VCAT S NATURAL JUSTICE OBLIGATIONS. By Justice Emilios Kyrou, Supreme Court of Victoria. Paper delivered at the VCAT on 23 June 2010

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1 VCAT S NATURAL JUSTICE OBLIGATIONS By Justice Emilios Kyrou, Supreme Court of Victoria Paper delivered at the VCAT on 23 June 2010 Introduction 1. It is trite to say that the Victorian Civil and Administrative Tribunal ( VCAT ), as a body with legal authority to affect the rights and interests of the parties to proceedings before it, is obliged to comply with the rules of natural justice. This obligation is reflected in several sections of the Victorian Civil and Administrative Tribunal Act 1998 ( VCAT Act ). 2. A breach of the rules of natural justice is frequently relied upon in applications for judicial review and in appeals on a question of law. 3. In the 2007 and 2008 calendar years, the Trial Division of the Supreme Court made 138 decisions involving judicial review or an appeal on a question of law and the Court of Appeal made 26 such decisions. Breach of the fair hearing rule of natural justice was raised in 52 cases and was successful in 16, representing a success rate of 31 per cent. Breach of the bias rule was raised in 11 cases and was successful in four, representing a success rate of 36 per cent. 4. In this paper, I will discuss: (d) (e) (f) (g) (h) the essential elements of the rules of natural justice; the provisions of the VCAT Act that reflect the rules of natural justice; what must be done to comply with the fair hearing rule of natural justice; what must be done to comply with the bias rule of natural justice; whether the Charter of Human Rights and Responsibilities Act 2006 ( Charter ) affects the VCAT s natural justice obligations; recent examples of conduct which has been held to constitute a breach of the fair hearing rule; recent examples of conduct which has been held to constitute a breach of the bias rule; and whether a breach of the rules of natural justice by the VCAT constitutes an appealable error of law. Essential elements of the rules of natural justice 5. It is well known that there are two basic rules of natural justice: the fair hearing rule and the bias rule. 6. The fair hearing rule requires the adjudicating body to provide to the parties before it a reasonable opportunity to present their cases and to answer any allegations against them.

2 The bias rule requires the adjudicating body to be impartial. There are two types of bias that can infringe the bias rule: actual bias and apprehended bias. Actual bias involves the adjudicating body being unable to decide the matter impartially, whereas apprehended bias involves a perception of a lack of impartiality. In the words of the leading High Court case in this area, apprehended bias describes a situation where a fair-minded lay observer might reasonably apprehend that the [adjudicating body] might not bring an impartial mind to the resolution of the question the [body] is required to decide The expressions procedural fairness and rules of natural justice are often used synonymously. My preference is to refer to the rules of natural justice because, while the expression procedural fairness encapsulates the fair hearing rule, it is less apt in relation to the bias rule. Relevant provisions of the VCAT Act 9. The VCAT Act contains a number of provisions which either impose directly on the VCAT obligations to accord natural justice or acknowledge the existence of such obligations. 10. These provisions, in numerical order, are as follows: Section 80(1). This section empowers the VCAT to give directions at any time in a proceeding and do whatever is necessary for the expeditious or fair hearing and determination of a proceeding. 2 Section 97. This section provides that the VCAT must act fairly and according to the substantial merits of the case in all proceedings. 3 Section 98. This section relevantly provides: (1) The Tribunal (d) is bound by the rules of natural justice; is not bound by the rules of evidence or any practices or procedures applicable to courts of record, except to the extent that it adopts those rules, practices or procedures; may inform itself on any matter as it sees fit; must conduct each proceeding with as little formality and technicality, and determine each proceeding with as much speed, as the requirements of this Act and the enabling enactment and a proper consideration of the matters before it permit. (3) Subject to this Act, the regulations and the rules, the Tribunal may regulate its own procedure. 1 Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337, 344 [6]. 2 Emphasis added. 3 Emphasis added.

