Meriton Apartments Pty Limited v Industrial Court of New South Wales [2008] FCAFC 172 (13 October 2008)

Meriton Apartments Pty Limited v Industrial Court of New South Wales
[2008] FCAFC 172

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 419 OF 2008

BETWEEN:

MERITON APARTMENTS PTY LIMITED
First Applicant

OWNERS CORPORATION SP 56443
Second Applicant

AND:

INDUSTRIAL COURT OF NEW SOUTH WALES
First Respondent

JOHN EMMANUEL ROSE
Second Respondent

JUDGES:	BRANSON, GREENWOOD AND PERRAM JJ
DATE OF ORDER:	13 OCTOBER 2008
WHERE MADE:	SYDNEY

2. The applicants pay the second respondent’s costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 419 OF 2008

BETWEEN:

MERITON APARTMENTS PTY LIMITED
First Applicant

OWNERS CORPORATION SP 56443
Second Applicant

AND:

INDUSTRIAL COURT OF NEW SOUTH WALES
First Respondent

JOHN EMMANUEL ROSE
Second Respondent

JUDGES:	BRANSON, GREENWOOD AND PERRAM JJ
DATE:	13 OCTOBER 2008
PLACE:	SYDNEY

1 I have had the advantage of reading in draft the reasons for judgment of Perram and Greenwood JJ. I am grateful to their Honours for setting out the background to, and the history of, this proceeding.

2 The Full Court, exercising the original jurisdiction of the Court, heard together the applicants’ application for declaratory and other relief and the second respondent’s motion for an order setting aside that application. In the circumstances it is unnecessary to give separate consideration to the second respondent’s motion.

3 I agree with the conclusion of Greenwood and Perram JJ that the Industrial Court of New South Wales had jurisdiction to determine whether, on the proper construction of s 60(3) of the Bankruptcy Act 1966 (Cth) ("the Act"), Mr Rose’s trustee in bankruptcy was to be deemed to have abandoned the action brought by Mr Rose in the New South Wales Industrial Relations Commission ("the State proceeding"). I make the following observations in that regard.

4 The jurisdiction conferred on this Court and the Federal Magistrates Court by s 27 of the Act is a wide jurisdiction. It is all jurisdiction and all proceedings "under or by virtue of" the Act. Whatever the outer limits of that jurisdiction it is a jurisdiction which s 27 makes plain cannot be exercised by State courts.

5 Resolution of this proceeding does not require determination of the precise limits of "jurisdiction in bankruptcy" within the meaning of s 27 of the Act. For present purposes it is sufficient, in my view, to consider the following questions. First, the extent of the jurisdiction in bankruptcy conferred by s 60 of the Act. Secondly, whether it is open to the trustee, in purported exercise of the power given to the trustee by s 134(1)(a) of the Act, to assign the right to prosecute a proceeding initiated by the bankrupt before he or she became bankrupt, to the bankrupt ahead of his or her discharge from bankruptcy. Thirdly, assuming that the trustee may assign the right to prosecute a proceeding to the bankrupt in such circumstances, whether the effect of s 58(2) of the Act is to vest any interest gained by the bankrupt immediately back in the trustee. Fourthly, whether consideration by the Industrial Court of New South Wales of the extent of the powers of the trustee under s 134(1) involved it in exercising jurisdiction in bankruptcy. Finally, whether it is appropriate to make the orders sought by the applicants.

6 Section 60 of the Act is concerned with the stay of legal proceedings. It relevantly provides:

7 It can be seen that s 60 has two broad purposes. First, it empowers "the Court" to discharge certain orders and stay certain legal processes against the person or property of a debtor in respect of whom a petition has been presented. Secondly, it impacts directly on the status of actions commenced by a person who subsequently becomes bankrupt. Section 5(1) of the Act defines "the Court" to mean a court having jurisdiction in bankruptcy under the Act. As mentioned above, s 27 gives jurisdiction in bankruptcy to federal courts to the exclusion of other courts. It is therefore clear that a State court does not enjoy the powers given to "the Court" by s 60. For this reason a State court cannot discharge an order or stay legal process in reliance on s 60(1) of the Act.

8 However, s 60(2), (3) and (4) of the Act are not concerned to give powers to "the Court". They are intended to apply generally to litigation commenced by persons who subsequently become bankrupt. The subsections are binding on all Australian courts. The status of a proceeding commenced by a person who subsequently becomes bankrupt is a matter which must necessarily be addressed by the court in which the proceeding has been commenced. Nothing in s 27, or elsewhere in the Act, discloses an intention to deprive a State court of the power to determine the status of a proceeding before it. Whether or not a trustee has made an election in writing to prosecute or discontinue a proceeding is a mixed question of law and fact. Although the Act requires every court seized of an action commenced by a person who subsequently becomes a bankrupt to determine this question, the determination of the question does not involve the exercise of jurisdiction "under or by virtue of [the] Act". It relevantly involves mere recognition of the binding legal effect of the Act. Further, every court has the implied or inherent jurisdiction to determine the extent of its jurisdiction and whether there is an impediment in the way of its hearing and determining a proceeding before it.

9 Section 134(1) of the Act gives rise to issues of greater complexity. It identifies powers that are exercisable by a trustee at his or her discretion. Relevantly s 134(1)(a) authorises a trustee to sell all or any part of the property of a bankrupt.

10 The parties agreed, for the purpose of this proceeding only, that the document entitled "Deed of Assignment" prepared on or about 20 December 2005 would have been effective to assign the right, title and interest in the State proceeding from the trustee to Mr Rose save for any material provision of the Act which may negate the effectiveness of the assignment. The matter was argued, appropriately in my view, on the basis that, if valid, the assignment effected a sale of property of the bankrupt.

11 In my view, it is clear that it would not involve the exercise of jurisdiction "in bankruptcy" for a court to recognise that a trustee has power to sell property of the bankrupt. For example, speaking generally, a person who had purchased property from a trustee could place reliance in any court on s 134(1)(a) to demonstrate his or her ownership of that property. It is suggested, however, that the position is different where the person is an undischarged bankrupt and the property is, or includes, the right to prosecute a proceeding commenced by the bankrupt before he or she became bankrupt. This is said to be because s 134(1)(a) of the Act does not authorise the sale by a trustee to an undischarged bankrupt of the right to prosecute an action.

12 I have found the question of whether s 134(1)(a) of the Act authorises the trustee to sell to the bankrupt, ahead of his or her discharge from bankruptcy, property of the bankrupt generally, or the right to prosecute a legal proceeding in particular, vexing.

13 I agree with Greenwood and Perram JJ that the Act recognises that classes of property other than those identified in s 116(2) may fall outside the classes of property of the bankrupt which vest in the bankrupt’s trustee for the benefit of creditors (see s 58 and s 116(1)). Moreover each of s 58 and s 116(1) operates "[s]ubject to [the] Act". For these reasons, if the power given to the trustee by s 134(1)(a) to sell all or any of the property of the bankrupt is properly understood to authorise a sale of property to the bankrupt, before discharge, neither s 58 nor s 116(1) would, in my view, operate to re-vest the property so sold in the bankrupt’s trustee for the benefit of the bankrupt’s creditors.

14 Section 134(1) gives powers to the trustee which are, generally speaking, to be exercised in the best interests of the bankrupt’s creditors. It is significant, it seems to me, that s 134(1) is expressed in unqualified terms. It also seems to me to be important that s 178(1) of the Act allows any person affected by an act, omission or decision of the trustee to apply to "the Court" and authorises "the Court" to make "such order in the matter as it thinks just and equitable". That is, there is available to any person adversely affected by a decision of a trustee to sell property to the bankrupt a readily available means of obtaining review of that decision.

