Chief Justice Richard Ground admitted he could be perceived as biased against lawyer Julian Hall – and rescinded his ruling against discharging his bankruptcy.

The lawyer had objected to the fact that Mr. Justice Ground also presided over behind-closed-doors "chambers" hearings under the Mental Health Act in relation to Betty McMahon, an elderly lady Mr. Hall owes more than $1.6 million.

The evidence considered by the Chief Justice in that matter, argued Mr. Hall, could have put his own credibility at stake and could have lead to observers questioning the Chief Justice's impartiality in dealing with the bankruptcy.

He stressed during a hearing of the matter last week that he was not accusing the top judge of actual bias - just making the point that there could be a perception of it.

As a result, Mr. Justice Ground ruled against himself and for Mr. Hall on Friday. He agreed to recuse himself from further dealings with the bankruptcy matter, which will now be reconsidered by a fresh judge.

Mr. Hall greeted the news with delight, telling The Royal Gazette the Chief Justice's refusal to lift his bankruptcy – which prevents him practicing as a barrister – was "clearly a wrong, unfair and lopsided ruling".

Mr. Hall acknowledged during his application that he had no right to be admitted to the Mental Health Act Hearing relating to his former client Mrs. McMahon, who has been deemed unfit to handle her own affairs since 1996. It resulted in the Chief Justice authorising the receivers of her estate to place Mr. Hall's debt to her in a protective trust.

However, Mr. Hall argued that his credibility may have been put at issue because of his history of legal disputes with those acting for Mrs. McMahon. Civil proceedings against him in 1997 led to a court order that he should pay Mrs. McMahon $1.6 million.

A Police investigation later resulted in Mr. Hall being charged in 2002 with stealing more than $500,000 from the elderly woman. He was acquitted after a high-profile Supreme Court trial in 2005.

During his bid to get his bankruptcy overturned last month, Mr. Hall accused attorneys from law firm Mello Jones and Martin (MJM) including Saul Froomkin QC - who acted against him in the bankruptcy matter - of pressing for him to remain bankrupt in order to prevent him becoming trustee and executor of Mrs. McMahon's estate when she dies.

In his ruling on Friday, Mr. Justice Ground stressed that he has never been asked to consider what stance the receivers of the estate should take in respect of Mr. Hall's bankruptcy.

But he acknowledged: "I have obviously considered it appropriate to authorise them to place his debt in a protective trust to protect it against the day when he becomes executor of her estate.

The Chief Justice said that in the modern legal test for bias: "The question is whether the fair-minded and informed observer, having considered the facts, would conclude that there was a real possibility that the tribunal was biased.

"The test is framed in that way partly to avoid the difficult task of ascertaining whether the judge was in fact biased, and partly because appearances can matter as much as substance, and justice must not only be done but must be seen to be done."

He concluded: "Applying the test, I consider that the objective bystander would consider that my involvement with the Mental Health Act receivers in the administration of the estate of Mrs. McMahon could give rise to a real possibility of bias against someone with Mr. Hall's history in relation to the affairs of Mrs. McMahon.

"I think therefore that it is better for the administration of justice that another judge bring a fresh mind to bear, and consider the matter anew. I therefore rescind my ruling of April 18 and step aside from further consideration of this case, save only to direct that it be listed before another judge."

Mr. Hall was declared bankrupt more than eight years ago after racking up debts of $2.7 million. Besides the estate of Mrs. MacMahon, he owes large sums to the estate of his former employer Charles Vaucrosson and other entities including the Government and the Bank of Bermuda. His debts currently stand in the region of $3.3 million including interest.

He claims his repayment proposals were unfairly rejected by the Official Receiver Stephen Lowe, who is handling his bankruptcy. However, Mr. Lowe argues that he has not repaid a cent so far and has not come up with suitable plans to do so.

Mr. Hall said after the Chief Justice's ruling that he hoped a resolution could now be thrashed out with the Official Receiver without the need for further court hearings.

"I'm obviously delighted with the result. My application raised profound and serious implications for the public confidence in the administration of justice," he said. "I will obviously take under advisement whether any further action should be taken by me, having fully considered the ruling."