Handbook for Judicial Officers — Actual or apprehended bias and unconscious bias

In Mohamed v Mohamed,^[25] a couple who were married under Islamic law had entered into a prenuptial agreement stating that the wife was entitled to a $50,000 dowry in the event that her husband divorced her.^[26] Under the terms of the agreement, if the wife ended the relationship or there was a mutually agreed separation, the wife would not receive the dowry.^[27] It was clear that both parties had received independent legal advice as to the effect of the agreement and had entered into it willingly.^[28] However, when the couple’s marriage broke down they could not agree as to which of them had initiated the divorce and the husband refused to pay.^[29] The wife commenced proceedings in the Local Court seeking to enforce the agreement, and the Local Court found as a matter of fact that the husband had ended the relationship.^[30] He was ordered to pay the $50,000.^[31]

The husband appealed, arguing that the agreement was unenforceable for public policy reasons. He asserted that the contract was effectively an “agreement of servitude”, in that its purpose was to force him to stay in the marriage against his will.^[32] The court did not accept this argument.

As a general rule, courts will enforce the principle of “freedom of contract”, and will be reluctant to interfere with agreements voluntarily entered into by parties of full legal capacity.^[33] There are a number of exceptions to this rule, including where enforcing a contract would be contrary to public policy. However, this does not mean that courts have a discretion to declare agreements unenforceable that in the opinion of an individual, or indeed in the opinion of the individual judges, are against the public interest. Rather, as Isaacs J has noted:^[34]

Harrison AsJ found that there was no accepted principle within the community that an agreement for the payment of a dowry was against public policy.^[35] Her Honour, referring to an academic article by Black and Sadiq, stated:^[36]

Although there was no Australian authority on the subject, cases from the US, the UK and Canada, were overwhelmingly in favour of enforcing contracts for the payment of dowries.^[37] Relevantly, in the process of upholding such an agreement, the British Columbia Supreme Court has stated:^[38]

The court’s decision that the agreement should be enforced was consistent with comments made by the High Court of Australia in the 1962 decision Haque v Haque.^[39] In that case, a second wife in a polygamous Islamic marriage sought to enforce a deed that she and her husband had executed immediately prior to their marriage ceremony.^[40] The deed provided that she and her children were entitled to share in her husband’s estate in accordance with Sharia law, despite any contrary testamentary dispositions.^[41] The deceased husband’s brother, who was the sole beneficiary under the will, argued that the deed was void for public policy reasons as the second marriage was not recognised under Australian law and the agreement therefore contemplated cohabitation outside of lawful marriage.^[42] Although the court ultimately did not have to decide the point, the judges stated:^[43]

Academic, Dr Ghena Krayem, has observed that the circumstances in Mohamed v Mohamed were rare, in that it is not the usual course for Islamic couples to have a lawyer draw up a formal deed setting out their agreement as to the amount of the dowry and the circumstances in which it is to be paid. Several Imams interviewed for Krayem’s research expressed concern that, because the dowry is not a right recognised by Australian law, Islamic women could be left in a vulnerable position if their husband refused to pay.^[44] In this sense, Mohamed v Mohamed is a powerful example of what Krayem describes as the “skilful navigation” of dual systems.^[45] The couple married in a Sharia ceremony and did not ultimately obtain a marriage recognised by Australian law. However, the wife nevertheless utilised aspects of the Australian law to protect her interests, by having a formal contract drawn up and by enforcing that contract through the courts.

Kavanagh v Akhtar^[46] also concerned an Islamic marriage, but the issues that arose were very different from those in Mohamed v Mohamed. In Kavanagh v Akhtar, Mrs Akhtar sustained a shoulder injury after a heavy box fell on her while she was shopping. Due to chronic pain from her injury she was unable to care for her very long hair and felt she had no choice other than to cut it short.^[47] Her husband was a strict Muslim and was extremely upset that this had occurred, particularly without his permission, as he believed that he had a right under Sharia law to control his wife’s actions in general, and he also believed that there was a specific rule prohibiting women from cutting their hair without their husband’s consent.^[48] Further, it was customary for women in Mrs Akhtar’s cultural group not to cut their hair, and there was evidence that Mr Akhtar had found his wife’s long hair very beautiful.^[49] The marriage, which had previously been a happy one,^[50] was destroyed. Mrs Akhtar’s husband left her and she was diagnosed with a major depressive illness.^[51] The issue to be decided by the Court of Appeal was whether Mrs Akhtar was entitled to damages from the owner of the shop to compensate her for the psychiatric injuries flowing from the breakdown of her marriage, or whether she should only be compensated for the physical injuries sustained in the accident.