15 Greenwood J has observed, correct as I respectfully suggest, that s 60 of the Act discloses two immediate statutory purposes. The first is to ensure that estate property is not deployed in the conduct of proceedings by the bankrupt and thereby potentially dissipated. The second is to ensure that defendants are not put at further or new risk of irrecoverable costs because the plaintiff has become bankrupt. It is not, as it seems to me, a purpose of the Act to bring to an end unmeritorious actions commenced by persons who later become bankrupt. Nonetheless it would clearly be appropriate for a trustee to abandon a plainly unmeritorious action – even over the objection of a bankrupt willing to purchase the right to prosecute that action. After considerable hesitation I have concluded that neither of the statutory purposes identified by Greenwood J requires that s134(1)(a) be read subject to a limitation not found in the language of the Act. Of course, were it shown that a trustee had acted in disregard of either of these statutory purposes, the trustee’s decision could, and most likely would, be reversed or set aside on an application under s 178. The assignment to the bankrupt of the right to prosecute a proceeding can be a means of ensuring that the bankrupt’s estate is not deployed and potentially dissipated in the conduct of the proceeding. Additionally, the trustee may be satisfied that an assignment to the bankrupt will not put the defendant at further or new risk of incurring unrecoverable costs. For example, a litigation funder willing to guarantee payment of costs orders made in favour of the defendant may have been identified by the bankrupt. Alternatively the proceeding may be in a "costs free" jurisdiction.

16 It also seems to me to be important that, unless the intention of the legislature is clear, an implication not be read into the Act which might impact, possibly seriously, on a bankrupt’s rights without providing any commensurate benefit to his or her creditors. It is not difficult to envisage an action commenced by a bankrupt before his or her bankruptcy which, while not falling within s 60(4) and not being of obvious financial value to the creditors, is of a kind that successful prosecution of it could be of importance to the bankrupt’s reputation or to some other matter of proper interest to the bankrupt.

17 I conclude that the plain language of s 134(1)(a) should prevail. It follows that I do not find in the Act an implied prohibition against a trustee assigning the right to prosecute an action commenced by the bankrupt before he or she became bankrupt to the bankrupt ahead of his or her discharge from bankruptcy.

18 I further conclude that the recognition by the Industrial Court of New South Wales of the trustee’s entitlement to assign to Mr Rose the right to prosecute the State proceeding did not involve it in the exercise of jurisdiction in bankruptcy. This is because, as mentioned above, it is not to exercise jurisdiction under or by virtue of the Act for a court simply to recognise the effect of the Act. Indeed it is necessary for a court to be able to determine the standing of parties before it.

19 My above conclusion should not be understood as suggesting that the Industrial Court of New South Wales has jurisdiction to exercise any control over a trustee in bankruptcy or otherwise to review a trustee’s conduct. The authorities disclose that a sale, or purported sale, by a trustee of property of a bankrupt is an act which falls within the purview of s 178. For example, in Willoughby v Official Trustee in Bankruptcy (WA) [2000] FCA 757; (2000) 102 FCR 261 bankrupts applied under s 178 for a determination that their trustee’s decision to transfer to, and vest a legal action and underlying causes of action in, Lawcover was invalid. The competence of their application was challenged. At 265 the Full Court observed:

20 A court could be invited to determine whether or not a trustee had acted improperly in the sense identified in Willoughby v Official Trustee in Bankruptcy (WA) without an application under s 178 formally being made. Having regard to the language of s 27 of the Act, I conclude that a State court would lack the jurisdiction to accept such an invitation. This conclusion is consistent with the intention of the legislature as revealed by the language of the Act, and in particular Part VIII Division 4, that control over trustees in bankruptcy is to be exercised by this Court and the Federal Magistrates Court. However, in my view, no control over Mr Rose’s trustee was involved in the recognition by the Industrial Court of New South Wales of his power to assign to Mr Rose the right to prosecute the State proceeding.

22 As I have reached the above conclusion for reasons not shared by the other members of the Court, it is appropriate that I record that, even had I concluded that the decision of the Industrial Court of New South Wales was affected by jurisdictional error, I would have denied the applicants the relief claimed by them. The following paragraphs therefore assume, contrary to my actual conclusion, a wrongful exercise of jurisdiction in bankruptcy by the Industrial Court of New South Wales in considering the issue of the validity of the assignment to Mr Rose of the right to prosecute the State proceeding.

23 The application claims a declaration that the State proceeding is, and at all times since 30 January 2006 has been, deemed to be abandoned by operation of the Act and in particular s 60 thereof. As indicated above, I agree with Greenwood and Perram JJ that it was within the competence of the Industrial Court of New South Wales to determine whether or not the trustee had, as a matter of fact, made the election for which s60(3) provides.

24 The application further seeks orders in the nature of certiorari quashing certain orders made by the Full Bench of the Industrial Court of New South Wales; an order in the nature of prohibition restraining the Industrial Court of New South Wales from further hearing the State proceeding; and an order restraining Mr Rose from taking any further steps in the State proceeding other than the filing of a notice of discontinuance. Each of these heads of relief is discretionary: Re Refugee Review Tribunal; Ex parte Aala [2000] HCA 57; (2000) 204 CLR 82 esp per Gaudron and Gummow JJ, with whom in this regard Gleeson CJ and Hayne J agreed, at [43]-[58], Kirby at [145]-[150] and Callinan J at [217]-[218]; Ainsworth v Criminal Justice Commission [1992] HCA 10; (1992) 175 CLR 564 per Mason CJ, Dawson, Toohey and Gaudron JJ at 581-582; s 21 and s 23 of the Federal Court of Australia Act 1976 (Cth). The claim for them is based, at least in substantial part, on a challenge to the correctness of the conclusion of the Full Bench of the Industrial Court of New South Wales concerning the validity of the purported sale by the trustee to Mr Rose, while he remained an undischarged bankrupt, of the right to prosecute the State proceeding.

25 It is not possible to state exhaustively the circumstances in which relief should be denied to an applicant in the exercise of the Court’s discretion. Nonetheless, in Re Refugee Tribunal; Ex parte Aala Gaudron and Gummow JJ at [56] and [57] found guidance in the following two observations when considering whether an order absolute for prohibition should issue to an administrative tribunal. The first observation comes from R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Ltd [1949] HCA 33; (1949) 78 CLR 389 at 400 where Latham CJ, Rich, Dixon, McTiernan and Webb JJ in a mandamus case said:

The second observation was made by Lord Denning MR in F Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry [1975] AC 295 at 320 where his Lordship said:

I conclude that that the guidance provided by the above observations is also apt in this case.

26 It is now nearly three and a half years since Mr Rose filed his originating process in the State proceeding. More importantly, more than three years have passed since he became bankrupt and more than two and a half years have passed since, as the applicants claim, the State proceeding was deemed to have been abandoned. Yet it was not until 27 March 2008 that the applicants sought relief from this Court by filing their application in this proceeding. They did not at the appropriate time seek review under s 178 of the Act of the purported decision of the trustee to assign to Mr Rose the right to prosecute the State proceeding. Nor did they at any earlier time seek declaratory, injunctive or other relief from this Court, or the Federal Magistrates Court, in reliance on s 27 of the Act or s 39B(1A)(c) of the Judiciary Act 1903 (Cth).

27 I interpolate that it is theoretically still open to the applicants to seek an extension of time within which to apply to "the Court" under s 178 in respect of the act of the trustee by which he purportedly assigned to Mr Rose, while he remained an undischarged bankrupt, the right to prosecute the State proceedings. I say nothing as to the likelihood of success of an application for an extension of time other than that the long delay in approaching the Court is likely to weigh heavily against the grant of any extension.

28 It was the applicants who moved the Industrial Court of New South Wales for orders that the proceedings in that court be dismissed by reason of the operation of s 60(3) of the Act. In doing so they did not, as has been conceded, draw the court’s attention to s 27 of the Act. Nor did they on appeal draw the attention of the Full Bench to that section of the Act.

29 In the meantime, as mentioned above, Mr Rose has been discharged from bankruptcy by operation of s 149(3) of the Act. The hostility to a bankrupt’s conduct of a legal proceeding which the other members of this Full Court have found to be reflected in s 60 of the Act is now of limited relevance.

