The Supreme Court judge whose business links with a Queen's Counsel saw a case sent back to the Court of Appeal for a re-hearing has quit his horseracing business interests, including those with the Chief Justice.

Justice Bill Wilson was a 50/50 owner with Alan Galbraith, QC, in a $3 million company that shared in the ownership of Rich Hill Stud in the Waikato.

Justice Wilson resigned as a director of Rich Hill Ltd and sold his shares to Galbraith in August.

That same month the judge also quit his interest in three partnerships with Galbraith, Chief Justice Dame Sian Elias and her husband, Hugh Fletcher, that bred, sold and raced thoroughbreds.

Each partnership owned a brood mare which they bred from. The brood mares have together produced a dozen horses, a few of which have sold for six-figure sums, with one fetching $450,000.

In his statement to the Supreme Court, written on the day he resigned from Rich Hill, Justice Wilson said he had dissolved those business interests, although he believed the allegations of potential bias were unfounded.

"I was not prepared to subject myself to the possibility of similar allegations being made against me in the future," he said.

His statement that day was the fourth of five about his relationship with Galbraith and came 2 years after he first informally advised of it.

It is the first time the Supreme Court has recalled an earlier decision of its own and sent a case back to the Court of Appeal to be heard again because of the reasonable perception of possible bias.

It raises the problem of maintaining the perception of impartiality in a small country with a tight-knit legal fraternity.

It may also raise questions about the decision to drop the Privy Council as last port of appeal.

The Judicial Conduct Commissioner Sir David Gascoigne is assessing a complaint relating to Justice Wilson's failure to recuse himself from the Court of Appeal case.

Gascoigne could dismiss the complaint, refer it to the Chief Justice [Elias] or recommend that the Attorney-General appoint a Judicial Conduct Panel to inquire into the matter.

Justice Wilson had a rapid rise to the bench of New Zealand's highest court. He was appointed directly from practising law as a Queen's Counsel to the Court of Appeal by Michael Cullen, Attorney-General in the Labour Government, who also promoted him two years later to the Supreme Court.

The issue over Justice Wilson's alleged conflict of interest appears to have grown not from any failure to declare his relationship with Galbraith (they met through their work and became firm friends long ago) but a failure to provide details at an early stage.

Case documents show that soon after he was assigned to a three-judge panel to hear an appeal by the Wool Board Disestablishment Company, represented by Galbraith, of a High Court decision in favour of fine wool producer Saxmere Company and others, the judge telephoned Saxmere's senior counsel, Francis Cooke, QC.

Justice Wilson's recollection was that he told Cooke, "that Mr Galbraith and I shared in the ownership of a horse stud". Cooke's recollection of the judge's words was to the effect that "we are good friends and have shared horseracing interests".

"I thought they owned one or more racehorses together," Cooke said in evidence. He had not known they were owners of Rich Hill Stud.

Cooke indicated his view to instructing solicitor, Sue Grey, that personal relationships between judges and counsel were common and did not influence the outcome of cases. "In other words, I was of the view there was no actual bias."

There was no objection to Justice Wilson sitting. The Wool Board's appeal was successful. Saxmere unsuccessfully applied for leave to appeal the Court of Appeal's decision.

Later, the principal of Saxmere, Peter Radford, and Russell Emmerson, also a litigant, learned of the involvement of the judge and lawyer in Rich Hill Stud, described by Grey as "a large and highly-successful racehorse stud".

"It's fair to say that Peter, Russell and I were shocked to learn about this shared business interest between a senior member of the judiciary and senior counsel who appeared before him," Grey wrote in an email to Cooke.

Radford made a complaint to the JCC in May 2008. Copies of the complaint were sent to the Prime Minister and Attorney-General (at the time, Helen Clark and Dr Cullen respectively).

The JCC at the time, Ian Haynes, first considered that he didn't have jurisdiction but after input from a law ethics academic, Professor Duncan Webb - who was advising Saxmere - undertook to investigate.

As a result of an apparent lack of progress by the JCC, Saxmere appealed to the Supreme Court seeking that it set aside the Court of Appeal judgment on the ground that Justice Wilson may have been unconsciously biased because of his friendship and business connection to Galbraith.

That was heard in March and in July the Supreme Court ruled that on the evidence there was no reason that Justice Wilson should have been disqualified for apparent bias from hearing the Saxmere appeal.

Its reasoning was that Rich Hill was primarily a landholding company and there was nothing to indicate the judge was beholden in any way to Galbraith.

Justice Wilson provided more information for this hearing about his and Galbraith's business interests but nothing to indicate he may have been seen to be indebted to the QC.

