrauded by the scheme) since their inception, recused himself for apprehended bias and ordered that the underlying proceedings be reallocated to another judge.
The reasons for the recusal arose from an earlier interlocutory judgment delivered by Lee J in Westpac Banking Corporation v Forum Finance Pty Limited (Freezing Order Variation) [2022] FCA 910 (the ‘July 2022 decision’). Following a three day interlocutory hearing, Lee J acceded to Mr Tesoriero’s application to vary the freezing orders that had been made at the commencement of the underlying proceedings in July 2021. The freezing orders were varied to provide a greater allowance for Mr Tesoriero to draw on those funds for his reasonable legal expenses, of up to $1.25 million (Mr Tesoriero had sought $1.866 million).
In the course of the interlocutory hearing to vary the freezing orders, Westpac was granted leave to cross-examine Mr Tesoriero at length on his assets and liabilities. Following that extensive cross-examination, Lee J considered the substance of Mr Tesoriero’s ‘Byzantine’ financial affairs had finally been revealed, although he remained unconvinced that the true position had been completely disclosed with any precision (at [31]-[32]). His Honour noted of the July 2022 decision that, in order to determine the application before him, it had been necessary to assess Mr Tesoriero’s evidence closely and observe him in the witness box (at [45]). His Honour said that:
‘Although it was unnecessary for me to make general credit findings to dispose of this application, it would leave the parties in a state of incomplete information to fail to record that I necessarily formed opinions as to the reliability of Mr Tesoriero as a witness. …
It is presently unclear as to whether Mr Tesoriero will be called and whether it will be necessary to hear him give evidence again. In fairness, however, I think I should record my view that the general impressions I formed of the evidence of Mr Tesoriero were unfavourable as to his reliability as a witness’ (at [45]-[46]).
His Honour noted he would continue as docket judge for the proceedings unless an application was made that he disqualify himself from doing so (at [46]).