3 - 3 - (4) Subsection (1) does not apply to the extent that this Act or an enabling enactment authorises, whether expressly or by implication, a departure from the rules of natural justice. (d) (e) Section 99. This section requires the VCAT to give to the parties notice of the time and place for the hearing of the proceeding. Section 102. This section relevantly provides: (1) The Tribunal must allow a party a reasonable opportunity to call or give evidence; and to examine, cross-examine or re-examine witnesses; and to make submissions to the Tribunal. (2) Despite subsection (1), the Tribunal may refuse to allow a party to call evidence on a matter if the Tribunal considers that there is already sufficient evidence of that matter before the Tribunal. 11. The above provisions do not supplant the common law rules of natural justice. Rather, they give statutory effect to those rules and, in some respects, amplify them. 12. Specific statutory provisions such as those exempting the VCAT from the rules of evidence, and those conferring upon the VCAT the power to inform itself as it sees fit and to regulate its own procedure do not derogate from its obligation to comply with the rules of natural justice. 4 Compliance with the fair hearing rule 13. It has often been said that the fair hearing rule does not involve an inflexible set of procedures. Rather, what must be done to comply with the fair hearing rule will depend on all of the circumstances of the case In a typical case, compliance with the fair hearing rule will be achieved as a matter of course due to the standard procedures that are followed by the VCAT. If the applicant and then the respondent are given an opportunity to present evidence and to make submissions, this will ordinarily satisfy the fair hearing rule. There are cases, however, where even this simple procedure may infringe the fair hearing rule. Where, in a review proceeding, an applicant is challenging a decision involving serious allegations such as the commission of a crime or a fraud, or professional misconduct it may be a breach of the fair hearing rule to require the applicant to give evidence first. 15. The case of Towie v Medical Practitioners Board of Victoria 6 involved an application for review of a decision by the Medical Practitioners Board to find Dr Towie guilty of unprofessional conduct and to reprimand him. The VCAT had made standard directions requiring Dr Towie and the Board to file witness statements in turn. Dr Towie had filed a 4 Francis-Wright v Victorian Civil and Administrative Tribunal (2001) 17 VAR 306, 317 [109]; [2001] VSC 35; Norville Nominees Pty Ltd v Strathbogie Shire Council [2008] VSC 339, [17]; MH6 v Mental Health Review Board [2009] VSCA 184, [31] ( MH6 ). 5 National Companies and Securities Commission v News Corporation Ltd (1984) 156 CLR 296, [2008] VSCA 157.

4 - 4 - witness statement from his receptionist but had not filed his own witness statement. The VCAT had dismissed the proceeding pursuant to s 78(1) of the VCAT Act on the basis that Dr Towie failed to comply with the VCAT s directions without reasonable excuse. 16. The Court of Appeal held that Dr Towie had complied with the VCAT s directions, which were the usual directions given by the VCAT on applications for review. In relation to those directions, the Court made the following observations: the usual directions given at VCAT, would not generally be appropriate where an applicant seeks to review disciplinary proceedings and is a person who is or may be exposed to a penalty. A party may, in such cases, be required to file written grounds and an outline of argument which identifies in broad terms what is in issue on the application for review. But it will not ordinarily be appropriate that directions be given which require the applicant for review to provide an outline of argument, or any other written material, which contains a positive assertion or denial of facts or requires an election by the applicant as to whether he or she intends to go into evidence or requires any proposed evidence the applicant intends to call to be the subject of a witness statement which must be produced and served on the other side, before the case advanced against the applicant has been completed The VCAT may infringe the fair hearing rule by failing to give the parties an opportunity to refute, or to make submissions about, evidence upon which it relies in making a decision. This can occur quite subtly. Assume that you are hearing a hypothetical case involving photographs being tendered in the form of a disk. Assume further that the photographs are shown to witnesses on a screen at the hearing and that, after you have reserved your decision, you discover that the zoom function on your computer allows you to see details in the photographs that did not appear on the screen during the hearing. Can you rely on those details in reaching your decision without re-convening the hearing and giving the parties an opportunity to give evidence about those details or to make submissions on them? In my opinion, you would not be able to rely on the details revealed by the computer s zoom function if that function was not used when the photographs were shown during the hearing. This is because a photograph which is enhanced by a zoom function in this way is, in substance, new evidence. 18. Another subtle way in which the fair hearing rule can be infringed involves the VCAT engaging in private, undisclosed research that extends beyond traditional sources such as dictionaries, statutes and case law. For example, if credit is a major issue in a case, you cannot Google each of the parties and their witnesses after you have reserved your decision in order to find out what has been published about them or what they themselves have published. If an opposing party has not put the adverse material to a party or witness and given him or her an opportunity to comment on it, you cannot rely on that material. 19. The above analysis is not inconsistent with what the Court of Appeal said in Weinstein v Medical Practitioners Board of Victoria. 8 In that case, during a formal hearing by a panel into patients complaints against Dr Weinstein, the panel had conducted a Google search on the qualifications and credentials of an expert witness. The information that the panel obtained had been disclosed to the parties during the hearing. The Court of Appeal held that the panel s function was investigative in nature and that its decision to conduct the Google search was authorised by s 52(1) of the Medical Practice Act 1994, which gave the panel the power to inform itself in any way it thinks fit. The fair hearing rule was not 7 Towie v Medical Practitioners Board of Victoria [2008] VSCA 157, [9]. Cf MH6 [2009] VSCA 184, [22]- [27], [33]-[35]. 8 (2008) 21 VR 29 ( Weinstein ).