30 The Industrial Court of New South Wales is a superior court of record of equivalent status to the Supreme Court of New South Wales. Its orders therefore stand and are to be observed until set aside – even where it is later authoritatively determined that the orders should not have been made or were made without jurisdiction: Siminton v Australian Prudential Regulation Authority [2006] FCAFC 118; (2006) 152 FCR 129 at [27]- [30].

31 I do not consider it necessary in this case to decide whether this Court has the power to set aside or vary orders made by the Industrial Court of New South Wales. As "a matter of common sense, practical convenience and federal comity" (see Jarrett v Seymour (1993) 46 FCR 521 at 554 cited in Second Life Décor Pty Limited v Comptroller-General of Customs [1994] FCA 1273; (1994) 53 FCR 78 at 85) supervision of that court, including by way of setting aside orders made in excess of jurisdiction, should ordinarily be exercised by the Court of Appeal of New South Wales or the High Court. If the Full Bench of the Industrial Court of New South Wales was exercising federal jurisdiction when it allowed the appeal from the judgment of Marks J, the High Court may grant leave to appeal from its decision whatever the intended ambit of the privative clause contained in s 179 of the Industrial Relations Act 1996 (NSW): s 73(ii) of the Constitution and s 39(2)(c) of the Judiciary Act 1903 (Cth). It may be that, as a matter of construction, s 179 does not render the decision of the Full Bench immune from review by the Court of Appeal of New South Wales as the decision could be characterised as one on an issue of the jurisdiction of the Commission: see s 179(4). However, as we did not hear full argument on this question, I express no concluded view on it. I am satisfied that avenues for seeking relief other than by way of the present application to this Court are available to the applicants.

32 Having regard additionally to the applicants’ unwarranted delay in approaching this Court (or alternatively the Federal Magistrates Court), their failure to join the trustee, their acquiescence in the exercise by the Industrial Court of New South Wales of jurisdiction in bankruptcy and the subsequent discharge of Mr Rose from bankruptcy, I conclude that it is appropriate to withhold relief from the applicants.

33 The order that I would make in this matter is that the application be dismissed with costs.

I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD419/2008

BETWEEN:

MERITON APARTMENTS PTY LIMITED
First Applicant

OWNERS CORPORATION SP 56443
Second Applicant

AND:

INDUSTRIAL COURT OF NEW SOUTH WALES
First Respondent

JOHN EMMANUEL ROSE
Second Respondent

JUDGES:	BRANSON, GREENWOOD AND PERRAM JJ
DATE:	13 OCTOBER 2008
PLACE:	SYDNEY

34 By this application, the applicants Meriton Apartments Pty Limited ("Meriton") and Owners Corporation SP56443 ("Owners") seek a declaration that proceedings brought by the second respondent, Mr Rose (who I will describe without disrespect as "Rose"), against them before the Industrial Court of New South Wales in reliance upon s 106 of the Industrial Relations Act 1996 (NSW) (the "IR Act") "are and at all material times since 30 January 2006 have been deemed to be abandoned by operation of the Bankruptcy Act 1966 (Cth) and in particular s 60 of that Act".

35 The applicants seek orders quashing final orders of the Full Bench of the Industrial Relations Commission in Court Session (the "Industrial Court") made in the disposition of an appeal from orders of a judicial member in the resolution of notices of motion by Meriton and Owners (as respondents before the Industrial Court) seeking dismissal of the proceedings and a notice of motion by Rose seeking leave to amend those proceedings.

36 By Rose’s application before the Industrial Court filed on 27 April 2005 he made these contentions. Between February and March 1999, Rose purchased 10 units in an apartment complex called "Regis Towers" developed by Meriton in central Sydney. On 20 April 1999, a company in which Rose was a director and shareholder, Cesscut, later known as Regis Towers Real Estate Pty Limited ("RTRE"), in reliance upon representations by Meriton, entered into a deed with Meriton. By that deed, Meriton agreed to procure a Caretaker Agreement between RTRE and the strata owner’s entity for the complex, namely, Owners. Under that agreement, RTRE would provide caretaker services to Owners. Rose and others would perform work in an industry in New South Wales pursuant to that agreement. RTRE paid Meriton $1,750,000 to procure the Caretaker Agreement and $1,225,000 of that sum was financed by a loan from Meriton. The Caretaker Agreement was signed on 6 August 1999.

37 Rose says that contrary to Meriton’s representations, the complex did not comply with the relevant building code and thus the remuneration payable by Owners under the Caretaker Agreement was not sufficient to enable RTRE to discharge its caretaker management obligations in respect of the complex. As a result, RTRE could not service its debt obligations and on 17 September 2004 a voluntary administrator was appointed to RTRE. A compulsory administrator was appointed to the Regis Towers Strata Scheme by the Consumer, Trader and Tenancy Tribunal on 27 January 2003.

38 On 27 April 2004, RTRE terminated the deed with Meriton and 12 months later, RTRE commenced proceedings before the Industrial Court against both Meriton and Owners contending that the contract (deed) between RTRE and Meriton and the contract or "collateral arrangement" between RTRE and Owners was unfair, harsh or unconscionable or against the public interest. The expression of that unfairness was said to reside predominantly in the inadequacy of the mechanisms for review of RTRE’s remuneration under the Caretaker Agreement and other conduct.

39 Rose seeks a declaration that both contracts are unfair, harsh or unconscionable or against the public interest; an order declaring the Meriton contract wholly or partly void or varied; and an order varying the contract between RTRE and Owners to include terms which address the perceived inadequacy in the remuneration review mechanisms under the Caretaker Agreement.

40 By such orders Rose seeks to insert into the Caretaker Agreement terms that prior to commencement of caretaker management services Owners is to consult with RTRE for the purpose of setting remuneration payable under the agreement; upon each anniversary of the agreement, the remuneration will be mutually agreed; if RTRE expresses concerns about the adequacy of the caretaker budget, a review process will be implemented; and if agreement cannot be reached in that review, an expert will be appointed to decide an appropriate level of remuneration payable under the agreement.

41 Rose also seeks an order that Meriton pay him an amount of $525,000 being the sum he personally paid Meriton in procuring the Caretaker Agreement plus interest and an order that Meriton and Owners pay him $10 million being the loss he says he suffered by reason of the unfairness of the contracts over the period August 1999 to April 2005.

42 The Industrial Court of New South Wales is by s 151A of the IR Act the name of the Industrial Relations Commission in Court Session. By s 151 of the IR Act, the Commission in Court Session is the Commission constituted by a judicial member or members only for the purposes of exercising functions conferred on the Commission in Court Session by or under the IR Act or any other Act or law. The Industrial Court is established by the IR Act as a superior court of record (s 152(1)). For the purposes of Part 9 of the Constitution Act 1902 (NSW) the Industrial Court is a court of equivalent status to the Supreme Court of New South Wales (s 152(2)). By s 153 of the IR Act the Industrial Court has jurisdiction conferred upon it in proceedings under Part 9 of Ch 2 of the IR Act. Chapter 2 deals with many aspects of employment and is comprised by 11 parts. Part 9 addresses "Unfair Contracts". By s 105 a contract for the purposes of Part 9 means any contract or arrangement or any related condition or collateral arrangement but does not include an industrial instrument. An "unfair contract" means, among other things, a contract that is unfair, harsh or unconscionable or one that is against the public interest (s 105).

