Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540

New South Wales Supreme Court

CITATION : Carbotech-Australia Pty Ltd & anor v Yates & 14 ors [2008] NSWSC 540

HEARING DATE(S) : 4 April & 16 May 2008

JUDGMENT DATE : 3 June 2008

JURISDICTION : Equity Division

JUDGMENT OF : Brereton J

DECISION : The communications do not give rise to a reasonable apprehension of bias. Further, any complaint of bias was waived. The report does not cover matters outside the terms of reference. Appeal allowed; report adopted.

CATCHWORDS : COURTS AND JUDGES – Bias – apprehended bias – referee – where referee communicates with one party only on matter of administration and procedure – whether reasonable apprehension of bias arises. - COURTS AND JUDGES – Bias – waiver – where party engages with referee on merits of report after becoming aware of possibility of apprehended bias – whether complaint of bias waived. - PROCEDURE – Referee – report – adoption – whether report covers matters outside reference – whether report should be rejected for apprehended bias – where Associate Judge dismissed motion for adoption – appeal from Associate Judge.

LEGISLATION CITED : (NSW) Uniform Civil Procedure Rules r 49.4 (NSW) Supreme Court Act 1970, s 75A

CATEGORY : Separate question

Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited [2005] NSWSC 784 Johnson v Johnson (2000) 201 CLR 488 Re JRL; Ex parte CJL (1986) 161 CLR 342 Kanda v Government of Malaya [1962] AC 322 CASES CITED : Kartinyeri v The Commonwealth (1998) 156 ALR 300 Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70 S & M Motor Repairs Pty Ltd v Caltex Oil (Australasia) Pty Ltd (1988) 12 NSWLR 358 Smits v Roach (2006) 227 CLR 423 Vakuata v Kelly (1989) 167 CLR 568 Xuereb v Viola (1989) 18 NSWLR 453

Carbotech-Australia Pty Ltd (first plaintiff) Ground Consolidation Pty Ltd (second plaintiff) Ian Kenneth Yates (first defendant) Donna Yates (second defendant) Eligild Pty Ltd (third defendant) Ron Godfrey Nielsen (fourth defendant) SES Resources Pty Ltd (fifth defendant) SES 2005 Pty Ltd (sixth defendant) PARTIES : Wombat Holdings (NSW) Pty Ltd (seventh defendant) Global Resins Pty Ltd (eighth defendant) SES International Ltd (ninth defendant) Mark Weston (tenth defendant) ERA Polymers Pty Ltd (eleventh defendant) ERA Polymers Holdings Pty Ltd (twelfth defendant) Geoffrey David Mellon (thirteenth defendant) Wendy Nielsen (fourteen defendant) SES Holdings Plc (fifteenth defendant)

FILE NUMBER(S) : SC 3813/05

COUNSEL : Mr W G Muddle SC w Mr S A Goodman (plaintiffs) Mr C D Freeman (eleventh & twelfth defendants)

SOLICITORS : Clayton-Utz (plaintiffs) Photios Vouroudis & Co (eleventh & twelfth defendants)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

BRERETON J

Tuesday, 3 June 2008

3813/05 Carbotech-Australia Pty Limited ACN 057 994 180 & 1 Or v Ian Yates & 14 Ors JUDGMENT 1 HIS HONOUR : The plaintiffs Carbotech-Australia Pty Limited and Ground Consolidation Pty Limited manufacture a family of polyol resins under the trade name Bevedol which, when mixed with an isocyanate marketed under the name of Bevedan, produce a rigid foam used in the mining industry to consolidate fractured ground. The first defendant Mr Yates was formerly Ground Consolidation's managing director, and the fourth defendant Mr Nielson and the thirteenth defendant Mr Mellon senior employees. The plaintiffs allege that Messrs Yates, Nielson and Mellon have used their confidential information to conspire with the eleventh defendant Era Polymers Pty Limited and its holding company the twelfth defendant Era Polymers Holdings Pty Limited to produce a competing product GeoBind which, when mixed with an isocyanate marketed as GeoBind Iso, produces a foam that serves the same purpose. The Era companies deny that they received any confidential information of the plaintiffs (including any formula or recipe for any product), and say that the only product they (unsuccessfully) attempted to match was Bevedol S (and no other version of Bevedol).

2 The proceedings are set down for hearing, to commence on 22 September 2008, for eight weeks. On 18 April 2006, Barrett J by consent made an order for reference to a Referee, Associate Professor Cook of Monash University, of a question as to the similarities and differences between Bevedol and GeoBind. Professor Cook delivered his report, dated 30 May 2006, to the Court on 12 July 2006. After listing the various components of each of several versions of Bevedol and GeoBind, the Referee concluded that the products were "very similar in composition". By Notice of Motion filed on 4 September 2006, the plaintiffs moved for adoption of the report, which the Era companies opposed. After a hearing on 12 February and 6 June 2007, McLaughlin AsJ on 16 November 2007 dismissed the motion for adoption of the report [ Carbotech-Australia Pty Limited v Yates [2007] NSWSC 1304]. His Honour held that by reason of communications passing between the Referee and the plaintiffs' solicitors (Clayton Utz), to the exclusion of Era's solicitors (Photios Vouroudis), there was a reasonable apprehension of bias on the part of the Referee such as to require that the report be rejected (at [25]-[33]). His Honour further held that any objection on grounds of bias had not been waived by Era (at [39]-[40]). Finally, his Honour held that the report should not be adopted in its present form for other reasons, namely that it incorrectly referred to a component of Bevedan (not Bevedol) called MDI, expressed a qualified opinion, and addressed matters with which the Referee was not required to deal (at [46]).

3 By motion filed on 7 December 2007, the plaintiffs appeal from the Associate Judge's decision. Such an appeal, pursuant to (NSW) Uniform Civil Procedure Rules , r 49.4, is an appeal by way of rehearing within (NSW) Supreme Court Act 1970, s 75A, and in order to succeed the plaintiffs must establish appellable error of fact or law in the judgment below. On the appeal, the main issues are: · Whether his Honour erred in concluding that there was a reasonable apprehension of bias on the part of the Referee arising from his communications with Clayton Utz ("the bias issue"); · Whether his Honour erred in concluding that Era had not waived any objection on the grounds of apprehended bias ("the waiver issue"); and

· Whether his Honour erred in concluding that the report was flawed in its contents in the respects to which his Honour referred ("the contents issue"). Background

4 The communications between Clayton Utz, the Referee and Photios Vouroudis provide the factual framework for the bias and waiver issues, for which purpose it is necessary to refer to them in some detail.

5 On 22 or 23 March 2006, Clayton Utz telephoned Professor Cook to ascertain his availability to undertake a reference. By email to Clayton Utz on 23 March, Professor Cook provided a copy of his Curriculum Vitae. On 7 April, Clayton Utz sent an email to Professor Cook with a draft of the proposed orders for reference that had been agreed between the parties. There followed on the same day a telephone discussion on the same subject matter, and an email from Professor Cook to Clayton Utz in which he indicated that he had read the short minutes and the expert witness code, and agreed to "go ahead as an expert witness", and quoted his consulting rate. On 12 April, Clayton Utz sent Professor Cook an email, to the effect that Era was awaiting sign-off by its CEO.

6 No objection is made to the communications which had taken place up to this point. The orders for reference were made on 18 April, relevantly as follows: 2. Pursuant to UCPR 20.14 and 20.15, Associate Professor Wayne Cook of the Department of Materials Engineering, Monash University be appointed Referee ('Referee') to inquire and report on the questions in paragraphs 2-4 of the Schedule.

3. The Report is to be provided to the Court on or before 4.00 pm on 5 May, 2006.

4. The plaintiffs are: (a) To produce to the Referee within 5 days of a written request by him: (i) All Formulas and Recipes for Bevedol (as defined in paragraph 1 of the Schedule) from 1 January, 2001 to date;

(ii) Such other information as the Referee shall reasonably require. (b) Within 5 days of delivery of Formulas and Recipes as referred to in paragraph 4(a), to file and serve an affidavit of a proper officer deposing that all Formulas and Recipes of Bevedol (as defined in paragraph 1 of the Schedule) were all of the Formulas and Recipes for each variant of Bevedol manufactured during the period 1 January, 2001 to date. 5. The eleventh defendant is: (a) To produce to the Referee within 5 days of a written request by him: (i) All Formulas and Recipes for GEOBIND (as defined in paragraph 1 of the Schedule) from 1 January, 2001 to date;

(ii) Such other information as the Referee shall reasonably require. (b) Within 5 days of delivery of Formulas and Recipes as referred to in paragraph 5(a), to file and serve an affidavit of a proper officer deposing that all Formulas and Recipes of GEOBIND (as defined in paragraph 1 of the Schedule) were all of the Formulas and Recipes for each variant of GEOBIND manufactured during the period 1 January, 2001 to date. 6. The Formulas and Recipes (as defined in the Schedule) referred to in paragraphs 4(a) and 5(a) herein are confidential and are not to be disclosed to any person other than the Referee and the Solicitors and Counsel for the plaintiffs and the eleventh and twelfth defendants.

....

8. The Report of the Referee is to include the following: (a) A statement that he has had no previous commercial dealings with the plaintiffs (or any officer or employee) or eleventh or twelfth defendants (or any officer or employee) and he is aware of no matter which may affect his impartiality towards any party;

(b) A statement that he has read the Expert Witness Code of Conduct (Schedule 7 of the UCPR) ('Code') and that his Report has been prepared in accordance with the Code;

(c) That he has read the Order and is aware of the orders of the Court in relation to confidentiality;

(d) A list of all correspondence and communications between the Referee and the plaintiffs and the eleventh and twelfth defendants (including their lawyers). .... 11. The plaintiffs' Solicitors are to provide the Referee with a sealed copy of this Order together with a copy of the Code.