5 - 5 - breached because the panel had disclosed to the parties the information it had obtained. There was also nothing in the panel s conduct which cast any doubt on its impartiality. The Court did say, however, that it might have been preferable for the panel to request counsel assisting to obtain the necessary information rather than to make its own private inquiry Decisions refusing an adjournment are frequently impugned on the ground that the fair hearing rule has been contravened. The traditional approach has been to err in favour of granting an adjournment in order to ensure that the real issues in dispute can be agitated properly and that the parties have sufficient time to prepare for the hearing. Under the traditional approach, an order for costs was usually considered sufficient to address any prejudice to the party opposing the adjournment and case management considerations were not given significant weight. 21. In the recent case of Aon Risk Services Australia Ltd v Australian National University, 10 however, the High Court accorded greater weight to case management considerations and expressed reservations about whether an order for costs could adequately address the full extent of the prejudice arising from an adjournment. French CJ said: In the proper exercise of the primary judge s discretion, the applications for adjournment and amendment were not to be considered solely by reference to whether any prejudice to Aon could be compensated by costs. Both the primary judge and the Court of Appeal should have taken into account that, whatever costs are ordered, there is an irreparable element of unfair prejudice in unnecessarily delaying proceedings. Moreover, the time of the court is a publicly funded resource. Inefficiencies in the use of that resource, arising from the vacation or adjournment of trials, are to be taken into account. So too is the need to maintain public confidence in the judicial system The practical consequence of the High Court s approach in Aon is that a decision to refuse an adjournment which properly weighs up all of the competing considerations that apply in a particular case is unlikely to be found to involve a breach of the fair hearing rule. Compliance with the bias rule 23. Apprehended bias can arise in many different circumstances. Examples include where: (d) the adjudicator is closely acquainted with one of the parties or a key witness for one of the parties in a case where credit is important; the adjudicator expresses opinions, prior to hearing the evidence, which show that he or she has prejudged vital issues; the adjudicator does not treat the parties equally on issues such as the admissibility of evidence; and in the course of the proceeding, the adjudicator communicates with one of the parties or a witness for one of the parties without the knowledge of the other party Weinstein (2008) 21 VR 29, 37 [27], [32]-[38]. 10 (2009) 239 CLR 175 ( Aon ). 11 Aon (2009) 239 CLR 175, 182 [5]. 12 Shields v Overland [2009] VSC 550, [110]-[117].

6 A situation may arise where a person or a company for whom you acted when you were in professional practice becomes a party to a proceeding before you. The High Court has said that there is no automatic rule that you must disqualify yourself where a former client is a party before you. 13 You will need to disqualify yourself, however, where the correctness or appropriateness of any advice you gave to the former client is a live issue for determination in the case. 14 You will also need to disqualify yourself if you have established a close relationship with a former client who is a natural person or an employee of a former corporate client and that individual will be a key witness in the proceeding. 25. If a proceeding is allocated to you, it is often prudent to look at the file well before the commencement of the hearing to familiarise yourself with the parties and their proposed witnesses. If there is a sound reason why you should not hear the case, you should raise this issue with the President so that the proceeding can be allocated to another member without causing inconvenience to any party. If this course is not adopted and you discover during the hearing that there is a disqualifying factor present, great cost or inconvenience will be caused to the parties, their witnesses, the VCAT and taxpayers by the hearing being aborted. 26. There will be situations where, after you look at the file, you conclude that there are possible grounds for disqualification, but that they are so tangential that they cannot seriously be entertained. In these situations, it is often prudent to disclose the circumstances to the parties before the commencement of the hearing so that they can consider their position. The parties may well be aware of additional facts which render your initial view erroneous. 27. In my experience, difficulties are often avoided by erring on the side of prior disclosure to the parties. There is, however, a balance to be achieved. Over zealous disclosure of matters which could not conceivably found a basis for recusal may simply encourage opportunistic and unmeritorious attempts to influence the composition of the VCAT. Nevertheless, if something strikes you as a possible disqualifying matter, it may be prudent to disclose it even if you think that it does not warrant recusal. Impact of the Charter of Human Rights and Responsibilities Act Section 24(1) of the Charter provides that a party to a civil proceeding has the right to have the proceeding decided by a competent, independent and impartial court or tribunal after a fair and public hearing. 29. I do not wish to comment on the difficult topic of the extent to which s 24 of the Charter applies to the VCAT s substantive hearings. 15 Even if it is assumed that s 24 of the Charter applies directly and without limitation to such hearings, it is unlikely that it will add materially to the requirements of the common law rules of natural justice and ss 97, 98 and 102 of the VCAT Act Re Polites; Ex parte Hoyts Corporation Pty Ltd (1991) 173 CLR 78, 87-8, 91 ( Polites ). For a recent application of Polites, see Slaveski v Victoria [2010] VSC Polites (1991) 173 CLR 78, See De Simone v Bevnol Constructions & Developments Pty Ltd [2009] VSCA 199, [35]-[53]. 16 Russell v Yarra Ranges Shire Council [2009] VSC 486, [41]-[42].