43 By s 106 of the IR Act, the Commission is invested with a power exercisable by the Commission in Court Session to declare contracts void or varied. The scope of the Commission’s powers under s 106 is very broad. The Commission may by order declare any contract whereby a person performs work in an industry wholly or partly void if the Commission finds that the contract is an unfair contract (s 106(1)). The contract may be found to be unfair at the time it was entered into or because it subsequently became unfair by reason of any conduct of the parties, any variation of the contract or for any other reason (s 106(2)). A contract comprised of a related condition or collateral arrangement may be declared void or varied even though it does not relate to the performance of work by a person in an industry so long as it is related or collateral to a contract by which a person performs work in an industry and the performance of that work is a significant purpose of the contractual arrangements (s 106(2A)). The contract may be declared void or varied in whole or in part from the commencement of the contract or from some other time (s 106(3)). In making an order under s 106, the Commission may make an order for the payment of money in connection with any contract declared wholly or partly void or varied, as the Commission considers just in all the circumstances (s 106(5)) and in making orders under the section the Commission must have regard to whether the applicant has sought to mitigate loss (s 106(6)). By s 108(a), an order may be made under s 106 on the application of any party to the contract or any person who but for the making of an order, would be a party to the contract (s 108(b)), among other categories of applicants. By s 153(1)(b), the Commission in Court Session is invested with jurisdiction in proceedings for declarations of right under s 154 of the IR Act in relation to a matter in which the Commission (however constituted) has jurisdiction.

44 The Commission in Court Session is invested with jurisdiction in proceedings on an appeal from a member of the Commission exercising the functions of the Commission in Court Session (s 153(1)(i)). That jurisdiction may only be exercised by a Full Bench of the Commission in Court Session which by s 156(3) must be comprised only of judicial members.

45 Rose, by filing a summons for relief under s 106 thus sought to invoke the jurisdiction of the Commission in Court Session in a proceeding seeking orders under s 106 in respect of a contract between RTRE and Meriton and a contract or arrangement between RTRE and Owners, each said to be an unfair contract as understood by s 105 of the IR Act for the reasons earlier identified. By s 108B(1), an application for an order under Div 2 of Part 9 in relation to a contract that has been terminated must be made not later than 12 months after the termination of the contract. Subject to exceptional circumstances, the Commission does not have jurisdiction to extend the time for making an application under s 108 (s 108B(2) and (3)).

46 By s 179(1) of the IR Act, a decision of the Commission however constituted is final and may not be appealed against, reviewed, quashed or called into question by any court or tribunal.

47 On 21 June 2005, Rose appointed Robert Whitton as trustee of his estate upon the presentation of a debtor’s petition. On either 20 or 21 June 2005, Rose’s solicitor (Adrian Barwick) wrote to Meriton advising of Rose’s bankruptcy and said that he expected to receive instructions from the trustee to act on the trustee’s behalf in the s 106 proceeding. (AB 296)

48 On 8 December 2005, Rose’s solicitor wrote to Meriton to "confirm to you that we have instructions from the Trustee in Bankruptcy that the matter [the s 106 proceeding] will be proceeding". The letter advised that: "A formal arrangement between the Trustee in Bankruptcy and [Rose] (a bankrupt) and consequently a Deed of Assignment has been forwarded to the Trustee in Bankruptcy for execution".(AB 260) A letter in the same terms was sent to the solicitor for Owners.(AB 261)

49 On 20 December 2005, Rose and Whitton entered into a Deed of Assignment signed only by Whitton (AB 136). The deed recites the s 106 proceedings commenced on 27 April 2005 called "the action", the events of bankruptcy and the agreement of the trustee to assign the action to Rose in accordance with the terms contained in the deed. The only operative clause is in these terms:

50 Rose undertook to keep the trustee reasonably informed of any progress in the action and to furnish a report to the trustee as may be requested from time to time. On 4 January 2006, the solicitors for Owners wrote to the trustee noting the s 106 proceeding, Rose’s bankruptcy commencing on 21 June 2005 and his likely discharge on 22 June 2008 and the terms of ss 60(2) and (3) of the Bankruptcy Act (AB 154). The letter noted the statutory stay of the s 106 proceeding effected by s 60(2) of the Bankruptcy Act "until the trustee makes an election in writing to prosecute or discontinue the action". The solicitors asked the trustee to treat their letter as "notice of the action for the purposes of s 60" so as to seek to bring about the result that if after 28 days the trustee failed to make "such an election" (i.e. the election contemplated by s 60(2)) the trustee would then be deemed to have abandoned the action by operation of s 60(3).

51 On 7 January 2006, the trustee wrote to the solicitors for Owners (AB 155) and said:

52 On 14 February 2006, Owners filed a motion in the s 106 proceedings seeking an order that the action be dismissed or stayed; in the alternative, an order for security for costs; and costs of the motion as against Rose and his trustee (AB 8). Owners by its notice of motion contended that an assignment to the bankrupt during the currency of the bankruptcy is beyond the power of the trustee and therefore void. The "purported" assignment was said not to amount to an election as required by s 60 and thus the action was deemed abandoned.

53 On 23 February 2006, Meriton filed a notice of motion in the proceeding seeking an order that the action be struck out on the ground that Rose did not have standing under s 108 of the IR Act to apply for any relief under s 106 on the footing that Rose was not a party to the contract as required by s 108(a) of the IR Act nor an applicant within s 108(b).(AB 11) Secondly, Meriton sought an order that the action be dismissed on the footing that the trustee had failed to make an election within 28 days of the letter of 4 January 2006 and thus the trustee was deemed to have abandoned the action by operation of s 60(3).

54 On 2 March 2006, Owners filed a further motion seeking an order that the action be struck out on the s 108 point.(AB 15) On 6 September 2006, Rose filed a notice of motion seeking leave to amend his summons for relief under s 106 presumably so as to answer an apprehended weakness on the s 108 point.(AB 18) By the proposed amended summons, Rose sought an order making him a party to the contract between RTRE and Meriton and the Caretaker Agreement between RTRE and Owners.(AB 21)

55 Those four notices of motion framed the immediate controversy on which Meriton, Owners and Rose, the same parties now before this Court, joined issue before the Commission in Court Session. In order to appreciate the scope of the controversy before that Court, it is necessary to set out briefly the issues dealt with by Marks J and Full Bench. In determining those motions before the primary judge, Marks J reached the following conclusions (Rose v Meriton & Anor [2006] NSWIRComm 298) and for present purposes, I will leave aside, his Honour’s analysis of the authorities on each of the various questions.

56 The exercise of a right to apply for orders under s 106 in relation to a contract that might be rendered void or varied on an unfairness ground is a future contingent interest arising out of or incidental to real or personal property and thus "property" for the purposes of the Bankruptcy Act. By s 58(1)(a) of the Bankruptcy Act, "the property of the bankrupt" vested forthwith in the trustee upon Rose’s bankruptcy. The phrase "the property of the bankrupt" means property "divisible among bankrupt’s creditors" including any rights and powers in relation to that property that would have been exercisable by Rose if he had not become a bankrupt (s 5).

57 By s 116(1) of the Bankruptcy Act, all property vested in Rose at the commencement of the bankruptcy is property divisible amongst his creditors unless exempt by s 116(2). By s 116(2)(g)(i) of the Bankruptcy Act, any right in Rose to recover damages or compensation for "personal injury or wrong" done to him (or damages or compensation recovered by him as a result of such a claim) is not property divisible amongst Rose’s creditors within s 116(1). Although an action commenced by a person who subsequently becomes a bankrupt is upon that event stayed until the trustee makes election in writing to prosecute or discontinue the action, Rose was entitled to continue in his own name any action in respect of any personal injury or wrong done to him. However, the s 106 action framed in terms of relief directed to the remuneration of Rose pursuant to the two contracts did not give rise to an action for personal injury or wrong done to the bankrupt recognising that "the approach taken is to confine ... s 116(2)(g)(i) and s 60(4) to claims strictly involving personal injury or personal wrong such as defamation" ([21] and [22]).

58 The primary judge then dealt with whether the trustee had made an election in writing to prosecute or discontinue the s 106 action. That question was said to involve "a construction of the terms of the letter from the trustee" (i.e. the letter of 7 January 2006) [23] which did not "specifically state that the trustee had elected to prosecute the action" [23]. The primary judge considered that it would be inconsistent with a determination of the trustee not to proceed with the action for the trustee to make a "purported assignment" to Rose. Thus, by implication, the trustee must have first elected to prosecute the action and then elected to assign it to another (in this case the bankrupt himself). Although the source of the election on that view is to be found in a decision necessarily integral to the Deed of Assignment of 20 December 2005, Marks J turned to the trustee’s letter of 7 January 2006 and said, "As a matter of construction, I would read the letter, therefore, as electing to prosecute the action" [23] and thus the source of the election.