12. Liberty to apply on 24 hours notice. Schedule

Definitions 1. In this Schedule, the following terms have the following meaning: (a) Bevedol means the plaintiffs' products known as Bevedol NK, Bevedol S, Bevedol SX, Bevedol WF, and Bevedol WL.

(b) GEOBIND means the eleventh defendant's products known as GeoBind STD, SLW, STD-X, WS, WS-XF, WS-XEP, WS-SLW and WS-PST resin including, for the avoidance of doubt, the GeoBind resin product(s) sent to LOBA and/or to the NSW Department of Primary Industries (formerly Department of Mineral Resources) as referred to in paragraph 4(b) of Clayton Utz' letter to Photios Vouroudis dated 13 March 2006.

(c) Formulas and Recipes means: (i) The product data sheet for each Bevedol and GeoBind product;

… Questions 2. Identify and list all Formulas and Recipes of Bevedol as provided pursuant to Order 4 from 1 January, 2001 to date.

3. Identify and list all Formulas and Recipes of GEOBIND as provided pursuant to Order 5 from 1 January, 2001 to date.

4. What are the similarities and differences in the Formulas and Recipes for Bevedol (on the one hand) and GEOBIND (on the other hand) from 1 January, 2001 to date?

7 On the same day, Clayton Utz notified the Referee by email that the orders had been made, attaching a PDF copy, and asked that he proceed to make the requests contemplated by Orders 4 and 5, and drew attention to the fact that the email had been copied to Era's solicitor, Mr Vouroudis. On 19 April, the Referee telephoned Clayton Utz seeking assistance in formulating the requests to the parties for the formulas and recipes. Later that day, he sent an email to Clayton Utz and Photios Vouroudis requesting copies of the formulas and recipes. On 21 April, the Referee called Clayton Utz on the telephone: he asked to be taken through the documents that had been forwarded, and Mr Fairbairn explained to him that the orders were the formal orders entered by the Court, and the other document was the Code referred to in the orders, which he should read carefully.

8 On 26 April, Photios Vouroudis wrote to Clayton Utz, noting that the parties need to exchange correspondence sent by their respective firms to the Referee and seeking a confidentiality undertaking. Clayton Utz replied on 27 April that the orders established the confidentiality regime, and they did not intend to copy to Photios Vouroudis the formulas and recipes, and would not expect to receive copies of Era's formulas and recipes.

9 By two emails sent on 28 April 2006, Clayton Utz provided to the Referee the formulas and recipes for Bevedol. An email to Photios Vouroudis confirmed that the formulas had been provided to the Referee, but the formulas were not provided to Photios Vouroudis (although a copy of the covering letter to Professor Cook was). On the same day, the Referee sent another email to Photios Vouroudis (copied to Clayton Utz) requesting Era's formulas and recipes; Photios Vouroudis replied that they would be provided on 1 May. By letter dated 27 April 2006 – but not sent until 1 May – Photios Vouroudis (using a letterhead which bore their relevant contact details), provided to the Referee the recipes and formulas for GEOBIND. This was not copied to Clayton Utz.

10 On 1 May, Photios Vouroudis wrote to Clayton Utz, asserting that they required all documents given by Clayton Utz to the Referee to be provided to them, and that they were willing to reciprocate, and that if consent were not forthcoming they would move the Court for orders.

11 On 5 May, the Referee sent Clayton Utz an email to the effect that he had just received the documentation from Photios Vouroudis and could not complete his report by 5 May, and requesting an extra two weeks. Clayton Utz answered that they had no problem with the request for extra time and would call Photios Vouroudis and let them know, and also foreshadowed providing a confidentiality undertaking. The Referee responded, requesting that it be provided urgently in light of his impending departure for overseas. Clayton Utz replied, forwarding a copy to Photios Vouroudis, confirming that Era agreed to the extension of time and enclosing the draft confidentiality undertaking. On 9 May, the Referee replied with a PDF copy of his confidentiality undertaking to Clayton Utz, indicating that he was departing overseas and would have to post the original later.

12 On 23 May, Clayton Utz sent an email to the Referee, with a copy to Photios Vouroudis, enquiring as to the status of his report, in light of the two week extension having expired on 19 May. On 26 May, the Referee telephoned Mr Fairbairn of Clayton Utz, indicating that his report should be available in the next few days. On the same day, the Referee telephoned Mr Fairbairn a second time, who immediately afterwards sent an email to his supervising partner, Mr Cutler, as follows: Professor Cook called me again and said that we had not come to an agreement on his fees. He mentioned something about a retainer between us and him. I said that we were not retaining him – he had been appointed by the court. Our obligation to pay his fees arose out of the orders (I referred to order 9). Any invoice needs to be sent to us and PV – costs split. As long as costs reasonable, our clients will pay their half. He was OK with this. He had spent a day on it so far. His rate is $1,000 a day. Invoice will be issued in due course. 13 Mr Fairbairn deposed that the Referee's reference to a retainer was an inquiry as to whether there should be one. His evidence was neither contradicted nor challenged. According to the email, the context of the inquiry was an inquiry by the Referee about his remuneration. This is confirmed by the Referee's subsequent email of 28 May, set out below, in which he discusses his fees, referring back to the conversation of 26 May. This material does not support the submission on behalf of Era that the Referee asked for a retainer from Clayton Utz. It is unsurprising that in the process of completing his report and submitting it with his fees, he would raise issues concerning how his fees were to be paid.

14 On 28 May 2006 the Referee sent an email to Clayton Utz (but not to Photios Vouroudis), attaching an unsigned report, and requesting payment. The covering email was in the following terms: Dear Folks I have spent approximately: 19 emails plus 4 telephone conversations over several weeks – estimated 4 hrs reading the documentation and comparing this information with information available from the open literature on Sat 13 May –estimated 5 hrs analysing the data and writing the report (3 hrs Sat 27 May, 8 hrs Sun 28 May) – estimated 11 hrs Total 20 hrs (16 hrs in private time)

The Monash standard rate for an Associate Professor is $150 per hr or $1000 per day Thus the real cost for this report is approximately $3000. On Friday May 26, I verbally quoted you $1000 (plus CAMT management costs plus GST) however I believe that I should be paid close to the real cost so that I can use these funds for my research activities (Monash does not allow consulting monies to be paid in cash to the researcher for non-Monash activities)

Please let me know if you have any problems with this report.

15 The 28 May 2006 Report included the following: List of all correspondence and communication Inward correspondence A list of the headings of the emails from Mr Robert Cutler, Clayton Utz are shown below: 7/4/2006 RE: Possible consulting 12/4/2006 Independent Expert Report 12/4/2006 Independent Expert Report 5/5/2006 RE: CarboTech-Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005

A list of the headings of the emails from Mr John Fairbairn, Clayton Utz are shown below: 28/4/2006 CarboTech-Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005 28/4/2006 CarboTech-Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005 28/4/2006 CarboTech-Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005 5/5/2006 CarboTech v Yates 28/5/2006 CarboTech v Yates

A list of the headings of the emails from Mr Photios Vouroudis, Photios Vouroudis & Co – Solicitors, are shown below: RE: CarboTech-Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005

A list of the headings of the mail from Mr Photios Vouroudis, Photios Vouroudis & Co – Solicitors, are shown below: 27/4/2006 Letter listing the enclosures including Work Request form, Tentative Formulations, Formulation Worksheets, Documented Physical and Mechanical Properties, Product Information and Materials Data Safety sheets

Outward correspondence A list of the headings of the emails to Mr Robert Cutler, Clayton Utz are shown below: 23/4/2006 Possible consulting 7/4/2006 Re: Possible consulting 5/5/2006 Re: CarboTech-Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005

A list of the headings of the emails to Mr John Fairbairn, Clayton Utz are shown below: 19/4/2006 Re: CarboTech Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005 5/5/2006: Re: CarboTech Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005 9/5/2006 Re: CarboTech v Yates

A list of the headings of the emails to Photios Vouroudis, Photios Vouroudis & Co – Solicitors, are shown below: 28/4/2006 Re: CarboTech Australia & Anor v Ian Yates & Ors – Supreme Court of NSW Proceedings No. 3813 of 2005

Inward communications I, Wayne Douglas Cook, hereby state that I have had several phone calls from Mr John Fairbairn, Senior Associate, Litigation – IP/I, Clayton Utz and Mr Robert Cutler, Partner, Litigation/Dispute Resolution, Clayton Utz regarding the nature of the consulting work and the timing of the report.

Outward communications I, Wayne Douglas Cook, hereby state that I have made several phone calls to Mr John Fairbairn, Senior Associate, Litigation – IP/I Clayton Utz and Mr Robert Cutler, Partner, Litigation/Dispute Resolution, Clayton Utz regarding the nature of the consulting work and the timing of the report.

16 The Referee did not include Photios Vouroudis as an addressee of the email attaching the 28 May 2006 Report. He did however include lex.edmond@eng.monash.edu.au as a recipient, and Clayton Utz responded on 29 May 2006, expressing concern that the confidential information in the report had been made available to a person (Lex Edmond) who had not signed a confidentiality undertaking. This email, which referred to "your Report" , and attached the Referee's 28 May 2006 email, was copied to Photios Vouroudis, and Mr Vouroudis was concerned when he read it, as it was the first notice he had had of what were said to be 19 emails and 4 telephone calls.

17 Also on 29 May 2006, the Referee replied by email, stating that Dr Edmond was an employee of Monash University with responsibility for consulting arrangements, and adding: "Is the report satisfactory?" . The Referee did not include Photios Vouroudis as an addressee of this email, but it came to the attention of Mr Vouroudis on 30 May 2006, when he received as a copy addressee Clayton Utz's response to the Referee, which was in the following terms: Your report is to be submitted to the court and we make no comment on its content at this stage. To the extent that there are issues that require further consideration or clarification, we will seek to put these to you through the court process and having liaised first with Photios Vouroudis.

As you know, the report and its content are subject to the confidentiality order and the following comments are intended to deal with this.