The owner of the shop conceded that the shoulder injury caused Mrs Akhtar to cut her hair.^[52] The trial judge made unchallenged findings, based on the evidence of Mrs Akhtar, her daughter, an Imam and several psychiatrists, that the cutting of the hair materially contributed to the marital breakdown, which in turn caused Mrs Akhtar’s psychiatric injuries.^[53] This meant that, in legal terms, factual causation was established between the shop owner’s negligence and the psychiatric harm suffered by Mrs Akhtar. In other words, “but for” the shoulder injury sustained in the accident, Mrs Akhtar would not have suffered the relevant psychiatric harm.

The question then, was whether it was appropriate to find the shop owner legally responsible for the harm suffered by Mrs Akhtar as a result of her husband’s reaction to the cutting of her hair.

In the law of negligence there is a principle that a negligent party takes their victim as they find them.^[54] This means that the law places the responsibility on individuals who engage in risky behaviour to bear in mind that some people may have beliefs or vulnerabilities that make them more susceptible to harm than others, rather than imposing legal responsibility on the injured party for possessing that belief or vulnerability.^[55] As McHugh J observed:^[56]

Although this principle is not absolute, the court in Kavanagh v Akhtar found that it could be applied to the facts of the case, stating:^[57]

What was important was that the general type of injury suffered by Mrs Akhtar was foreseeable, even if the precise chain of events leading to it was not.^[58] The court determined that it was a foreseeable result of Mrs Akhtar’s shoulder injury that she would struggle to attend to matters of “personal hygiene and adornment”,^[59] and it was foreseeable that this could cause a marital breakdown.^[60] The court also thought it was foreseeable that the breakdown of Mrs Akhtar’s marriage following her injury could result in psychiatric harm.^[61] That the precise sequence of events leading to the psychiatric injury, including the cutting of the hair and the husband’s reaction, may not have been foreseeable, was irrelevant. Mrs Akhtar’s damages were re-assessed to compensate her for the distress, illness and suffering inherent in the psychiatric injury she had sustained.

In Khalid v Perpetual Ltd,^[64] the appellant, Mr Khalid, entered into an agreement to purchase a home from the second respondent, Mrs Dilati. Under the terms of the agreement Mr Khalid was to pay Mrs Dilati the purchase price of the home in instalments, as he could not afford to buy the property outright and did not wish to enter into a mortgage with a bank due to the prohibition on interest under Islamic law.^[65] The parties agreed that once the purchase price had been paid in full, Mrs Dilati would transfer the home to Mr Khalid, but until then Mrs Dilati would remain the registered owner.^[66] Under the Real Property Act 1900, the register is the source of title,^[67] meaning that despite the existence of the contract of sale between Mrs Dilati and Mr Khalid, and despite Mr Khalid’s payment of large sums of money to Mrs Dilati, Mrs Dilati remained the legal owner of the home. Mr Khalid did not search the register to ascertain whether the land was already encumbered by a mortgage or other interest before he commenced to pay for the property. Had he done so, he would have discovered that a mortgage taken out with Perpetual Ltd (the mortgagee) was registered to the property. Several years later, Mr Khalid had paid the majority of the purchase price and, with the agreement of the vendor, he and his family were living in the home.^[68] In 2009, Mrs Dilati defaulted on her mortgage repayments. The mortgagee filed proceedings claiming possession of the property preparatory to a mortgagee sale in order to recover over half a million dollars outstanding on the mortgage debt.^[69] (I pause here to note that in their written agreement Mr Khalid and Mrs Dilati had clearly provided that any disputes arising from the transaction were to be resolved in accordance with Islamic law and without recourse to the courts.^[70] There were several attempts to moderate the dispute with an Imam. However, the involvement of the third-party mortgagee company, which was entitled to seek an order for possession in the Supreme Court in order to exercise its power of sale, meant that there could be no resolution between them. Practical difficulties in resolving the dispute according to Islamic law would have arisen in any event, as Mrs Dilati disappeared and could not be located by Mr Khalid after the extent of her indebtedness came to light.)