59 Although apparently inconsistent positions, Marks J identified the task as one of "endeavouring to ascertain the intention of the trustee" [emphasis added] not only from "the language used" but from the "course of action proposed" in determining whether there has been an election to prosecute the proceeding [23]. Marks J seemed therefore to look to the letter as evidence of an election made by reason of the course of action earlier adopted to assign the action to Rose which, as a matter of consistency, necessarily evidenced the trustee’s intention to prosecute the action and thus an election.

60 However at [28], the primary judge found there was on a prima facie basis "an election constituted by the trustee’s letter of 7 January 2006 [emphasis added]. At [51], Marks J put the same matter this way, "I have previously expressed the view that on a prima facie basis that letter constituted an election albeit one which arguably was made contemporaneously with a reference to the purported assignment to [Rose]". His Honour considered that such a prima facie election would be invalid if the trustee had put it out of his power to make an election on 7 December 2006 by assigning the action to Rose on 20 December 2005. If the assignment however was invalid, the election constituted by the letter would operate.

61 His Honour considered that although s 134 of the Bankruptcy Act confers a power on the trustee to sell all or any part of the property of the bankrupt (s 134(1)(a)), authority supported the proposition that a trustee cannot validly assign property of the bankrupt to the bankrupt during the currency of the bankruptcy as re-vesting the "property" (i.e. the right to seek relief under s 106 and the action as an expression of that right) in the bankrupt during the currency of the bankruptcy would defeat the limitations the Bankruptcy Act places upon a bankrupt to deal with property and pursue proceedings against others.

62 The primary judge noted a further issue arising out of such an assignment that s 58(1)(b) of the Bankruptcy Act vests in the trustee after-acquired property of the bankrupt as soon as it is "acquired by or devolves upon the bankrupt" and although an assignment under s 134(1)(a) to a bankrupt after discharge from bankruptcy is on authority valid, an assignment during the bankruptcy would result in a circularity of vesting under s 51(1)(a), assignment to the bankrupt under s 134(1)(a) and re-vesting of the after-acquired property in the trustee under s 58(1)(b).

63 As in his Honour’s view the assignment failed as a matter of law, leaving the action vested in the trustee by operation of s 58(1)(a), his Honour then further considered the effect of the letter of 7 January 2006. At [52], his Honour thought the letter equally capable of bearing two possible constructions. First, an election to prosecute the action "having in mind the assignment to [Rose]" and secondly, "as representing solely an intention to assign the proceeding to [Rose] with no concurrent intention that they be continued to be prosecuted by the trustee". At [53], his Honour said this:

64 Since the letter did not contain a valid election by the trustee to prosecute the action, the trustee was deemed to have abandoned the action 28 days after the notice letter of 4 January 2006 from the solicitors for Owners to the trustee.

65 As to the status of the s 106 proceedings, his Honour considered that since Rose was not a party to either contract Rose had no standing under s 108(a) to apply for orders under s 106 nor any standing under s 108(b). The proceeding was found to be a nullity for that reason and also for the reason that Rose had no standing as an undischarged bankrupt to continue the proceeding in his own name as an assignee of the chose of action. Because the proceeding was a nullity there was nothing to amend. Accordingly, Marks J made orders dismissing Rose’s application for leave to amend the summons for relief and dismissed the proceeding as one abandoned by the trustee.

67 The Full Bench heard argument on the leave application and the issues joined on the proposed appeal. Those issues were whether Rose had standing under s 108 of the IR Act to apply for orders under s 106 and secondly, a cluster of three bankruptcy issues identified as (a) whether the s 106 proceeding is an action falling within s 60 of the Bankruptcy Act; was the trustee required to make an election under s 60; is the proceeding one for personal injury or wrong done to Rose within s 60(4); (b) if s 60 operates, did the trustee make a valid election; and (c) what is the relevance of the deed of assignment and what is the effectiveness of the assignment in law for the purposes of determining the validity of the election (Rose v Meriton & Anor [2007] NSWIRComm 264 per Wright J (President), Walton J (Vice President) and Boland J) at [18].

68 Leaving aside the analysis of the authorities, the Full Bench reached these conclusions.

69 Although not named as a contracting party with either Meriton or Owners in either agreement, Rose is properly characterised as "a party to the contract" for the purposes of s 108(a) because, taking the evidence at its highest, he is a party to an "arrangement" with each corporation to personally perform the work of caretaker to be provided by RTRE and further, he was closely associated with the execution of the contracts as principal director and shareholder of RTRE. In addition, contract means any contract or arrangement for the purposes of ss 105 and 106 of the IR Act. Each motion to strike out Rose’s proceeding on the s 108 point was dismissed.

70 As to the bankruptcy issues, the Full Bench reached these conclusions. The right to apply under s 106 is "property". It vested in the trustee upon Rose’s bankruptcy. It is property divisible amongst the creditors. The s 106 proceeding is not one for personal injury or wrong done to Rose. Thus, the action is stayed until the trustee makes an election or deemed abandonment arises should no election be made in the circumstances of s 60(3) of the Bankruptcy Act [55].

71 The trustee made an election by the letter of 7 January 2006 by "indicating that an assignment had been made to [Rose]". An election may be valid although an assignment is made to a third party before or after the election [58] and [59]. The validity of an election depends upon the trustee indicating in writing "even implicitly" an intention to prosecute or discontinue the relevant chose in action [90]. Considerations of statutory construction or policy are not grounds for prohibiting an assignment of a chose in action to a bankrupt whether discharged or undischarged [74]. The s 134 power conferred on the trustee to sell any part of the property of the bankrupt should be interpreted broadly [75]. Section 58 effecting a vesting in the trustee of after-acquired property of the bankrupt as soon as it is acquired by or devolves upon the bankrupt must be read subject to s 134 and thus s 58 does not refer, as a matter of interpretation, to any re-vesting in the trustee of after-acquired property of the bankrupt acquired by assignment from the trustee [76].

72 A consideration of the intersection between s 134 and s 58 of the Bankruptcy Act does not suggest any intention to preclude an assignment of a right to bring proceedings, to an undischarged bankrupt [79]. Section 134 contains other powers that might benefit the bankrupt if exercised by the trustee such as ss 134(1)(m) or (1)(ma) [81]. The distinction between an assignment to an undischarged bankrupt and a discharged bankrupt is not a relevant distinction in principle, going to the validity of the assignment.

73 As to the efficacy of the election, any deficiency in the assignment will not render the election invalid [91]. The act of validly assigning the action to Rose on 20 December 2005 did not result in the trustee having no interest or right to make a subsequent election on 7 January 2006, [93] and [94]. The election constituted by the 7 January 2006 letter indicated a clear intention that the proceeding would be continued albeit by the bankrupt rather than the trustee personally. Thus, the assignment to the bankrupt was effective and the election by the letter of 7 January 2006 was valid. The power to assign is not constrained by s 58(1)(b), [95] and [96]. The Full Bench dismissed the notices of motion of Meriton and Owners. Since Rose was found to have standing under s 108, his notice of motion seeking leave to amend to be joined as a party to each contract was dismissed.

74 Meriton and Owners now seek a declaration in the original jurisdiction of this Court binding Rose and the Industrial Court in terms that the s 106 proceedings have since 30 January 2006 been deemed to be abandoned by operation of the Bankruptcy Act and in particular, s 60 of that Act. They seek orders of this Court that the following orders of the Full Bench of the Industrial Court made on 30 November 2007 be quashed and set aside: Order 1 granting Rose leave to appeal; Order 3 by which the Full Bench quashed the orders of Marks J; Order 5 dismissing Meriton’s motion of 23 February 2006 to strike out the proceeding on the s 108 point and on the further ground that the trustee had failed to elect within 28 days of 4 January 2006; and Order 6 dismissing the motion of Owners of 2 March 2006 to strike out the proceedings on the s 108 point. Meriton and Owners seek orders that all four costs orders made by the Full Bench on 14 February 2008 be quashed and set aside. They seek an injunction or the grant of prohibition preventing the Industrial Court from continuing to hear the s 106 proceedings; an injunction restraining Rose from taking any further steps other than the filing of a notice of discontinuance; and an order that Rose file a notice of discontinuance.