I have copied this email to Photios Vouroudis and so the following suggestions are subject to any comments that Mr Vouroudis may wish to make:

…

[Several suggestions were made as to how the report could be formatted to protect confidentiality]

…

Subject to these comments and any comments from Photios Vouroudis, if you are satisfied that the report is complete, could you please sign and date it. You can either file it with the court, or if it is more convenient, you can send the original report and annexure A to us and we will file it (sic) your behalf and serve a sealed copy on Photios Vouroudis.

18 Mr Vouroudis's evidence is that he first became aware from the text of this email of the existence of the 28 May 2006 Report.

19 On 31 May 2006 the Referee sent an email with a reformatted version of his report, now signed and dated 30 May 2006, to Clayton Utz (but not to Photios Vouroudis); it differed from the 28 May 2006 Report only in that it adopted the suggestions that Clayton Utz had made in their 30 May 2006 email for protection of the confidentiality of the information it contained. The covering email stated "Dear John, Here are the new documents regards Wayne" .

20 On 1 June 2006, Photios Vouroudis sent a facsimile to Clayton Utz (italicised emphasis added): Our client and this Office is very concerned that Associate Professor Cook has disclosed that he has sent 19 emails and his draft report to your Office. We have not received copies of these emails or the draft Report.

Your Office has received and commented on his draft Report. All legal representatives, including our Office, ought to have been provided with a copy of the draft Report at the same time (subject to any parts which were the subject of the confidentiality order). Our Office had assumed that if you were communicating with Associate Professor Cook, or he with you, we would be copied in on all such communications. Associate Professor Cook was appointed as the independent expert. The whole integrity of the process has been compromised. In the circumstances, this conduct has given rise to a reasonable apprehension of bias and all rights of our clients in this respect are reserved .

We require copies of all communications and attachments between your Office and Associate Professor Cook within 24 hours together with your undertaking to copy this Office in on all future communications. We give the undertaking to copy your Office in with all future communications with Associate Professor Cook.

21 Clayton Utz responded at 5.40 pm on the same day, attaching Professor Cook's email of 28 May and the reports of that date, and the subsequent exchange of emails, and foreshadowing a further response: I refer to your facsimile dated 1 June 2006 in which you assert that you have not received a copy of Associate Professor Wayne Cook's report. Please see attached emails. We will respond to the other matters raised in your facsimile separately.

We need to be satisfied that the confidentiality issues have been dealt with appropriately before the report is circulated more widely.

22 On 2 June 2006, Photios Vouroudis sent an email to the Referee in the following terms: Pursuant to the Court orders, you are an independent expert appointed by the Court.

That being so, all written correspondence and communications ought be simultaneously copied to my Office at 1st Floor, 195B Burwood Road Burwood NSW 2134 or via email on vouroudis@bigpond.com . If you have any telephone conversations with Clayton Utz, my Office needs to be informed of the conversation and its substance.

Lastly, your email dated 28 May 2006 refers to "19 emails plus 4 telephone conversations over several weeks" Would you kindly forward to me a copy of each of these emails, together with details of the 4 telephone conversations (i.e. the date, who you spoke with and the substances of the conversation).

23 On 2 June 2006, Clayton Utz sent a facsimile to Photios Vouroudis attaching copies of all their correspondence with the Referee, noting that the emails which had not originally been copied to Photios Vouroudis were all administrative in nature or necessary to comply with the Court's orders, and stating: We assumed that Wayne Cook sent a copy of his report to you at the same time as it was sent to us, namely, at 6.00 pm on Sunday, 28 May 2006. In any event, at 12.40 pm on Monday, 29 May 2006, we sent an email to Wayne Cook raising a concern in relation to the confidentiality of our respective clients' information. That email was copied to you and included Wayne Cook's email of 28 May 2006. At least by that time you would have been aware that Wayne Cook had issued his report. We cannot understand why you did not contact, and appear still not to have contacted Wayne Cook and requested a copy of the report rather than complain to us. We sent you a copy of his report yesterday by email despatched at 5:40pm. 24 On 3 June 2006, Photios Vouroudis wrote to the Referee (with a copy to Clayton Utz) [TB408; Ex.JIF1, p212, Ex.PV1, p244]: Further to our email sent on 2 June 2006, we request that you not sign off on your report in this matter, until we have received copies of all correspondence and communications from you.

Please be advised that we intend to make a further submission on your report by no later than Wednesday of next week.

25 On 5 June 2006, Clayton Utz wrote to Photios Vouroudis in the following terms: You have indicated to the Referee that you intend to make a further submission on the report by no later than Wednesday of this week.

Would you please let us know by 5:00pm today, and before communicating it to the Referee, the nature of the submission.

In any event, we object to you unilaterally making any submission to the Referee in relation to the content, as opposed to the form of his report and request that you refrain from doing so.

To the extent you are seeking to make a submission as to the content, it is our view that such a unilateral submission would be inappropriate. The Referee was appointed by the court to answer specific questions set out in the orders made on 18 April 2006. The Referee has now answered those questions. To the extent you require further work to be done or perceive a deficiency in content of that report, it is our view that the proper approach would be for you first to notify us of the further question(s) to be put to the Referee and for the parties to then approach the court for further orders (see for e.g. UCPR r 20.17).

We have not received a response to our facsimile sent to you on the morning of 2 June 2006. Would you please let us know when we may expect to receive a response.

26 On 5 June 2006, Photios Vouroudis sent an email to the Referee (copied to Clayton Utz) taking issue with certain aspects of the Referee's findings, and seeking to have him change those findings. It raised four matters: (1) that the report incorrectly referred to '4,4 diphenyl methane diisocyanate oligomer' as being part of the formula and recipe for both Bevedol and GEOBIND, (2) that it deals with Bevedan and GEOBIND ISO which the order of the court did not require or authorise him to do, (3) that it did not contain all the formulas and recipes for GEOBIND, and (4) that the Final Conclusions were ambiguous. Each of these matters was then elaborated, at some length and in some detail. On the same day, Photios Vouroudis responded to Clayton Utz in the following terms: We have sent our submission to Associate Professor Cook and it has been copied to you. His draft report was clearly incorrect in the respects that we have pointed out to him. We were not required to seek your consent to any further submission that we have made. Your office is at liberty to make any further submissions to Professor Cook.

27 On 6 June 2006, Clayton Utz replied by email to Photios Vouroudis, as follows: We refer to your email to the Referee, Associate Professor Wayne Cook, sent on 5 June 2006.

As you know, the Referee signed off on his report on 30 May 2006.

The matters raised in your email go beyond seeking corrections. For example, you make the statement "[i]n it [sic] unsurprising that these products are similar given that they perform basically the same function and you would expect them to be similar." It is our view that this is an inappropriate statement and should be withdrawn.

The orders made on 18 April 2006 did not contemplate the making of submissions by a party seeking to qualify aspects of the report. If you are seeking qualifications to the report, or further matters to be addressed, we repeat that it is our view that the parties should seek to first agree the additional questions or matters to be put to the Referee and approach the court for the appropriate further orders.

We look forward to receiving your response to this email.

28 On 6 June 2006, the Referee wrote to Photios Vouroudis (with a copy to Clayton Utz) in response to their email of 2 June: Dear Folks I do not know the legality of this but have no qualms myself in delivering the emails if all agree. Regarding the telephone conversations, they are described in my submission.

29 Also on 6 June, the Referee wrote to Photios Vouroudis (copied to Clayton Utz) responding to the criticisms made by Photios Vouroudis in its 5 June 2006 email. His response included: I only spoke to Clayton Utz on procedural matters, much to do with timing and when/what I should do when you did not deliver the information ordered by the Court. In addition, they were the first point of contact since I did not have your contact details. In those conversations, there was no discussion of any matters which would have affected the impartiality of my report.

30 On 7 June, Photios Vouroudis emailed Clayton Utz: The Report is obviously incorrect and ambiguous.

…

The net result of his failure to correct his report (apart from any other questions of apprehended bias) mean that the adoption of the report will be opposed at a contested hearing. The time can be more constructively put by attempting to resolve these issues now. Alternatively, you can agree that we seek another independent expert to undertake the inquiry correctly.

… 31 There followed further correspondence between Photios Vouroudis and the Referee, concerning some confusion as to whether the Referee had received certain formulas from Mr Vouroudis.

32 On 20 June 2006, Clayton Utz wrote to the Referee (copied to Photios Vouroudis):

Would you please let me know whether the original of your report was sent to the Court. 33 On 22 June 2006, the Referee answered: No I thought that the copy I sent you would have been sent. What should I do? 34 On 23 June 2006, Photios Vouroudis sent an email to the Referee: Thank you for your most recent email, however it appears that you do not intend to comply with the Orders of the Court.

Therefore, it is pointless in engaging in any further correspondence with you in order to have you comply with such Orders. 35 On the same day, the Referee replied: I am an expert in thermosetting polymers such as polyurethanes, I have identified the ingredients in all products and, as such, I believe that I have complied with the orders of the court. I do not have any intension (sic) of not complying with these orders.

In the meantime, while this discussion is going on, can someone please tell me in plain English what is going on in this court case? Has the court met and does the court require further clarification? I have had no direct contact with the court but only from the Solicitors for the Plaintiffs and Defendants.