7 - 7 - Recent examples of breaches of the fair hearing rule 30. In Towie v Victoria, 17 the VCAT had made an order under s 75 of the VCAT Act summarily dismissing the application for review on a ground that had not been raised by the respondent and without giving prior notice to Dr Towie that it proposed to rely on that ground. I decided that the VCAT had infringed the fair hearing rule In Victoria v Turner, 19 the VCAT had awarded compensation on the basis that the respondent had discriminated against the applicant during a period that was not covered by the applicant s claim without giving prior notice to the respondent that it proposed to award compensation for that period. I decided that the VCAT had infringed the fair hearing rule In CGU Insurance Ltd v C W Fallaw & Associates Pty Ltd, 21 the VCAT had ruled that the respondent could not call an individual as a new witness on the ground that it ought to have called him at an earlier stage of the hearing. The individual had attended the VCAT from the commencement of the hearing, but he had not approached the respondent s solicitors to disclose information that went to a central issue in the case until the hearing had entered its final stages. Warren CJ found that the VCAT had breached the fair hearing rule and ss 97, 98 and 102 of the VCAT Act. Her Honour held that the VCAT s ruling was based on its own case management directions rather than the correct test, namely, whether the evidence of the new witness was relevant and, if the evidence was relevant, whether it could be received without causing irremediable prejudice to the other party In Leon Holdings Pty Ltd v O Donnell, 23 Habersberger J held that the VCAT had breached the fair hearing rule by preventing the applicant from tendering relevant documents and its key witness from giving evidence about relevant matters. 24 His Honour also held that the VCAT had breached s 102(1) of the VCAT Act by not permitting the applicant to crossexamine the respondent. His Honour said: In my opinion, nothing said in s 98 of the VCAT Act overrides the clear mandatory statement in s 102(1) that the Tribunal must allow a party a reasonable opportunity to cross-examine a witness. Although the Tribunal may regulate its own procedure (s 98(3)), that power is expressly subject to this Act. The ability to conduct the proceeding with little formality and technicality (s 98(1)) is also expressed to be subject to the requirements of this Act. Although permitting cross-examination would have increased the length and formality of the hearing, the obligation on the Tribunal was to allow Mr Flinkier a reasonable opportunity to cross-examine Mr O Donnell. Since the outcome of the proceeding was heavily dependent on the assessment of the credibility of the conflicting evidence given by Mr O Donnell and Mr Flinkier, in my opinion, a short but orderly cross-examination of Mr O Donnell, and of Mr Flinkier if Mr O Donnell wished to exercise his right, should have been allowed. The disjointed and limited questioning by Mr Flinkier was no substitute for his statutory entitlement. 17 (2008) 19 VR Towie v Victoria (2008) 19 VR 640, [40]-[43]. 19 [2009] VSC Victoria v Turner [2009] VSC 66, [78]-[86], [94]-[97]. 21 [2008] VSC CGU Insurance Ltd v C W Fallaw & Associates Pty Ltd [2008] VSC 197, [24]-[32]. 23 [2009] VSC 430 ( Leon Holdings ). 24 [2009] VSC 430, [89]-[91].