75 Meriton and Owners seek to re-agitate in this Court’s original jurisdiction the controversy framed by the bankruptcy issues raised by the motions before the Industrial Court. They seek to do so in the exercise of the Court’s jurisdiction arising under s 39B(1A)(c) of the Judiciary Act 1903 (Cth) having regard to ss 71, 76(ii) and 77(i) of the Constitution and s 21 of the Federal Court of Australia Act 1976, on the footing that the Federal Court proceeding raises a matter arising under the Bankruptcy Act as the subject matter of the proceeding requires the determination of whether by operation of s 60(3) of the Bankruptcy Act the s 106 proceeding in the Industrial Court was abandoned. Moreover, s 60 operates, it is said, not merely as an answer to Rose’s claim in the Industrial Court but as a statutory immunity from suit. It follows, it is said, that if the Industrial Court albeit a superior court of record, falls into error by concluding that s 60(3) does not effect a stay of the s 106 proceedings when the proper operation of s 60(3) is that it does so, the error is jurisdictional error. Although the Industrial Court is not an inferior court, it is a court of limited jurisdiction. Thus, it follows, it is said that consistent with the underlying principles identified in Craig v The State of South Australia [1995] HCA 58; (1995) 184 CLR 163 at 171 per the Court, an election by a court of limited jurisdiction to embark upon the hearing and determination of a proceeding from which the respondents in that proceeding are immune by operation of a law of the Commonwealth, is a jurisdictional error.

76 On 10 April 2008, Rose filed a notice of motion seeking an order that the originating process in this Court be set aside. On 17 June 2006, the Court made a number of directions and noted by consent the agreement of the parties as to the issues arising in the proceeding and on the notice of motion. On the applicants’ case, the issues are these.

77 On the respondent’s case (i.e. Rose’s case), 15 issues are raised. Six of those issues are threshold questions: Does the Federal Court of Australia have jurisdiction in this proceeding to make the orders sought? (Issue (e)); Does the Court have jurisdiction to quash orders of the Full Bench of the Industrial Court or otherwise interfere with those orders? (Issue (f)); Is the effectiveness of the trustee’s assignment as raised by the applicants a jurisdictional issue? (Issue (g)); Should orders be made on the motion, dismissing the Federal Court proceeding for want of jurisdiction? (Issue (h)); Does s 179 of the IR Act limit the jurisdiction of the Federal Court under s 39B of the Judiciary Act having regard to s 118 of the Constitution? (Issue (i)); Is s 39B to be read down or is s 39B invalid by reason of s 179 of the IR Act and s 118 of the Constitution? (Issue (j)).

78 Six of the remaining nine issues go to the application and effect, in the circumstances of the case, of provisions of the Bankruptcy Act namely, s 60(4) (Issue (k)), ss 58 and 134 (Issue (l)); ss 58 generally and s 58(6) (Issue (m)); s 134 (Issue (n)); s 60(2) (Issue (o)); and s 60(3) (Issue (p)). The next two issues go to the effect of Rose’s discharge from bankruptcy upon the making of orders sought by the applicants and does s 153(6) of the Bankruptcy Act and the discharge of Rose validate any defect in the assignment arising under s 60(2) or (3). The final issue raised by the respondent within the agreed set of issues is whether any discretionary ground arises for refusing the orders sought by the applicants if they are otherwise entitled to relief.

79 Pursuant to s 20(1A) of the Federal Court of Australia Act 1976, the Chief Justice made a direction that the original jurisdiction of the Court in this matter be exercised by a Full Court.

80 During the course of the hearing, the Court invited the parties to make supplementary submissions as to whether the Industrial Court was deprived of jurisdiction by operation of s 27 of the Bankruptcy Act. No party asserted before the Industrial Court a denial of jurisdiction to determine any of the matters raised by the motions before that court. Section 27 of the Bankruptcy Act provides that the Federal Court and the Federal Magistrates Court have concurrent jurisdiction in bankruptcy, and that jurisdiction is exclusive of the jurisdiction of all courts other than the jurisdiction of the High Court under s 75 of the Constitution or the jurisdiction of the Family Court under ss 35 or 35A of the Bankruptcy Act. The Parliament has thus invested exclusive jurisdiction "in bankruptcy" in the identified courts for the purposes of s 71, s 76(ii) and s 77(ii) of the Constitution. The exclusive jurisdiction is a jurisdiction "in bankruptcy" which means "in relation to jurisdiction or proceedings, any jurisdiction or proceedings under or by virtue of the [Bankruptcy Act] (s 5)".

81 The investing of exclusive jurisdiction in bankruptcy in the nominated s 27 courts effects a repeal of the general investing of federal jurisdiction in State courts within the limits of their several jurisdictions by s 39(2) of the Judiciary Act having regard to ss 71, 76(i) and 77(i) of the Constitution, in matters arising under a law of the Commonwealth, to the extent any jurisdiction or proceeding arises under or by virtue of the Bankruptcy Act.

82 Was the Industrial Court exercising any jurisdiction or hearing and determining a proceeding under or by virtue of the Bankruptcy Act when Meriton and Owners applied by their motions to dismiss Rose’s proceeding on the ground that s 60(2) effected a stay giving rise to an immunity or that s 60(3) effected an abandonment of the proceeding or, alternatively, on the ground that an undischarged bankrupt has no standing to maintain a proceeding as assignee of the trustee.

83 I have had the benefit of reading the useful analysis by Perram J of the history of the jurisdiction in bankruptcy in England and Australia; the introduction of the provisions dealing with jurisdiction and powers of courts in bankruptcy by Part III of the Bankruptcy Act 1966 as originally enacted; that Act’s treatment of the "bankruptcy" jurisdiction; the introduction of s 27 into the Bankruptcy Act in its modern form and the authorities dealing with the scope of the jurisdiction both before and after the commencement of s 27.

86 Rose sought to engage the jurisdiction of the Commission in Court Session by applying under s 108 of the IR Act for orders within the field of orders contemplated by s 106 of that Act in respect of which the Commission in Court Session was invested with jurisdiction. The question of Rose’s standing to apply for those orders or continue to maintain his proceeding before that court involved the construction and application of ss 105 and 108 of the IR Act to the facts pleaded taken at their highest. Secondly, that court had to determine whether the proceedings before it could be competently brought or maintained having regard to the application or operation of the relevant provisions of the Bankruptcy Act to those facts. If a consideration of that second limb is properly characterised as an application or proceeding "under" the Bankruptcy Act or one made "by virtue of" the Bankruptcy Act with the result that the Industrial Court is impermissibly engaging the exclusive jurisdiction of a s 27 court, the result is that courts of the States and in particular, the Supreme Courts of the States and Courts of Appeal will be deprived of jurisdiction in such circumstances to determine whether a plaintiff seeking to engage that court’s jurisdiction, either in its original or appellate jurisdiction, is a competent litigant before that court, as a matter of law.

87 Such courts would be required to say that they have no jurisdiction to determine the competency or standing of the plaintiff to engage the jurisdiction of the court where competency is to be determined by construing the operation of the relevant provisions of the Bankruptcy Act, until that matter is determined for them by, relevantly here, the Federal Court of Australia in entirely separate proceedings. The constitutional arrangements in the Australian Federation have sought to avoid such jurisdictional difficulties by providing for the creation of Chapter III courts, the conferral of jurisdiction in those courts having regard to ss 75, 76 and 77 of the Constitution and the investing of federal jurisdiction in courts of the States in matters arising under a law of the Commonwealth. Section 77(ii) of the Constitution however enables the Parliament to define the extent to which the jurisdiction of any federal court is exclusive of that which "belongs to or is invested in the courts of the States". An expansive interpretation of the exclusive jurisdiction "in bankruptcy" correspondingly diminishes the jurisdiction invested in State courts by s 39(2) of the Judiciary Act.