36 On 30 June 2006 Clayton Utz wrote to the Referee (copied to Photios Vouroudis): If as appears to be the case, your correspondence with Mr Vouroudis has been exhausted and your report remains unchanged, it is our view that the original signed copy should now be sent by you to the Court …

37 On or about 12 July 2006, the Referee sent his Report (dated 30 May 2006) to the Court.

The bias issue 38 His Honour held that by reason of communications passing between the Referee and the plaintiffs' solicitors, to the exclusion of Era's solicitors, there was a reasonable apprehension of bias on the part of the Referee such as to require that the report be rejected (at [25]-[33]). The plaintiffs/appellants contend that his Honour was in error in concluding that a reasonable apprehension of bias on the part of the Referee arose from his communications with Clayton Utz

39 It is undoubted that a Referee under Part 20 is bound by the rules of natural justice [ Xuereb v Viola (1989) 18 NSWLR 453, 466G]. However, as Cole J said in that case, a Referee is not required to conduct his inquiry as if it were a trial by a judge; subject to any directions of the Court, the Referee may conduct proceedings in such manner as he thinks fit, and is not bound by the rules of evidence but is at liberty to inform himself in such manner as he thinks fit. Nonetheless, the Referee must be actually and apparently impartial, and an appearance of impartiality may be compromised if the Referee has private dealings with one of the parties [ Xuereb v Viola (1989) 18 NSWLR 453, 469-70]: Another aspect of natural justice is that the Referee must be actually impartial, and must be perceived by a disinterested bystander to be so. Accordingly he must not hear evidence or receive representations from one side behind the back of or in the absence of the other. As Gibbs CJ said in Re JRL; ex parte CJL (1986) 161 CLR 342 (at 346-347): "It is a fundamental principle that a judge must not hear evidence or receive representations from one side behind the back of the other: see Kanda v Government of Malaya [1962] AC 322 at 337. McInerney J stated the practice as it is generally understood in the profession in Reg v Magistrates' Court at Lilydale; Ex parte Ciccone [1973] VR 122 at 127 as follows: 'The sound instinct of the legal profession — judges and practitioners alike — has always been that, save in the most exceptional cases, there should be no communication or association between the judge and one of the parties (or the legal advisers or witnesses of such a party), otherwise than in the presence of or with the previous knowledge and consent of the other party. Once the case is under way, or about to get under way, the judicial officer keeps aloof from the parties (and from their legal advisers and witnesses) and neither he nor they should so act as to expose the judicial officer to a suspicion of having had communications with one party behind the back of or without the previous knowledge and consent of the other party. For if something is done which affords a reasonable basis for such suspicion, confidence in the impartiality of the judicial officer is undermined.' The principle, which forbids a judge to receive representations in private, is not confined to representations made by a party or the legal adviser or witness of a party. It is equally true that a judge should not, in the absence of the parties or their legal representatives, allow any person to communicate to him or her any views or opinions concerning a case which he or she is hearing, with a view to influencing the conduct of the case. Indeed, any interference with a judge, by private communication or otherwise, for the purpose of influencing his or her decision in a case is a serious contempt of court …." And as Mason J, as he then was, said (at 350): "A central element in the system of justice administered by our courts is that it should be fair and this means that it must be open, impartial and even-handed. It is for this reason that one of the cardinal principles of the law is that a judge tries the case before him on the evidence and arguments presented to him in open court by the parties or their legal representatives and by reference to those matters alone, unless Parliament otherwise provides. It would be inconsistent with basic notions of fairness that a judge should take into account, or even receive, secret or private representations on behalf of a party or from a stranger with reference to a case which he has to decide. This principle immediately distinguishes the judicial branch from other branches of government, except in so far as they may be relevantly affected by the rules of natural justice. In conformity with the principle, every private communication to a judge made for the purpose of influencing his decision in a case is treated as a contempt of court because it may affect the course of justice." How are such principles to be reconciled with Pt 72, r 8, and in particular r 8(2)(b) which permits the Referee to "inform himself … in relation to any matter in such manner as the Referee thinks fit". Further, it has become common for orders made pursuant to Pt 72, r 8(1), to permit a Referee "to communicate with expert retained on behalf of the parties or any of them". The utility of such a direction is obvious for it enables a person technically qualified who does not understand a particular technical aspect of the report of an expert retained by a party to inquire of that expert what he meant. But such an order is not to be understood as permitting a Referee to have a private conversation with one expert. He may call the experts for opposing parties together to seek clarification, or he may arrange a conference telephone discussion with the experts for competing parties. Pursuant to r 8(2), the Referee may be permitted to carry out his own tests. But if he does so, prior to preparing his "just opinion" he must give, in most cases, the information so derived to the competing parties to permit them to express their views upon it to him. There is nothing in Pt 72, r 8, or in the usual order made by the Court pursuant to r 8 (1) which permits private discussions between the Referee and only one party or his expert. Similarly, normally if communications are received by a Referee from a party they should be provided to the other party, unless it has previously been arranged that the party providing a document to the Referee will also provide it to his opponent.

40 In the present case, the Associate Judge said (at [27],[28] and [33]); 27 It is all very well for the Plaintiffs and Clayton Utz to say (as they now do) that the 19 e-mails and the four telephone conversations dealt essentially with procedural matters, and not with matters of substance. In approaching this question of procedural fairness and perceived or apprehended bias, I consider it to be the fact of the e-mails and the telephone conversations passing between the Referee and the solicitors for only one party (a fact of which the other party was at the time totally unaware), and not the content of those e-mails and the telephone conversations, which constitutes the ground for apprehended bias in the mind of an objective observer or disinterested bystander. 28 Similarly, the fact that the draft report was sent to only one party, with an invitation to comment thereon, and not to both parties, is relied upon by Era as a further ground for such apprehended bias. The Plaintiffs, however, point to the fact that the report in its final form was in identical terms to the draft report which had been sent by the Referee to Clayton Utz. That there was no change to the draft report does not appear to me to be relevant to this ground relied upon by the Defendants in respect to apprehended bias. The fact that an opportunity was given to the Plaintiffs to comment upon the draft report is what I consider to impugn the integrity of the procedure. It matters not whether the Plaintiffs chose to comment upon the draft report, or whether the Referee chose thereafter to make any alterations thereto. What matters is that the Referee gave to the Plaintiffs (but not to Era) an opportunity so to comment and to himself an opportunity to change the draft Report in the light of any such comments.

….

33 I am satisfied that the Referee, by the fact of the foregoing communications passing between himself and only one of the parties (irrespective of the content of those communications) and the opportunity which he gave to only one of the parties to comment upon the draft Report, has so compromised the integrity of the procedure, and has so contravened the concept of natural justice, by disregarding the principles of procedural fairness, that he has given rise to a perception of apprehended bias which, in the interests of natural justice, requires that the report be rejected.

41 The plaintiffs contend that his Honour: · made findings of fact not open to him on the evidence, in finding that the Referee (a) had 19 email communications with the plaintiffs' solicitors to the exclusion of the defendants' solicitors and had himself asserted that he had communications to that extent, (b) heard evidence or received representations from the plaintiffs behind the back or in the absence of ERA, and (c) had provided a draft report to the plaintiffs' solicitors for comment; · misapprehended and misapplied settled law, in that he did not attribute to the reasonable and fair-minded lay observer knowledge of the actual facts; · failed to consider the material facts and actual circumstances in which the claim of apprehended bias arose; and · took into account an irrelevant consideration, namely that the plaintiffs in these proceedings make allegations of fraud and improper conduct against the defendants. 42 As to the contention that the Associate Judge erroneously found that the Referee had 19 email communications with the plaintiffs' solicitors to the exclusion of the defendants' solicitors and had himself asserted that he had communications to that extent, I am satisfied – notwithstanding the submissions of Mr Freeman, for Era, to the contrary – that the Associate Judge did make such findings, as is explicit in para [27] of his Honour's judgment (set out above), as well as in para [17]: 17 … Regarding this ground, Era relies upon the fact that, according to the Referee himself, 19 e-mails and four telephone conversations passed between himself and the solicitors for the Plaintiff, Clayton Utz, none of which e-mails or telephone conversations were disclosed to Photios Vouroudis, the solicitors for Era. 43 In fact, what the Referee wrote, as set out in [14] and [15] above, did not assert that all 19 e-mails and four telephone conversations were solely with Clayton Utz. It is accepted for the purposes of the appeal that there were 13 email communications and 4 telephone conversations between Clayton Utz and the Referee to the exclusion of Photios Vouroudis. However, to the extent that this reveals any error in the Associate Judge's reasons, it is immaterial. It was the apparently routine engagement of the Referee in ex parte communications with the plaintiffs' solicitors to the exclusion of Era's solicitors that founded the Associate Judge's conclusion that there was a reasonable apprehension of bias. Whether it occurred on 19 or 13 occasions made not the slightest difference to this. I would not allow the appeal on this ground.

44 The remaining contentions in respect of this issue are all encompassed in the proposition that in the circumstances of this case, the ex parte communications between Clayton Utz and the Referee did not warrant a conclusion of ostensible bias. The contrary case, advanced by Era and accepted by the Associate Judge, focussed on the communications of 28 and 30 May, and what followed. Era emphasised that on 28 May, the Referee sent an email to Clayton Utz – and not to Photios Vouroudis – noting that he spent time of approximately "19 emails and 4 telephone conversations over several weeks" , attaching a draft of his report and concluding " please let me know if you have any problems with this report" . This was followed by another inquiry as to whether the report was satisfactory the next day, in response to which Clayton Utz suggested amendments, which were adopted by the Referee in his 30 May report. Era submitted that it was open to his Honour to make a finding that the fact of the ex parte emails and/or the telephone calls, irrespective of their number or content, would create in the disinterested bystander a reasonable apprehension of bias, given the context of the serious nature of the allegations made in the proceedings generally, that the Referee had Mr Vouroudis' contact details and the false excuse given by the Referee for not communicating with Mr Vouroudis (that he did not have Mr Vouroudis' contact details), that even if only matters of procedure were dealt with Era was denied the opportunity of having input into those matters, that the Referee refused to disclose to Era the substance of his communications with Clayton Utz (the identification in his report of the fact that communications were made being insufficient), that (two days before the draft report was sent to Clayton Utz) the Referee telephoned Clayton Utz wanting a retainer with them (which was said to be clear evidence that the Referee considered himself to be acting only for the plaintiffs), that the Referee never disclosed that conversation to Mr Vouroudis nor could its substance be identified from the face of his report and was not disclosed by Clayton Utz until an affidavit served in February 2007, and that notwithstanding that the orders required the Referee to report to the Court he sent the first draft of his report only to Clayton Utz on 28 May 2006 with the statement " please let me know if you have any problems with this report" and then on 29 May, 2006 again asked Clayton Utz "Is the Report satisfactory?" .

