Court orders judge’s recusal due to “business association” with defendant


HSBC: Bank made loans to judge’s company

The High Court has ruled that a circuit judge should not hear any more of a claim against HSBC because his own relationship with the bank raised the risk of apparent bias.

Hugh Sims KC, sitting as a deputy High Court judge, said the “fair-minded informed observer” (FMIO) would have concerns because the issues facing the company owned by the claimants were not dissimilar to those of His Honour Judge Gerald’s business, Hot Yoga Brixton (HYB).

The claimants, Mr and Mrs Ryan, applied to have the judge recused from hearing a derivative claim against HSBC brought under section 261 of the Companies Act 2006.

The application was only made after the judge had concluded the permission application should be dismissed, at which point the Ryans’ research uncovered his “business association” with the bank.

The Ryans submitted that there was a “logical connection” between the complaints they made against HSBC about its alleged misconduct when agreeing to provide rescue finance to their business and the fact that HSBC has this year advanced rescue finance to HYB.

In a statement then made during a hearing, HHJ Gerald said he and his wife each owned 50% of the shares in HYB, “a small single-premises yoga studio based in Brixton run by a full-time manager serving the local community”.

There were no bank borrowings until during the pandemic, when HYB received a £50,000 Bounce Back Loan an £75,000 Recovery Loan.

He described the relationship with HSBC as “essentially transactional”, with no relationship or assigned account manager, while neither he nor his wife had provided personal guarantees or security.

But he decided the recusal application should be heard by another judge.

Mr Sims concluded that the FMIO “would conclude that there was a real possibility that the tribunal was biased” on three grounds.

First, the FMIO “would begin to have some doubts as to whether or not the business association in this case between the judge, via HYB, and HSBC, having regard to the insolvent financial position of HYB, and its close connection with the judge, and perceived importance to him and his family, was an association which could result in a real possibility of bias, having regard also to the potential for some subject matter, and issue overlap, with the facts of the present case”.

It would have left the FMIO “interested to know to what extent the judge gave any conscious consideration to the issue before he heard the case and gave his judgment,” Mr Sims went on.

Second, the manner in which the judge dealt with the issue of apparent bias, after it had been raised and the circumstances became clearer, “would not have assuaged those concerns, and instead would have exacerbated them”.

Between these two factors, Mr Sims said, “the FMIO would perceive that there was a real possibility of bias by the judge against the Ryans, and in favour of HSBC”.

This would be reinforced by the approach taken by the judge at the substantive hearing, such as how “the FMIO would be left with the general impression that the judge had misdescribed a number of aspects of the Ryans’ case in a manner which was unfavourable to them”.

Mr Sims said: “There are a number of indicators that the judge did not discharge his judicial functions in accordance with a fair process during the hearing, and as reflected in the judgment, such that the FMIO would conclude there was a real possibility of bias.

“They are sufficiently widespread, and significant, that in my view the FMIO would have reached the conclusion of a real possibility of bias from them alone, and whether or not grounds 1 and 2 are made out.”

Mr Sims concluded that HHJ Gerald should not continue to hear the permission application, or make any final order on it, and his judgment should be set aside.

In a postscript, he stressed that there was no finding of actual bias.

Mr Sims continued: “Nothing in this judgment should be taken as an invitation by those who receive a judgment they do not like to look to take points of apparent bias after the hand down, and before consideration of any appeal. The facts of this case are most unusual.”




Leave a Comment

By clicking Submit you consent to Legal Futures storing your personal data and confirm you have read our Privacy Policy and section 5 of our Terms & Conditions which deals with user-generated content. All comments will be moderated before posting.

Required fields are marked *
Email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Blog


Commercial real estate: The impact of AI and climate change

There is no doubt climate change poses one of the most complex challenges for the legal industry; nonetheless, our research shows firms are adapting.


Empathy, team and happy clients

What has become glaringly obvious to me are the obvious parallels between the legal and financial planning professions, and how much each can learn from the other.


Training the next generation lawyer

Since I completed my training and qualified over 10 years ago, a lot has changed. It’s. therefore imperative that law firms adapt and progress their approach to training and recruitment.


Loading animation