88 The model adopted by the Bankruptcy Act 1966 upon its commencement provided for the investing of federal jurisdiction in bankruptcy (s 27(2) and s 5) in the eight courts identified in s 27(1) of that Act rather than an exclusive vesting of jurisdiction in a federal court. It would be an odd result if the subsequent conferral of exclusive jurisdiction in bankruptcy in the terms of the current s 27 of the Bankruptcy Act deprived the several courts of the States of a jurisdiction to determine whether a plaintiff has properly engaged that court’s jurisdiction having regard to his or her standing by reason of the operation of one or more provisions of the Bankruptcy Act. There is a distinction between the exercise of a court’s jurisdiction in a proceeding that calls into question a provision of the Bankruptcy Act on the one hand and the exercise by that court of a jurisdiction under or by virtue of the Bankruptcy Act, on the other.

89 In Howden v Cock & Ors [1915] HCA 44; (1915) 20 CLR 201, the High Court held that s 5 of the Insolvency Act 1897 (Vict) that conferred "full power on the Court of Insolvency to decide all questions of priorities and all other questions whatsoever whether of law or fact which may arise in any case of insolvency or which the Court deems necessary to decide for the purpose of doing complete justice or making a complete distribution of property"; and s 83 of the Act conferring jurisdiction on the Court in relation to deeds of arrangement and deeds of assignment, conferred power in the exercise of that jurisdiction, to decide all such questions of law and fact as a Court of Equity charged with the administration of an estate could decide. Thus, the jurisdiction in insolvency under that instrument of conferral of jurisdiction and power was, in terms, very broad.

90 In Re Hawkesford (1937) 10 ABC 26, Lukin J considered s 4 of the Bankruptcy Act 1924-1933 (Cth) which defined "Bankruptcy" in more familiar terms as "Bankruptcy in relation to jurisdiction or proceedings includes any jurisdiction or proceedings under or by virtue of this Act". Lukin J concluded from an analysis of the content of particularly eight provisions of the Bankruptcy Act that a deed of arrangement under Part XII of the Act between a debtor and a trustee is "a bankruptcy" within the meaning of the Act and the court has jurisdiction over matters arising for determination in regard to and under deeds of arrangement "just as fully and effectively as ... in a bankruptcy by sequestration". In that sense, the s 4 definition conferred a wider meaning than the English legislation. Lukin J reached that position by recognising that matters "in regard to and under deeds of arrangement" engaged a jurisdiction or proceeding "under or by virtue of this Act".

91 Although the language of the statutory instrument was quite different, Lukin J took comfort from the High Court’s view in Howden of the scope of the insolvency jurisdiction (as it applied to deeds of arrangement and deeds of assignment) of the Victorian Insolvency Court, as a power to decide all such questions of law or fact that a Court of Equity might decide in the administration of an estate.

92 In Re Hawkesford, the application engaged the Court’s supervision of the conduct of the trustee of the deed of arrangement under Part XII of the Act and whether the trustee had in collusion with the buyers fraudulently sold at an undervalue the debtor’s business the very subject of the deed to be administered under the Act by the trustee. It would be difficult to imagine a jurisdiction or proceeding more directly under or by virtue of the Act.

93 In Re Lamb; Ex parte Melsom; Re Duncan (1980) 29 ALR 157, Brinsden J in the exercise of federal jurisdiction invested in the Supreme Court of Western Australia had to consider an application by the trustee of a deed of arrangement of a debtor (Lamb) and the trustee of the estate of a bankrupt (Duncan) for an order for the consolidation of the estates of the debtor and bankrupt in order to facilitate the proper administration of both estates. Section 53 of the Bankruptcy Act expressly conferred a jurisdiction in the court to order consolidation on terms thought appropriate and s 30(1) of the Act conferred a power to make orders giving effect to the Act. It is true that Brinsden J put the function of the court exercising bankruptcy jurisdiction on the footing of Lord Selborne’s observations in Ellis v Silber (1872) 8 L.R. Ch. App. 83 at 86 although particular reliance and emphasis was placed upon Lord Selborne’s observation that, "That which is to be done in bankruptcy is the administration in bankruptcy". Brinsden J concluded that the exercise of federal jurisdiction in bankruptcy "is therefore the administration in bankruptcy of those matters which properly fall within the provisions of the Bankruptcy Act including any case of bankruptcy and any matter under Parts X or XI". The emphasis upon the administration in bankruptcy as the principled source of the jurisdiction in bankruptcy in conjunction with the powers conferred by s 30(1) and s 53, together provided a basis for the consolidation order as an exercise of a jurisdiction in a proceeding, under or by virtue of the Bankruptcy Act.

94 In Morris v Maroudas (1986) 12 FCR 346, Morris sought to engage the jurisdiction of the Federal Court in these circumstances. Maroudas took proceedings in the Western Australian District Court alleging causes of action in connection with a franchise agreement and obtained judgment against Morris for damages on 17 January 1985 after a trial in October 1984. On 20 June 1983, Mr and Mrs Morris had appointed a trustee of their estates under Part X of the Bankruptcy Act by authority signed under s 188 and each of them executed joint deeds of assignment in September 1983. No point was taken by Morris at the trial that deeds of assignment had been signed or that Maroudas’s claim reflected a "debt or liability" within s 82(1) of the Bankruptcy Act at the date of execution of the deeds and thus a provable debt with the result that Morris was released from that debt by operation of s 230(1) of the Bankruptcy Act. That was also the situation when judgment was entered.

95 Morris sought a declaration as to release from the provable debt; consequential orders setting aside the judgment and orders restraining execution, before the Federal Court. The application was dismissed. On appeal, the Full Court considered the source and scope of the Court’s jurisdiction to hear and determine the application. Toohey J concluded that the Court had full power to decide all questions of law or fact in any matter under Part X of the Bankruptcy Act although his Honour accepted that s 30(1) is directed to the powers available to the Court when exercising jurisdiction rather than a source of jurisdiction (p 359). His Honour noted that jurisdiction is conferred by s 27 and is elaborated upon by specific classes of applications that might be brought to the Court (sequestration applications, approval of schemes and compositions, discharge applications, power to determine assignments, arrangements or compositions void, for example).(p 359) Toohey J referred to Lukin J’s view in Re Hawkesford that in matters arising for determination in regard to and under deeds of arrangement, the Court was invested with jurisdiction as fully and effectively as it was by way of sequestration. Toohey J isolated the character of the questions attracting that jurisdiction in quite precise terms (p 360):

96 His Honour did not accept that the attraction of the jurisdiction was merely concerned with "matters of administration". (p 360) The jurisdiction was attracted because "the sections ... bear directly on the legal rights and obligations of creditors and debtors in the case of an arrangement with creditors made under Pt X of the Act" [emphasis added] (p 360) and thus the jurisdiction to determine the identified precise questions was a jurisdiction under or by virtue of the Act. Northrop J held that the s 30(1) powers are ancillary only to jurisdiction and no specific provision of the Bankruptcy Act could be identified under or by virtue of which the application was made.(p 352) Thus the Court had no jurisdiction. Northrop J did not see the inquiry as one of characterising the questions to be examined by the application and then determining whether those questions engage the jurisdiction under or by virtue of the Bankruptcy Act. Spender J simply expressed the view that the Court had jurisdiction to declare, by reason of s 30(1), that the deeds operated to release Mr and Mrs Morris.(p 366)

97 In Forshaw v Thompson (1992) 35 FCR 329, Lockhart J with whom Black CJ and Sweeney J agreed also recognised, applying Re Hawkesford and Morris v Maroudas, that the Court’s jurisdiction "over matters arising for determination under Part X" was conferred by the "general conferral" upon the Court by s 27 of "jurisdiction in bankruptcy". His Honour observed that specific examples of conferral of powers upon the Court by numerous sections of the Bankruptcy Act ought not to obscure the general conferral of jurisdiction.(p 334) Lockhart J said:

98 In Forshaw, the matter that answered the description "any jurisdiction or proceeding under or by virtue of this Act" was this. Two debtors, Forshaw and Sent each signed an authority under s 188 of the Bankruptcy Act directed to Thompson, a solicitor, to call a meeting of their creditors. Each meeting was adjourned a number of times to enable Thompson to determine the entitlement of particular creditors to vote at Part X meetings in relation to a proposed deed of arrangement. Thompson foreshadowed a decision to accept the claims of two of those creditors to vote at each meeting to be convened under Part X. The debtors contended that those claims arose out of guarantees said to be void and challenged Thompson’s proposal as chairman to accept the claims to voting.