45 Era additionally submitted that when all those circumstances were considered, the reasonable bystander could only conclude that not only was there a reasonable apprehension of bias, but actual bias. The Associate Judge, though acknowledging that there was a strong argument for a case of actual bias, did not make a positive finding of actual bias and rested his decision on apprehended bias. No notice of contention was filed, and it is unnecessary for me to deal with actual bias. However, the submission that a reasonable bystander would conclude that there was actual bias is misconceived, because actual bias depends not upon the impression of any reasonable bystander, but upon proof that the decision-maker is actually biased.

46 The "twin pillars" of the rules of natural justice are the hearing rule ( audi alteram partem ) and the bias rule ( nemo debet judex esse sua in propria causa ). However, as the opening paragraph of the above citation from Cole J in Xuereb shows, they may overlap: a persistent failure to hear one party might establish an apparent lack of impartiality as well as a breach of the hearing rule. Kanda v Government of Malaya [1962] AC 322, 337, which states the principle that a judge must not hear evidence or receive representations from one side behind the back of the other, was a case concerning the hearing rule. However, Re JRL; Ex parte CJL (1986) 161 CLR 342 was a case about the bias rule – it was argued, and held, that the actions of a Family Court counsellor and a judge of the court, where the counsellor approached the judge in chambers to complain about the intended adjournment of a children's case, and canvassed aspects of the proceedings with the judge before counsel were invited to attend, gave rise to a reasonable apprehension that the judge would not bring an impartial mind to the resolution of the matter.

47 The process by which that conclusion was reached illuminates the relevance and importance of the circumstances of the individual case in determining whether an inference of apparent bias will be drawn from the fact of communications between a judicial officer and one only of the parties. Gibbs CJ said (at 349-50) (emphasis added): In the present case it was wrong of the counsellor to attempt to influence the judge and ill-advised for the judge to speak to the counsellor in private. Counsel for the prosecutor referred us to authorities which establish that a judge should not sit to hear a case if in all the circumstances the parties or the public might entertain a reasonable apprehension that the judge might not bring an impartial and unprejudiced mind to the resolution of the question involved in it: see Livesey v NSW Bar Association . I rather think that the present case is governed by an analogous principle, that justice must not only be done but must manifestly be seen to be done; when a judge has received in private representations concerning a case, the court will not inquire whether the representations in fact worked to the prejudice of the party against whose interest they were made – it is enough that they might do so: see Kanda v Government of Malaya . Examples of a strict application of the principle are provided by R v Justices of Bodmin; Ex parte McEwen and Garrihy v Wyatt . In the present case, the counsellor had formed a view adverse to the husband. She had expressed that view, not only in her report, but also in the presence of counsel in the judge's chambers. She had gone to see the judge because she believed that it would be detrimental to the child to remain for long in the husband's custody. The husband was entitled, not unreasonably, to fear that the counsellor may have made remarks adverse to him when she was alone with the judge and that the judge might have been influenced by them. Justice would not be manifestly seen to be done if in those circumstances the judge decided the case. The judge should not continue to hear the case and the order nisi for prohibition should be made absolute. 48 Mason J said (at 351, 355-7) (emphasis added): As McInerney J pointed out, the receipt by a judge of a private communication seeking to influence the outcome of litigation before him places the integrity of the judicial process at risk. A failure to disclose that communication will seriously compromise the integrity of that process. On the other hand, although the terms of a subsequent disclosure by the judge of the communication and a statement of its effect in some, perhaps many, situations will be sufficient to dispel any reasonable apprehension that he might be influenced improperly in some way or other , subsequent disclosure will not always have this result. The circumstances of each case are all important. They will include the nature of the communication, the situation in which it took place, its relationship to the issues for determination and the nature of the disclosure made by the judge . The problem is governed by the principle that a judge should disqualify himself from hearing, or continuing to hear, the matter if the parties or the public entertain a reasonable apprehension that he might not bring an impartial and unprejudiced mind to the resolution of the issues: Reg v Watson; Ex parte Armstrong ; Livesey v NSW Bar Association . This principle, which has evolved from the fundamental rule of natural justice that a judicial officer should be free from bias, reflects a concern with the need to maintain public confidence in the administration of justice. This concern is expressed in the cognate principle that, not only must justice be done, it must be seen to be done. … But the critical question is whether in all the circumstances the parties or the public would reasonably apprehend that the judge would not bring an impartial and unprejudiced mind to a hearing and determination of the custody proceedings between the parents of the child . Or to put it another way, the question is whether the principle that justice must be seen to be done requires that the judge be disqualified. In considering this issue the first point to be made is that the view which Ms Bernet expressed to the judge in private chambers during the luncheon adjournment strongly favoured the wife. It appears that she asked that the child be placed with the mother and said that the sooner that this took place the better it would be emotionally for the child . It is true that Ms Bernet had expressed a similarly strong view in favour of the wife in her report dated 31 January 1986 which became available to counsel during the hearing on 4 February. In that report Ms Bernet described the child as being "on the way to a severe anxiety neurosis". However, this was the first indication that the child might be affected in such a way. It excited a question as to Ms Bernet's qualifications (which were not known) to express such an opinion. It made it very likely that Ms Bernet would be called as a witness, more particularly because the husband wished to have the child examined by a psychiatrist or psychologist. One other circumstance must be mentioned and it is important. Ms Bernet, before seeing the judge, had spoken to the wife during the course of proceedings on 5 February, saying that the proposed adjournment was outrageous and that she proposed to do something about it. In fact she discussed the matter with the Director of Court Counselling at Parramatta before seeing the judge. In this situation the discussion between the judge and Ms Bernet was significant in several respects. It resulted from an approach by a potential witness who strongly supported the wife's case and seems to have expressed that support to the judge. She apparently informed the judge of her qualifications and thereby indicated that her opinion was that of a qualified expert, a matter which was in question in the proceedings. Moreover, the reference in the discussion to the Director of Court Counselling at Parramatta suggests the possibility, not negatived by the evidence, that Ms Bernet claimed that her approach was indorsed by the Director. In disclosing the approach which had been made, the judge did not reflect adversely on it. On the contrary the judge seems to have proceeded on the footing that the initiative taken by Ms Bernet required serious consideration by the court and counsel for the parties. In effect the judge invited counsel to respond to the recommendations of the court counsellor and to obtain instructions to enable them to do so. The judge did not treat the court counsellor's approach as irregular and did not assure counsel that she intended to disregard completely what the court counsellor had said to her . It is evident from what I have said that there is a firm basis for a reasonable apprehension that the judge will not bring to bear an impartial and unprejudiced mind on the resolution of the custody issue. It is not to the point to say that the prosecutor has failed to establish the existence of any bias on the part of the judge. The courts have always refused, for obvious reasons, to embark upon an inquiry whether a judge will determine the issues impartially and with an unprejudiced mind. It would be idle for this Court to say that it is confident that the judge will act impartially. We have to ask ourselves how the matter would appear, viewed reasonably, to the public and the parties. And when we ask this question the answer that immediately presents itself is that the judge, who in all probability would be called upon to evaluate the correctness of the opinion of the court counsellor and her credibility as a witness, had the unprecedented advantage of a private discussion with her on the very issue for decision in the case, the counsellor being a convinced, and perhaps convincing, advocate of the wife's cause in the case. The fact that the counsellor is an officer of the court is a matter which enhances, rather than diminishes, cause for concern. A fair-minded observer, as well as a concerned parent who is a party to the litigation would naturally and rationally conclude that the counsellor's standing as an officer of the court would ensure that her opinion would carry weight with the judge. The subsequent discussion between the judge and counsel in private chambers would have done nothing to dispel that cause for concern. The case is plainly one in which the principle that justice must manifestly be seen to be done requires that the matter be heard by another judge: see Goold v Evans & Co . 49 Wilson J (who dissented, holding that no reasonable apprehension of bias arose) said (at 360-1)(emphasis added): The prosecutor complains of the conduct of the judge in allowing the counsellor to speak to her in private concerning the case and then in permitting, in the presence of counsel representing each of the parties, a general discussion to proceed in her chambers concerning procedural arrangements attending the adjournment. There is no transcript of any conversation that took place in the judge's chambers. However, although the judge does not detail in precise terms the matters that were referred to, it does appear that before counsel were called in the counsellor told the judge that having spoken to the Director of Court Counselling at Parramatta she wished to make the two recommendations to which reference has already been made. When counsel joined them, the judge said that the Counselling Service, having regard to the welfare of the child, was extremely concerned about the length of an adjournment and asked the counsellor to repeat the two recommendations that she wished to make. In the course of the discussion that followed the judge mentioned that the counsellor's professional qualifications were those of a clinical psychologist. Reference was made to the counsellor's recommendation, expressed in her second report, that it would be better for the child if she were placed in the custody of the mother whereupon the judge said, in effect, that for that to happen there would have to be a hearing of an application for interim custody. With regard to the recommendation that separate representation be provided for the child, counsel for the wife expressed support for that view and foreshadowed an application to that effect. Although there is no suggestion that any other aspects of the case were referred to in the private discussion between the judge and the counsellor, it remains an important fact requiring consideration, as counsel for the prosecutor correctly submitted, that the conversation occurred at all. However the apprehension that might reasonably be generated by such a happening can only be determined in the light of all the circumstances including the subsequent conduct of the judge . 50 Brennan J said (at 370-1)(emphasis added): Here, it is known that a counsellor whose views are antipathetic to the husband's case, saw the judge privately and had a conversation with her which reinforced the counsellor's concern (as stated in the report) that the child ought not be allowed to remain in the husband's custody. The judge ascertained Ms Bernet's qualifications to make a diagnosis that the child was in the early stages of a neurotic process. Ms Bernet made a submission to the judge with reference to the order which the judge should make during the adjournment, and that submission reinforced the view she had expressed in the report that the wife should have the custody of the child. The judge thus had a private conversation with an expert witness whose opinion was to be challenged, and it might reasonably be thought that that conversation enhanced the witness' credibility in the judge's eyes. Then a discussion took place in the presence of counsel in which the judge sought confirmation of the counsellor's views that the child should be placed in the wife's custody as soon as possible. An impression that the judge was influenced by the discussions she had had privately was strengthened by the judge's request to counsel to seek instructions on the recommendations which Ms Bernet had made. It is reasonable for the husband to apprehend in those circumstances that the judge will not be able, however conscientiously she tries, to remove from her mind the impermissible effect of the discussions she had in chambers and thus to bring an impartial and unprejudiced mind to the determination of the matter pending in the court . Acknowledging the good faith of all involved, it is none the less necessary to make absolute the order nisi. I would so order. 51 Dawson J, who also dissented, said (at 371-2)(emphasis added): It is an understandable tendency to assume the existence of a reasonable basis for supposing bias where there is, as in this case, an apparent departure from the proper standards of judicial behaviour. But the whole of the circumstances must be considered and such a conclusion must be firmly established and should not be reached lightly : Reg v Commonwealth Conciliation and Arbitration Commission; Ex parte Angliss Group ; Reg v Watson; Ex parte Armstrong ; Reg v Lusink; Ex parte Shaw . Moreover, the whole of the circumstances are not confined to the conduct said to afford reasonable grounds for suspecting a lack of impartiality. They include what was done by the judge subsequently, which may be sufficient to eradicate any reasonable apprehension of bias notwithstanding an earlier lapse in the observance of proper procedures . It is clear that an initial failure to hear a party or to allow him to put his case may be cured by giving him an appropriate opportunity to be heard at a later stage: see Ridge v Baldwin . It seems to me to follow that it must also be possible to remove an apprehension of bias on the part of a judge which might otherwise arise out of the failure to hear a party. After all, that kind of bias is not bias through interest or preconceptions existing independently of the case . Suspicion of bias of the latter kind, where there are grounds for it, may well be ineradicable: see Reg v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd . Here the suggested bias is an inability to act impartially which is said to have been demonstrated by the fact that representations were made to, or evidence was heard before, the judge in the absence of the parties. Remembering that both parties were absent at the time, it does not seem to me to have been a situation which was necessarily incapable of correction either as regards fairness or as regards the appearance as well as the fact of impartiality. The learned judge took steps to correct the situation which had arisen and I shall refer to these in a moment, but I should first observe that the conduct which is called in question took place in a somewhat special situation. 52 The passages to which I have referred in JRL establish that while the (mere) fact that an ex parte communication takes place is an important one, it is not decisive, and closer examination may show that the informed reasonable lay observer might not form an apprehension of bias despite such communications. It will depend on the facts of each case whether communications between a judicial officer and one party to the exclusion of the other give rise to a reasonable apprehension of bias, and one must look to the whole of what happened to establish whether such an apprehension should be inferred. The reasonable and fair minded lay observer according to whose standards the question of ostensible bias is judged is taken to have knowledge of the material objective facts [ Laws v Australian Broadcasting Tribunal (1990) 170 CLR 70, 95 (Deane J); Kartinyeri v The Commonwealth (1998) 156 ALR 300, [16]; S&M Motor Repairs Pty Ltd v Caltex Oil (Australasia) Pty Ltd (1988) 12 NSWLR 358, 380F-G, 381D-E (Priestley and Clarke JJA); Johnson v Johnson (2000) 201 CLR 488, 493-494 (Gleeson CJ, Gaudron, McHugh, Gummow and Hayne JJ), 508-509 (Kirby J)]. In S&M Motor Repairs , Priestley and Clarke JJA, said (at 380F-G) that for the apprehension of the parties or the public to be reasonable, it must arise upon an understanding of the actual circumstances in which the claim of possible bias is made, and added (at 381D-E): We stress that whenever a court is called on to decide whether disqualifying bias or apprehension of bias exists all the circumstances of the particular case must be looked at.

