Judge Joseph Mathews yesterday withdrew from the Circuit Civil Court action after he agreed that there was a risk of a perception of objective bias.
The case, which collapsed on its third day, will now have to be heard all over again.
Judge Mathews withdrew from the case when barrister John Ferry told the court his client, Fr Ciaran Dalton, was unhappy with a number of developments.
Fr Dalton, of Arran Court, Waterville, Blanchardstown, Dublin, who is on leave of absence from the priesthood, is suing Fr Martin Geraghty, head chaplain at James Connolly Memorial Hospital, Blanchardstown, for slander.
Mr Ferry told Judge Mathews yesterday that just before a lunch break in the hearing on Wednesday, a member of the Irish Inner Bar, barrister Patrick Long, had entered the courtroom and had shaken hands with the defendant, Fr Geraghty.
Mr Long (85) had sat beside Fr Geraghty in the courtroom while a defence witness, Fr Tony O'Riordan, gave evidence.
Mr Ferry said he had reserved his cross-examination of Fr O'Riordan until after the lunch break.
When Fr O'Riordan stepped from the witness box, Mr Long had greeted him warmly with the words: "I insist on buying you lunch."
Mr Long had then entered the judge's chambers and had joined Judge Mathews and High Court judge Mr Justice Patrick McCarthy, leaving the chambers after 20 minutes.
Mr Ferry said Mr Long had then shaken hands in the corridor with the plaintiff, Fr Dalton, and had wished him well before taking Fr O'Riordan down to lunch in the public restaurant.
Counsel told the court that Fr Geraghty, Fr Dalton and Fr O'Riordan had all been chaplains together at the James Connolly Memorial Hospital. Mr Long was a regular Mass-goer there.
He was very friendly with the priests and used all of them for advice and spiritual guidance.
Mr Ferry said that while he was not implying any impropriety on the part of the court, there could be, in the perception of an independent observer, a risk of objective bias in the case.
Costs
Judge Mathews said Mr Long had visited him in his chambers to wish him well during the long vacation, which begins today.
Mr Justice McCarthy had joined them but the case at hand had not been discussed.
He nevertheless had been convinced by Mr Ferry that there was a risk of a perception of objective bias.
He said he deeply regretted that an accidental, wholly unforeseeable and innocent incident should have led to the collapse of the case, but he had no alternative but to withdraw.
Counsel for Fr Geraghty opposed Mr Ferry's application and said the implication for legal costs was enormous.
SIC: II