The mortgagee sought and obtained default judgment against Mrs Dilati, which allowed it to take possession of Mr Khalid’s home in order to exercise its power of sale. Mr Khalid succeeded in obtaining orders setting aside the default judgment.^[71] However, those orders were reversed on an initial appeal.^[72]

When the matter came before the NSW Court of Appeal, Mr Khalid sought to impugn the decision to reinstate the order for possession on a number of grounds. As the mortgagee’s interest was registered and was therefore superior to any interest Mr Khalid might have had, his only option was to challenge the order for possession on a technicality. His main argument was that the default notice the mortgagee had issued to Mrs Dilati was invalid. The court ultimately held that the default notice was valid on the basis that Mrs Dilati was given a reasonable opportunity to comply with the notice, had knowledge of the amount of money due under the loan, and had accepted liability for the outstanding money.^[73] The order allowing the mortgagee to take possession of the property was therefore upheld and Mr Khalid lost his home, notwithstanding that he had paid nearly the whole of the purchase price.

In Helou v Nguyen,^[74] the plaintiffs were an Islamic family: a mother, father and their five adult children. Each of the children contributed the majority of their income to the family savings, with the intention that it would be used to redevelop the family home.^[75] The money was initially held in a bank account, and the children accommodated their religious beliefs by donating any interest earned to charity, however the father, after undertaking the Hajj, became stricter in his religious beliefs and grew uncomfortable with having any money in the bank at all.^[76] He instructed his family to withdraw the savings which, at that stage, amounted to almost half a million dollars, and to store it in the roof cavity of the family home. This money was stolen.

Unusually perhaps, the plaintiffs knew who had stolen their money. The defendant, who was the owner of a store in the local area, had formed a friendship with Walid Helou, one of the adult children in the family, who suffered from an intellectual disability.^[77] Walid trusted the defendant, and described him as his “best friend”.^[78] He told him the location of the family savings and watched the defendant use a ladder to enter the roof cavity and take a portion of the money.^[79] The defendant returned for the balance of the cash, using Walid’s keys, when he knew no one was home. The plaintiffs reported the theft to the police, who conducted an investigation and ultimately decided that there was not enough evidence to sustain a criminal prosecution.^[80] The Helous, not to be defeated, decided to let some time pass before commencing civil proceedings in the hope that the defendant would implicate himself in the theft through extravagant spending or other suspicious behaviour that could be used in evidence against him.^[81] At the end of 2013, more than seven years after the theft, the plaintiffs brought civil proceedings against the defendant and his wife. Although the standard of proof in civil proceedings is less stringent than in criminal proceedings, the seriousness of the allegation meant that in order to succeed, the plaintiffs needed to persuade the judge to a high degree of certainty that the theft had occurred.^[82] This task was particularly challenging, as the defendant insisted that the money had never existed in the first place and that the plaintiffs had fabricated their story.^[83] In addition, the only eye-witness to the theft was Walid, whose intellectual impairment meant that his evidence needed to be treated carefully.^[84] Each plaintiff gave oral evidence and was extensively cross-examined as to the existence of the money and the motivation for storing it in the home. In addition, the plaintiffs were able to produce handwritten notes that recorded the amount of money stored in the roof from time to time, from stocktakes they had conducted over the years.^[85] Justice Lindsay was impressed by the consistency with which the plaintiffs told their story and formed the opinion that they were truthful witnesses.^[86] Regarding their evidence, his Honour stated:^[87]

Despite acknowledging the “improbability of anybody believing that they had a small fortune in cash held, at home, without security”,^[88] his Honour also felt compelled to note:^[89]

In contrast to the plaintiffs’ evidence, the defendant’s oral evidence was inconsistent and much of it was shown to be false either by concessions made under cross-examination or by other independent evidence.^[90] As the plaintiffs had hoped, the defendant’s financial records in the intervening seven-year period aroused considerable suspicion. Relevantly, Lindsay J found that:^[91]

Justice Lindsay was therefore satisfied both that the money had existed and that the defendant had taken it.^[92] His Honour delivered judgment almost eight years after the theft had occurred, setting out his findings. Justice Lindsay was satisfied that real estate acquired by the defendant during the relevant period was purchased using a combination of the stolen money and the defendant’s own money,^[93] which meant that the plaintiffs were entitled to a share of the proceeds of sale in proportion to their contribution.