53 Moreover, where a judge is concerned, the mere fact of an ex parte communication is of importance, though not decisive, because it is such an obvious departure from the norms of behaviour understood by judges and the legal profession alike. The same cannot be said of a Referee who is not a lawyer let alone a judicial officer, who is not required to conduct the proceedings as if he were a judge, and who may be quite unfamiliar with the practices and protocols of lawyers. In my view, less significance attends the mere fact of such a communication in that context than in the context of a judicial officer. Accordingly, it is necessary to look beyond the mere fact of the communications to see whether the reasonably informed bystander would apprehend bias, knowing of their contents. Thus in JRL , it was of decisive importance that the court counsellor – a person whose opinion might be thought to carry weight with the judge – had made strong representations to the judge on the merits, in private, which it was not unreasonable to suppose may have influenced the judge adversely to the husband's case.

54 Such an examination in the present case reveals the following.

55 First , and foremost, the matters entrusted to the Referee did not require him to engage in the receipt and evaluation of competing cases, evidence and submissions, but simply to receive from each party its own formula, compare them, and identify the similarities and differences, in circumstances where neither party was to have access to the other's formula. It is a function that required scientific expertise, but not one which lent itself to shades of opinion or persuasion. To my mind this is a very significant matter, which places the case in a radically different position to JRL. Though appointed as a Referee, his function was much more akin to that of a court expert witness.

56 Secondly , the orders contemplated that there would be single-party communications, and that the Referee would list them (as he did) in his report. In particular, the orders provided for each of the plaintiffs and Era to produce to the Referee upon request copies of the formulas and recipes for their respective products, together with "such other information as the Referee shall reasonably require", on a confidential basis. The orders required the Referee to include in his report a list of all correspondence and communications between the Referee and (a) the plaintiffs or their lawyers; and (b) Era or its lawyers.

57 Thirdly , the Referee was not a lawyer, let alone a judge, and while qualified to give the expert opinion sought of him, was apparently unfamiliar with the procedures and protocols involved with litigation. As Mr Muddle SC, who appeared for the plaintiffs, submitted, some insight into the Referee's mindset may be gleaned from: (a) the Referee's letter of 6 June 2006 to Photios Vouroudis (copied to Clayton Utz) [TB425; Ex.JIF1, p220]: Dear Folks I do not know the legality of this but have no qualms myself in delivering the emails if all agree. Regarding the telephone conversations, they are described in my submission. (b) the Referee's response on 22 June to Clayton Utz's inquiry as to whether he had sent the original of his report to the Court (copied to Photios Vouroudis) [TB444; Ex.JIF1, p237]: [TB450]: No I thought that the copy I sent you would have been sent. What should I do ? (c) the Referee's response on 23 June 2006 to Photios Vouroudis' assertion that it appeared that he did not intend to comply with the Orders of the Court. [TB476]: I am an expert in thermosetting polymers such as polyurethanes, I have identified the ingredients in all products and, as such, I believe that I have complied with the orders of the court. I do not have any intension (sic) of not complying with these orders.

In the meantime, while this discussion is going on, can someone please tell me in plain English what is going on in this court case? Has the court met and does the court require further clarification? I have had no direct contact with the court but only from the Solicitors for the Plaintiffs and Defendants.

58 The reasonable and fair-minded lay observer, informed of these facts and circumstances, would make allowance for them in judging the significance of the fact that communications took place between the Referee and one party, and would recognise: that the Referee was a scientist given a task pursuant to orders which contemplated some communications with only one party, but provided for the ultimate disclosure of the fact of such communications; that the Referee provided such disclosure; and that all of the communications involved matters of administration and procedure.

59 Fourthly , the Referee was initially approached by Clayton Utz, and it was to Clayton Utz that he indicated his willingness to accept an appointment, and from Clayton Utz that he received the Court's orders. Significant emphasis was given, by Era and by the Associate Judge, to the Referee's explanation for not having communicated with Photios Vouroudis – to the effect that Clayton Utz were his first point of contact and he did not have Photios Vouroudis's contact details – being "false", in that in truth he did have Photios Vouroudis's email address. Three matters were said to follow: first, that the Referee must have known that his denial that he had Mr Vouroudis's contact details was false; secondly, that it constituted an implied admission by the Referee that Mr Vouroudis should have been copied in on all communications; and thirdly, that neither the Referee nor Clayton Utz disclosed the substance of the telephone call two days before the draft Report was supplied to Clayton Utz, in which the Referee wanted a 'retainer with Clayton Utz' (which, it was said, could hardly be described as 'a procedural matter, much to do with timing').

60 As to the first, it was correct to state that Clayton Utz was the Referee's first point of contact – they had first approached him, ascertained his availability, and provided the order of reference to him. Indeed, the Court orders expressly provided that the plaintiffs' solicitors provide the Referee with a sealed copy of the Order and a copy of the Code. The idea that the Referee would deliberately state, to Photios Vouroudis, the readily disprovable falsehood that he did not have their contact details, is improbable in the extreme. The innocent explanation – that what he was saying, perhaps imprecisely, was that when first approached by Clayton Utz he did not then have Photios Vouroudis's details, and continued thereafter to deal primarily with Clayton Utz on administrative matters – is much more likely. As to the second, it is not for the Referee to make admissions; he is not a party. As to the third, I deal with the retainer conversation below.