"During my many years of practice as a barrister prior to my being appointed a Judge of the Court of Appeal ... it was apparent to me that in this country a personal friendship between a judge and counsel appearing before that judge was not seen as creating a conflict of interest for the judge," he wrote.

"Nor was a business relationship between judge and counsel, unless there was some connection between that business and the subject matter of the litigation."

Saxmere came back to the Supreme Court, with new grounds including that Justice Wilson had not made a full disclosure, and asked the court to recall its earlier judgment.

Justice Wilson made a further statement that imbalances occurred from time to time in the amount he and Galbraith had invested in their business.

At the time he was considering the Saxmere appeal he had thought their contributions were about even. That was borne out, he said, by the year's accounts which showed his contributions were about 6 per cent less than Galbraith's.

He also revealed in that statement that at the time of the court case, he and Galbraith were also settling the purchase of land adjoining Rich Hill's property and arranging a mortgage to fund it.

Saxmere considered that the latter meant it was likely the judge and Galbraith were in frequent contact during the time the judge was deliberating on the Saxmere appeal. In contrast, if Saxmere's solicitor wished to contact the judge, she had to do so through the court registrar.

The Supreme Court agreed. "The judge and Mr Galbraith must have been reliant upon one another during the very time the Saxmere judgment was reserved in the Court of Appeal," it said in its judgment last month.

More important in the court's decision to recall its earlier judgment was information Justice Wilson provided in response to a request by the Supreme Court to specify dollar amounts of the imbalance. That indicated that the judge had effectively owed Galbraith $242,804.

"We are of the clear opinion that the objective lay observer could reasonably consider that ... the judge was at the relevant time beholden to Mr Galbraith because of the imbalance and that this might unconsciously affect the impartiality of the judge's mind in deciding a case in which Mr Galbraith was appearing," the judgment said.

Justice Wilson is popular both in law and horse racing circles. John McKenzie, Chief Racecourse Inspector, said the judge had sold his interest in racehorse partnerships because "he doesn't want to embarrass anyone else".

All eyes are now on the JCC. It was set up in 2005 to deal with complaints about judgesand to enhance public confidence in, and protect the impartiality and integrity of, the system.

If a Judicial Conduct Panel is appointed, it must give its findings of fact to the Attorney-General along with an opinion as to whether the judge's conduct justifies consideration of removal. In the four years since it was established, the JCC has received 429 complaints. Ten have been referred to the head of the relevant judicial bench.

None have been referred to the panel.

FORTUNE RIDES ON SHEEP'S BACK CASE

Eight million dollars is at stake in the case that gave rise to the claim that Justice Bill Wilson had a conflict of interest through his business relationship with one of the lawyers.

Saxmere Company versus the Wool Board Disestablishment Company (Disco) dates back to the old Wool Board, which marketed and sold all NZ wool. That arrangement suited most, but some small groups of fine wool producers, including Saxmere, were not satisfied. They lobbied Parliament and the result was a clause in the Wool Act, known by lawmakers as the "Saxon clause" allowing some groups to do their own marketing.

The lawsuit relates to levies that Saxmere and others claim should have been repaid to them. They claim to be owed about $30 million; but Disco holds reserves of only $8 million.

Disco argued that it repaid the levies by paying Merino New Zealand, but the Saxon wool growers argued that by doing this Disco had effectively given their levies to their opposition.

Saxmere partially won in the High Court which found the Wool Board liable for breach of statutory duty and negligence in relation to one of four decisions. But this was overturned by the Court of Appeal. One of the three Court of Appeal judges who heard the case was Justice Bill Wilson. Wilson's friend and - at the time - business partner, Alan Galbraith, QC, was counsel for Disco.

Saxmere owner Peter Radford, through his lawyer Sue Grey, appealed to the Supreme Court alleging a potential conflict of interest because of the shared business interests.

The Supreme Court disallowed the challenge, concluding that a fair-minded lay observer would reasonably understand that Justice Wilson brought an impartial mind to his judgment.

Citing new causes, Saxmere applied to the Supreme Court for it to recall its earlier judgment. As a result of new information provided by Justice Wilson the Supreme Court recalled its earlier judgment and ordered a rehearing of the appeal that went against Saxmere in the Appeal Court before new judges.

That information was that the judge was effectively indebted to Galbraith by $242,804; and they were also reliant on each other for a mortgage to buy land.

"The objective lay observer could reasonably consider that... the judge was at the relevant time beholden to Mr Galbraith," the Supreme Court said.

* This article originally incorrectly stated that Justice Bill Wilson was promoted from the Court of Appeal to the Supreme Court by Attorney-General Chris Finlayson. The appointments were made by Finlayson's predecessor, Dr Michael Cullen.