The sad tale of Mr and Mrs Garnock’s attempt to buy a 1,600-acre farm called “Wanaka” in Southern NSW is a case in point.^[94] The Garnocks had entered into a contract for the sale of Wanaka with Mrs Smith. Unbeknown to the Garnocks, Mrs Smith had significant debts, including over $200,000 owed to a firm of accountants. The accountants had obtained a court order against Mrs Smith for the payment of that debt.

At 9.00 am on settlement day, the Garnocks’ solicitors did a title search with respect to the land, which revealed no unexpected encumbrance. At 11.53 am the same day, a writ of execution issued by the District Court was recorded on the title at the instance of the accountants. This writ conferred rights upon the sheriff to sell the property to pay the judgment debt. Settlement went ahead at 2.00 pm and the full purchase price was paid. Only after this did the Garnocks discover, much to their dismay, that the transfer of land could not be registered because of the writ recorded on the title.

The Garnocks were in a bind — they were going to lose the house for which they had already paid the purchase price of $1 million, but their money had already been paid over to the mortgagee of the property. The Garnocks began proceedings in the Supreme Court to stop the sheriff from executing the warrant and selling the land.

It may be recognised that most ordinary people would feel a great deal of sympathy for Mr and Mrs Garnock. Their predicament was caused by no fault of their own. Their solicitors were following the prevailing conveyancing practices of the time, and only five hours had elapsed between their final title search and settlement.

However, due to the strict statutory interpretation that prevailed in the High Court, the Garnocks lost their money. The Real Property Act 1900, s 105, permitted the recording of writs on the register. Section 105A prohibited the Registrar-General from registering any dealing lodged within six months after the writ was recorded on the registrar. The majority in the High Court (Gummow, Hayne and Callinan JJ) read these words literally and without any qualification. They held that the Torrens system is a system of title by registration, and because the accountants had their interest in the land registered ahead of the Garnocks’ interest, it took priority. It was immaterial that the Garnocks had entered into a contract for the sale of land before the writ was recorded and had obtained an equitable interest in the land. The High Court considered that the Garnocks should have protected that equitable interest by filing a caveat.

The ultimate outcome was that the Garnocks had to pay the accountants the debt they were owed by Mrs Smith to have the writ removed from the title.

Howe v Fischer^[95] concerned the will of the late Mrs Marie Fischer, who died at 94 years of age. Prior to her death, she had been visited on the 25 March 2010 by a solicitor, the appellant, as she intended to change her will. The appellant took detailed instructions of her intentions, and arranged to come and see her in the week after Easter (6–9 April 2010). However, less than two weeks after he took those instructions, on 6 April 2010, Mrs Fischer passed away.

Probate was granted on an earlier version of Mrs Fischer’s will. However, the respondent, Mrs Fischer’s son Henry, would have received a significantly larger legacy under the proposed new will, as Mrs Fischer no longer wished to leave anything to her daughter.

The respondent brought an action in negligence against the appellant, alleging that he had breached his duty of care by failing to have an informal will prepared. The primary judge found that the appellant had breached his duty of care.^[96] However, this finding was overturned by the Court of Appeal. In addition to finding that the primary judge erred in a number of factual findings, Barrett JA emphasised that a solicitor’s duty to a disappointed beneficiary is circumscribed by the terms of the retainer with his or her client.^[97] Mrs Fischer had instructed the appellant that she wished to have a formal will drawn up and properly executed in the presence of other persons. The appellant had complied with these instructions, and had the express agreement of Mrs Fischer to come back at the later date. As the appellant could not have breached any duty of care to Mrs Fischer in preparing her will, nor could he have breached any duty to the respondent as an intended beneficiary.

Some might think that these circumstances were unfair to the respondent, who would have received just over $800,000 more had the proposed new will been executed. The sense of injustice may be particularly heightened, given that the evidence was that Mrs Fischer no longer wished to leave anything to her daughter whom she felt had abandoned her in a nursing home after she had broken her hip, and had taken her jewellery and furniture while she was there. However, these were not the considerations that informed the outcome of the case. As with all the cases previously discussed, the impartial application of legal principles determined the outcome.