61 Fifthly , the communications that the Referee received were (with the possible exception of those to which I shall specifically come) entirely procedural or administrative in nature, and contained no comments or submission on the substance of the report – as Mr Vouroudis conceded in cross-examination before the Associate Judge. They are in the nature of what would be expected when a scientist is appointed as a Referee by Court order. Someone on behalf of the parties has to communicate with him, organise payment of his fees, provide him with documents, answer queries, and enquire as to the progress of his report; the circumstance that the Order provided for the plaintiffs' solicitors to give the Referee a sealed copy of the order and the Code effectively placed Clayton Utz in that position. 62 The first possible exception is the communications that provided to the Referee the relevant formulas. However, the orders provided for each party on request to provide its formulae to the Referee (with no reference to provision to the other), and it was the subject of specific correspondence between the parties that each would not have access to the other's formulae, and no inference of bias could be drawn from the circumstance that the communications providing the formulae were not copied to the other party. 63 The next suggested exception is the "retainer" telephone conversation that took place between the Referee and Mr Fairbairn of Clayton Utz on 26 May 2006. Era submits that it could not be described as procedural. I disagree. I have already explained that I do not consider that the "retainer" conversation bears the sinister connotation which Era seeks to attribute to it, but was an innocent inquiry by a naïve Referee as to how he was going to be paid and whether there should be a retainer. It is not without significance that the Referee was required by the Order to, and did, include in his report, a statement of adherence to the Expert Witness Code, and a declaration that he had no previous commercial relationship with either party. In that context, I do not accept that the reasonable observer would infer that the Referee might be under some mistaken apprehension that he was retained primarily, if not exclusively, on behalf of the plaintiffs. In those circumstances, an informed observer would not infer, from the circumstance that the Referee had inquired whether there should be a retainer when discussing arrangements for his remuneration with the firm which had first approached him and attended to the administrative arrangements for his appointment, that he might bring other than an impartial mind to the issues remitted to him.

64 The next possible exception is the email of 28 May, which enclosed an unsigned copy of his report and asked "Please let me know if you have any problems with this report". It was this that the Associate Judge described as submitting a draft report for comment. If in fact this communication was, or could reasonably be perceived as amounting to, an invitation extended only to the plaintiffs, to the exclusion of Era, to make comments on the substance of a discussion draft report before it was finalised, a reasonable apprehension of bias would undoubtedly be established. However, once again, the context is illuminating. His Honour said that there was no purpose in the Referee making the inquiry if the first report was not a draft, and that if it was not a draft it would have been signed. On their own, those might have been important indicia. But there are other, contrary, indicia. The report was provided under cover of an email requesting payment and setting out a calculation of the hours involved, which suggests that the Referee regarded his task as having been completed. As already mentioned, it contained a statement of adherence to the Expert Witness Code. It was sent two days after the 26 May 2006 conversation, in which the Referee said that he should complete the report "in the next few days" . The email is headed "Report to the Supreme Court of New South Wales" , and contains no reference to the attached report being a draft. Nor does the attached report bear any marking suggesting that it is a draft. Further, in my view, when seen in context – including, in particular, that Clayton Utz had initially approached him, had forwarded the Order to him and had been his contact point on matters of administration; that the Referee was aware that the information in the Report was confidential; and that the Referee was preparing a report for the Court and was not familiar with the process – the concluding words "Please let me know if you have any problem with this report" were not an invitation to comment on or make submissions about the merits of the report with a view to influencing him towards a different opinion, but an inquiry as to whether the report complied with formal requirements, and to establish that he had done all that was required of him. In fact, no substantive comment was forthcoming – although a suggestion was made as to the structure of the report to avoid compromising confidentiality. In fact, no change to the substance of the report was made, and the final signed report was identical to the draft (except for the structural changes to address confidentiality concerns). And in due course, Era was afforded and took avail of the opportunity of making submissions to the Referee about the substance of his report before it was submitted to the Court, to which the Referee provided a reasoned response.

65 Appreciating all these matters, and the Referee's naivety in matters of legal protocol and procedure, the reasonable observer would have concluded that the Referee's inquiry of Clayton Utz did not manifest a disposition in favour of their client, but a desire to be satisfied that he had done what was required of him by the reference. This is confirmed by the email of 29 May, which enclosed the report, by then signed, and asked "Is the report satisfactory".

66 Accordingly, in my respectful opinion, the learned Associate Judge erred in concluding that a reasonable apprehension of bias arose from the mere fact of the single party communications, without examining the context and content of the communications. Upon such an examination, I conclude that no reasonable apprehension of bias arose.

The waiver issue 67 Lest I be wrong in that respect, I consider the question of waiver.

68 It is well-established that a party cannot sit on its hands – or reserve its rights – in respect of an allegation of apprehended bias. It cannot argue the merits, reserving its rights to take the bias point later: it must take the bias point, or waive it. If it continues to engage on the merits, and loses, it cannot then belatedly raise the bias point [ Vakauta v Kelly (1989) 167 CLR 568, 572; Smits v Roach (2006) 227 CLR 423, [43]]. As Toohey J said in Vakauta v Kelly (at 588): Waiver involves a decision by the party against whom bias is shown to raise no objection... The situation is one in which the law prevents a party to litigation from taking up two inconsistent positions: he is held to his election.

69 The Associate Judge disposed of the waiver argument as follows:- 39 However, it was suggested by the Plaintiffs that there had been a waiver on the part of the Defendants of their right to object to the adoption of the Report on the ground of lack of procedural fairness. In rejecting that suggestion I would refer to the e-mail of 20 June 2006 from Mr Vouroudis to Mr Fairbairn, which is clear evidence against the existence of any such waiver. 40 The foregoing submissions regarding both perceived bias and actual bias on the part of the Referee were relied upon by the Defendants as being relevant to their resistance to the assertion by the Plaintiffs that the Defendants had waived their right to complain about a lack of procedural fairness on the part of the Referee. I am in agreement with that submission on the part of the Defendants.

70 The plaintiffs contend that his Honour failed to provide adequate reasons for rejecting the waiver argument, and that upon reconsideration of it the Court would be satisfied that Era has elected to have the Referee finalise his report and waived its right to object to the adoption of the report on the basis of apprehended bias.

71 In my view, argument about the sufficiency of reasons in this respect is superfluous. An appeal under s 75A is not limited to error of law. Although Mr Vouroudis was cross-examined before his Honour, none of the Associate Judge's findings turn on demeanour or depend on any advantage enjoyed by the primary judge over an appellate court. If the Associate Judge were right to conclude that there was no waiver, the inadequacy of the supporting reasons will not ultimately avail the plaintiffs. Conversely, if he were wrong, it is unnecessary to consider the adequacy of his Honour's reasons. The issue for this court is simply whether there was a waiver. 72 It follows from Photios Vouroudis's letter of 1 June 2006 that they were aware from no later than that date that there had been a significant number of communications between the Referee and Clayton Utz to which they had not been privy, such as to justify the assertion on their part that "the whole integrity of the process had been jeopardised" and that "in the circumstances, this conduct has given rise to a reasonable apprehension of bias". By 2 June 2006, Photios Vouroudis had been provided with a copy of the email communications between Clayton Utz and the Referee. They also had the Referee's Report, and were aware from it of the fact, though not the detailed contents, of the telephone conversations between Clayton Utz and the Referee. Yet despite that knowledge, Era did not ask the Referee to withdraw from the reference on the basis of ostensible bias. Rather, Era embarked upon the inconsistent course of making further submissions to, and engaging in debate with, the Referee, as to the substance of his findings. In particular, on 5 June, over Clayton Utz's objection, Photios Vouroudis sent to the Referee a submission, taking issue with the substance of his report, and seeking to have him reach different conclusions. The Referee responded on 6 June 2006. Further correspondence culminated in Photios Vouroudis' email of 23 June 2006, in which they accused the Referee of not intending to comply with the Orders of the Court.

73 Era pointed to the circumstances that it had made clear that it reserved its rights in relation to the question of bias; that Clayton Utz had been asked on 1 June to disclose the telephone communications; that in the letter of 20 June it was noted that the file notes of telephone conversations had still not been provided "despite a previous request" (and were not provided until Mr Fairbairn's second affidavit of 1 February 2007); that the "retainer" conversation of 26 May 2006 had not been disclosed by either the Referee or Clayton Utz (and was not in fact disclosed until February 2007); and that the Referee did not himself ever disclose the substance of the conversations at any time. However, in fact Clayton Utz had provided copies of all the email communications to Photios Vouroudis on 1 June, so Photios Vouroudis had knowledge of the fact of those communications and their contents; and the Referee had disclosed the fact of the communication – including the telephone conversations – in his report, and that they were "regarding the nature of the consulting work and the timing of the report". It is true that the circumstance that in one conversation he had queried whether there should be a retainer was not specifically disclosed; but the most potentially significant communication – the provision of the unsigned report with the query whether there was any problem with it – was known to Photios Vouroudis.

74 Era submitted that there could not be a waiver in circumstances where both the Referee and Clayton Utz refused to disclose file notes of conversations with the Referee, and where Mr Vouroudis was still attempting to ascertain what had in fact occurred between them. However, while knowledge is essential for there to be a waiver, what is required is knowledge of the right waived – not of every fact that constitutes that right. What is important is that, as Photios Vouroudis' letter of 1 June 2006 establishes, Era knew by then of any right to object on grounds of bias – even if it did not know the whole detail of every communication that had taken place between the Referee and Clayton Utz which gave rise to it – and with that knowledge, adopted the inconsistent course of arguing the merits. Had Photios Vouroudis done no more than attempt to ascertain the full extent and substance of the communications, there would have been great force in the argument that there had been no waiver. But they went further, and sought to debate the merits of the report, with a view to persuading the Referee to a different view; only when they failed in that course did they indicate, on 20 June, that they would oppose adoption of the report. Era cannot avoid the consequences of adopting such a course by purporting, as it did in its letter of 1 June, to "reserve all rights". Such a reservation does not avert the consequences of waiver where an inconsistent course is adopted.