8 - 8 - In my opinion, Mr Flinkier did not have a reasonable opportunity to test by cross-examination the credibility of Mr O Donnell s evidence 25 Recent examples of breaches of the bias rule 34. In Rustom v Ismail, 26 the VCAT senior member had previously heard an unrelated proceeding involving the applicant in which she had rejected important parts of his evidence. When the current proceeding was listed before the senior member, the applicant expressed concern at the potential for bias, but the senior member dismissed the applicant s concern by stating that she did not believe that she was prejudiced against him. The senior member then heard the proceeding and did so in a conspicuously fair manner. In a detailed and painstaking set of reasons for decision, she rejected key aspects of the applicant s evidence and found substantially against him. Cavanough J held that the senior member had erred in refusing to disqualify herself for the following reasons: The senior member made very strong and very colourful comments with regard to the credibility of the applicant, before the Senior Member had heard a word of evidence on oath or affirmation or any cross-examination or any submissions. 27 The relevant ground of disqualification is a reasonable apprehension that the adjudicator will not decide the case impartially or without prejudice, rather than that he or she will decide the case adversely to one party. Bias can occur even if the decision-maker is equally distrustful of both parties. Accordingly, it was no answer that the senior member had the same negative view of both the applicant and the respondent. 28 The mere fact that the adjudicator has previously decided against a party on issues of fact or law is not sufficient to infer the existence of apprehended bias. However, the fact that, in a previous case, the adjudicator has made an adverse finding with respect to the credibility of a party or a relevant witness may be particularly significant in deciding whether he or she should conduct the hearing. 29 In this case, the senior member should have disqualified herself because a fair-minded lay observer could have read her findings in the earlier case as findings of the applicant s untruthfulness and her comments on the first day of the subsequent proceeding may well have confirmed such an impression in the observer s mind. 30 The observer would retain a reasonable apprehension of bias notwithstanding that the hearing was fair and the reasons for decision were written carefully In Leon Holdings, 32 Habersberger J upheld various grounds of apprehended bias. One of those grounds related to the VCAT member s decision to permit the applicant to give hearsay evidence when he later refused to receive evidence of the same nature from the respondent s key witness. 33 His Honour held that, although it was up to the VCAT to determine whether to allow hearsay evidence, the approach adopted had to be even-handed 25 Leon Holdings [2009] VSC 430, [97]-[99] (citations omitted). 26 [2009] VSC Rustom v Ismail [2009] VSC 625, [20]. 28 Rustom v Ismail [2009] VSC 625, [22]-[23]. 29 Rustom v Ismail [2009] VSC 625, [23]-[24]. 30 Rustom v Ismail [2009] VSC 625, [27]. 31 Rustom v Ismail [2009] VSC 625, [32]. 32 [2009] VSC Leon Holdings [2009] VSC 430, [69]-[72].

9 - 9 - and treat both parties equally. Another ground of apprehended bias was that the member had expressed a concluded view, before hearing all of the relevant evidence, that the key witness for the respondent had retrospectively rationalised his version of events. 34 Breach of the rules of natural justice as an appealable error of law 36. Section 148(1) of the VCAT Act provides that a party to a proceeding before the VCAT may appeal to the Supreme Court on a question of law from an order of the VCAT. 37. Although some cases have suggested otherwise, 35 the prevalent view is that a breach of the rules of natural justice by the VCAT involves a question of law for the purposes of s 148(1) of the VCAT Act Where the Supreme Court finds that the VCAT has breached one of the rules of natural justice, it will usually set aside the VCAT s order and remit the proceeding to the VCAT for re-hearing. 39. That is not to say, however, that every case involving a breach of one of the rules of natural justice will automatically result in the VCAT s order being set aside. The Court will not set aside the VCAT s order if it is inevitable that, upon a re-hearing, the VCAT will make the same order or if a re-hearing would be futile for some other reason In addition, the Court will not set aside the VCAT s order if the appellant waived the right to rely on the breach. 38 This may occur where the appellant, in full knowledge of the breach, decided to continue with the hearing without making any objection. The waiver rule is intended to preclude parties from staying silent in relation to a known breach with the intention of raising it only if they are unsuccessful in the proceeding. 34 Leon Holdings [2009] VSC 430, [85]-[86]. 35 See, eg, Sherman v Watson [2003] VSCA 70, [7]; PRA v MA (2004) 21 VAR 16, 28 [36]; [2004] VSCA Luck v Renton (2005) 24 VAR 1, 5 [17]; [2005] VSCA 210; Martin v Fasham Johnson Pty Ltd [2007] VSC 54, [47]; CGU Insurance Ltd v C W Fallaw & Associates Pty Ltd [2008] VSC 197, [26], [32]; Towie v Victoria (2008) 19 VR 640, 652 [46]; Rustom v Ismail [2009] VSC 625, [4]-[5]. 37 Stead v State Government Insurance Commission (1986) 161 CLR 141, 145; Ucar v Nylex Industrial Products Pty Ltd (2007) 17 VR 492, 519 [75]. 38 MH6 [2009] VSCA 84, [53].

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