75 The learned Associate Judge, in rejecting the waiver argument, referred to the letter of 20 June as "clear evidence against the existence of any such waiver". In my view, the letter of 20 June was too little, too late, to have that consequence. The waiver had taken place when, on 5 June, Era elected to engage with the Referee on the merits, notwithstanding its belief that there was a reasonable apprehension of bias. And even the letter of 20 June, while referring to the ex parte communications, expresses only an objection to the report "in its current form" – as distinct from generally – which bespeaks an objection to aspects of the report on the merits (the contents ground), but is inconsistent with maintaining that the Referee was forever disqualified by apprehended bias. 76 In my judgment, Era having clearly formed the view that there was a bias point to be taken if it wished, rather than doing so purported to "reserve all rights" but engaged with the Referee on the merits, to see if his conclusions could be changed. Only after failing on that front did it determine, on 20 June, to object to the report on bias grounds. In my respectful opinion, that is a classic case of waiver.

The contents issue 77 The Court will reject a Referee's report if the Referee has patently misapprehended the evidence, or exhibited perversity and/or manifest unreasonableness in finding facts that no reasonable tribunal of fact could have found [ Chocolate Factory Apartments Limited v Westpoint Finance Pty Limited [2005] NSWSC 784, [7] (sub-paragraph (6))].

78 The Associate Judge said: 46 For completeness, I would record that I am in general agreement with the Defendants' specific criticisms regarding the contents of the Report, which criticisms I have earlier set forth herein (for example, the incorrect inclusion of MDI, the expression of a qualified opinion, the consideration of matters which the Referee was not required to deal with). For those reasons, alone, the Report in its present form should not be adopted.

79 The plaintiffs contend that his Honour failed to provide any reasons for that conclusion, and that upon consideration of this issue, the Court would be satisfied that there was no sufficient error on the part of the Referee to decline to adopt his report. Once again, I regard the question of the adequacy of his Honour's reasons as superfluous. This court is in as good a position as his Honour to determine those issues and, while affording due deference his Honour's findings of primary fact, is bound to give effect to its own conclusions if they differ. Moreover, I would not readily accede to the view that reasons are insufficient where they express "general agreement" with a party's submissions: that amounts to an adoption of the submissions as reasons which, while not invariably appropriate, may in some circumstances suffice to explain a decision-maker's reasoning. 80 The Associate Judge's reference to "the expression of a qualified opinion" reflects a complaint made by Era in its 5 June 2006 email to the Referee as follows: Ambiguity of Final Conclusions

Lastly, we direct you (sic) attention to the final paragraph head "Final Conclusions". You have stated that "these products are all very similar in composition". In (sic) it unsurprising that these products are similar given that they perform basically the same function and you would expect them to be similar. However, you do not identify which formulations are similar and you do not define what you mean by similar

…

In relation to the latter, you state that with the exception of the "use/absence of fire retardants [and] siloxane defoamers … these products are all very similar in composition". We take it that if you include the differences of the "use/absence of fire retardants [and] siloxane defoamers", the products are not similar. If this is correct, it follows that your opinion, as an independent expert, ought clearly be stated.

81 The Referee's response was: Yes I agree with you that the formulations are all very similar. In the details of my report I expand on the similarities and differences

…

I think my statement is clear.

82 The Referee has set out in his report the similarities and differences between the products, and the conclusion that, save for the use or absence of fire retardants, siloxane defoamers and the requirement to add water to the mix, the products are "all very similar in composition". This clearly enough identifies similarities and differences in their composition: the main differences are fire retardants, siloxane defoamers and the requirement for water. There is no obvious problem with a conclusion that the one Era product and the five different Bevedol formulations are similar: there is no reason to exclude the possibility that the five Bevedol formulations are themselves similar to each other. There is nothing in this respect that would warrant rejection of the report, and Era did not press it on the appeal.

83 The other "content" matters that Era sought to sustain were the "inclusion of MDI" and "the consideration of matters which the Referee was not required to deal with"; in substance they amount to the same complaint. Both Bevedol and GeoBind must be mixed with an isocyanate (respectively Bevedan and GeoBind Iso) to produce the rigid foam that is the final product. In each case, the isocyanate – which is not manufactured by Carbotech or Era respectively – is '4,4 Diphenyl Methane Diisocyanate Oligomer', or MDI. Both Bevedan and GeoBind Iso were MDI manufactured by a third party and rebadged under those respective names.

84 Originally, the plaintiffs' pleadings alleged that they were the developer and manufacturer of Bevedan, and the plaintiffs proposed that Bevedan be included in the reference. However, the plaintiffs came to accept that they did not manufacture Bevedan, and agreed to amend the statement of claim to delete the allegations about Bevedan. Bevedan (and GeoBind Iso) were not included in the reference.

85 Era's submission, which the Associate Judge presumably accepted, was that the Referee found that one of the similarities between the formulations was that they both included MDI, and as MDI was not a component of Bevedol or GeoBind, but added to them, this finding was plainly erroneous and the conclusion that the products were 'similar' because, inter alia, they both contained MDI was unreasonable. This too was raised by Photios Vouroudis in correspondence with the Referee, on 5 June 2006: Reference to '4,4'diphenyl methane diisocyanate oligomer'

Your draft Report contains a statement in several places that both Bevedol and GEOBIND contain '4,4'diphenyl methane diisocyanate oligomer'.

In relation to GEOBIND, it does not contain 4, 4'diphenyl methane diisocyanate oligomer. Rather, this is contained in GEOBIND Iso which is designed to be mixed with GEOBIND. Similarly, Bevedol does not contain 4,4'diphenyl methane diisocyanate oligomer, which is the separate Bevedan product which is also designed to be mixed together. You were not required to form any opinion as to Bevedan and GEOBIND Iso.

We ask you to confirm whether it remains your opinion that:

The formulation and recipe for Bevedol contains 4,4'diphenyl methane diisocyanate oligomer; and

The formulation and recipe for GEOBIND contain 4,4'diphenyl methane diisocyanate oligomer.

If this is not your opinion, then all reference to 4,4'diphenyl methane diisocyanate oligomer must be removed from the final Report. 86 The Referee's response was: Both Bevedol and GeoBind must be mixed with an isocyanate to function as a polyurethane and each is designed to be used with a particular isocyanate resin. Without the isocyanate they are just a mixture of chemicals which have no inherent function and no specific properties. The data you supplied me was for the foam which was produced with GeoBind and the isocyanate. Therefore I consider that the terms of Bevedol etc and GeoBind to be a package which include the isocyanate.

87 I do not accept that the substance of the Referee's report is to the effect that Bevedol or GeoBind in its unmixed form contains isocyanate. Reading his report as a whole, the Referee does not assert that Bevedol or GeoBind – before mixing with the isocyanate – contains MDI: the Referee has separately listed each of the components of each Bevedol variant and each GeoBind variant, apart from the corresponding isocyanate. What the Referee did in substance was to identify and list each component of each of the Bevedol variants and of GeoBind, and observe that one similarity between the products was that both were mixed with MDI to produce the rigid foam.

88 Era submitted that this was at odds with the agreed position of the parties and the Order of Reference, the issue for inquiry and determination being limited to the similarities and differences between Bevedol and GeoBind, and not the respective final products after combination with the MDI to form the rigid foam. However, one can easily see how a request to identify similarities and differences between Bevedol and GeoBind naturally invites attention to the isocyanate with which each was mixed to produce the foam. The material provided by both parties included information relating to the MDI component. For example, the data supplied by Era to the Referee [TB62ff] was, as the Referee stated, data for the combined product GeoBind Std, and did not differentiate between the two components GeoBind Std Resin and GeoBind Std Iso: GEOBIND STD was described in Era's documents provided to the Referee as a product that "consists of two components: GEOBIND STD RESIN and GEOBIND STD ISO . In the application of his expertise, the Referee determined that the questions posed were best answered by considering the products in the context in which they were intended to operate – as part of a combination with MDI. In so doing, he answered the questions posed. No evidence has been adduced to suggest that this was other than appropriate. The order of reference did not suggest that the isocyanate was to be disregarded.

89 I do not consider that the Referee's references to MDI could warrant rejection of the report; to the contrary, the Referee's observations were appropriate when asked to comment on the similarities and differences of the two products: if both are mixed with the same additive, that is a similarity. Whether it is a similarity of significance is a matter for the trial. Moreover, in circumstances where all parties apparently agree that the isocyanate in each case is MDI, and both products in their mixed form contain it, there is no prejudice to any party from the Referee having adverted to that fact.

Conclusion

90 My conclusions may be summarised as follows.

91 First, in considering whether a reasonable apprehension of bias arose from the ex parte communications between the Referee and Clayton Utz, while the mere fact of those communications is relevant, it is necessary to go beyond that and to view the context and content of the communications. When that is done, in the circumstances of this reference – particularly the nature of the reference and the Referee – they do not found a reasonable apprehension of bias.

92 Secondly, Era having clearly formed and articulated by 1 June 2006 the view that there was a bias point to be taken if it wished, rather than doing so purported to "reserve all rights" and engage with the Referee on the merits, to see if his conclusions could be changed. Only after failing on that front did it determine, on 20 June, to object to the report. In my respectful opinion, that is a classic case of waiver.

93 Thirdly, in the application of his special expertise, the Referee determined that the questions posed were best answered by considering the products in the context in which they were intended to be used – as part of a combination with an isocyanate. In so doing, he answered the questions posed. The Referee's observations were an appropriate response to a request to comment on the similarities and differences of the two products: if both are mixed with the same additive, that is a similarity. Whether it is a similarity of significance is a matter for the trial. Moreover, in circumstances where all parties apparently agree that the isocyanate in each case is MDI, and both products in their mixed form contain it, there is no prejudice to any party from the Referee having adverted to that fact.

94 My orders are: 1. Order that the appeal be allowed.

2. Order that the orders made by McLaughlin AsJ on 16 November 2007 be set aside.

3. In lieu thereof, order that the Report of the Referee be adopted.

4. Order that the eleventh and twelfth defendants pay the plaintiffs' costs of the motion before McLaughlin AsJ and of this appeal. **********

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