99 In determining that question the Court closely considered the operation of Part X including, the debtor’s obligation to provide a statement of affairs (s 188(2)), the calling of the meetings (s 190), the right of a creditor to vote (s 198), the chairman’s authority (s 201), the Court’s power to make a summary sequestration order (s 221) or declare a deed or composition void (s 222) and the role of s 201 in potentially foreclosing the Court’s review of the chairman’s decision. Lockhart J considered that on hearing applications under either s 221 or s 222, the Court may determine whether a creditor was entitled to vote at a meeting convened under s 190 of the Bankruptcy Act. His Honour noted that the absence of an express power in the Court to determine at an earlier stage in the Part X process whether a creditor is entitled to vote did not result in a lack of jurisdiction to decide that question. Section 27(1) of the Bankruptcy Act conferred jurisdiction in matters arising under Part X concerning the rights of creditors to vote (pp 341 and 342) for the reasons his Honour "mentioned earlier", namely such matters arose under or by virtue of the Act. Plainly enough, an application that invites a close analysis of the voting entitlement of a creditor for the purposes of a Part X meeting could not be anything other than an exercise of jurisdiction arising under or by virtue of the Act.

100 The principle applied by Lockhart J was the principle adopted by Toohey J in Morris v Maroudas, that is, characterise the questions to be examined in the proposed exercise of jurisdiction raised by the application or proceeding and then determine whether those questions engage a jurisdiction under or by virtue of the Bankruptcy Act.

101 In another Part X case in Farrow Mortgage Securities v Abeyratne (1993) 47 FCR 208, the Full Court, Northrop, Sheppard and Wilcox JJ adopted the reasoning of Lockhart J in Forshaw v Thompson in an application by a creditor under s 222(1) and s 236(1)(c) of the Bankruptcy Act to declare void a deed of arrangement approved by a meeting of creditors convened under Part X. The creditor contended that the trustee as chair of the meeting had wrongly refused to admit the creditor’s claim for voting purposes. The source of the jurisdiction was seen to arise under s 27 as the essential subject matter of the application arose under or by virtue of the Bankruptcy Act.

102 In Re Dingle; Westpac v Worrell, Re Cockerill; Westpac v Worrell (1993) 47 FCR 478, the Full Court, Wilcox, Ryan and Cooper JJ applied Forshaw v Thompson and Farrow v Abeyratne in determining that the Court had jurisdiction to examine a decision of a trustee of the bankrupts taken at a meeting of creditors convened by the trustee to consider a proposed deed of composition. The trustee disallowed Westpac’s right to vote. Had its claim been accepted and cast it would have determined the outcome of the meeting. The composition was approved and the bankruptcies annulled. The challenge to the trustee’s decision called into question the application of s 64ZA(1) to (9) of the Bankruptcy Act relating to voting. Section 64ZA did not expressly provide a mechanism for reviewing the trustee’s determination as to a person’s entitlement to vote. The Full Court agreed with the primary judge that the Court had a jurisdiction to declare a composition void as not having been accepted in accordance with the Bankruptcy Act if a creditor with a valid claim was denied a right to vote. The point for present purposes is that the jurisdiction to exercise a remedial power arose under s 27. An application calling into question the consequences of a failure to comply with s 64ZA was found to invoke, consistent with authority and principle, a jurisdiction arising "under or by virtue of" the Bankruptcy Act.

103 Each of these decisions (Re Hawesford, Re Lamb, Morris v Maroudas, Forshaw v Thompson, Farrow v Aberyratne and Re Dingle; Re Cockerill) is an emblematic illustration of an applicant seeking recourse in the most immediate and direct sense to the exercise of jurisdiction arising under the Bankruptcy Act or by virtue of the Bankruptcy Act. The essential subject matter of each application to the Court was remedial intervention in a central aspect of bankruptcy including conduct by debtors, creditors or trustees seeking to invoke the mechanisms of Part X of the Bankruptcy Act or in relation to arrangements, compositions or assignments under that Part. Some provisions of the Bankruptcy Act were seen to expressly confer standing to apply for orders in the exercise of conferred powers. Where no such express conferral of a right to apply to the Court arose, the application was characterised as one properly within the general conferral of jurisdiction under s 27 as the questions to be determined in the application invoked jurisdiction, that is, the application owed its essential authority to the Bankruptcy Act itself and thus arose under or by virtue of the Bankruptcy Act.

104 Although the notion of a "general conferral": of jurisdiction by the words "under or by virtue of" conveyed a broad conferral of jurisdiction which was merely "elaborated upon" (Morris v Maroudas; Forshaw v Thompson) by provisions of the Bankruptcy Act dealing with subject specific applications, the jurisdiction was not so broad that any exercise of general jurisdiction by a Court which called into consideration the operation or application of a provision of the Bankruptcy Act, rendered the exercise of that jurisdiction a jurisdiction "in bankruptcy". An application made in the exercise of a court’s general jurisdiction would not in such a case owe its authority to the Bankruptcy Act itself.

105 Exclusive jurisdiction "in bankruptcy" was initially conferred on the Federal Court of Australia by the Bankruptcy Legislation Amendment Act (1996) (Cth) No 44 of 1996). There is no reason to believe that the conferral of exclusive jurisdiction was intended to do anything other than vest exclusively the same jurisdiction (as understood according to authority and principle) that had previously been invested in the Federal Court of Australia and State courts exercising federal jurisdiction, in the Federal Court of Australia and subsequently the Federal Court concurrently with the Federal Magistrates Court exclusively, according to the terms of s 27 of the Bankruptcy Act.

106 This is no doubt the reason for the proposition put as an authoritative proposition by the editors of the Fifth Edition of McDonald, Henry and Meek, Australian Bankruptcy Law and Practice, at [27.1.03] in these terms:

107 The explanatory memorandum in the Senate for the 1996 Bill seems to suggest a particularly narrow conception of the jurisdiction as the exclusivity of jurisdiction was said to be "necessary in order to preserve existing arrangements whereby there is national uniformity with respect to creditor’s petition". The change in jurisdiction to an exclusive one was said in the memorandum not to have "any significant impact in practice as very few bankruptcy cases are initiated in State or Territory Courts". The memorandum seems to be concerned with framing the jurisdiction in terms of the clearest example of applications made under or by virtue of the Bankruptcy Act.

108 In Sutherland v Brien (1999) 149 FLR 321; [1999] NSWSC 155, Austin J considered the operation of s 27 of the Bankruptcy Act in these circumstances. Mr Sutherland was the administrator of a company (AIG) under a Deed of Company Arrangement. The administrator and AIG (in liquidation) sought a declaration that monies held in a trust account by the administrator were held on behalf of particular creditors of AIG. The defendants were the trustees of the estate of a former director of AIG and his wife, appointed pursuant to Deeds of Arrangement under Part X and s 228 of the Bankruptcy Act. They cross-claimed for a declaration that the total amount held in the trust account was payable to them and an order for payment out. The administrator contended that the monies arose from realising a security given by Mr and Mrs Roberts of AIG’s debts and should be distributed to creditors of AIG. The trustees of the estates of Roberts claimed the monies for the benefit of the creditors of each estate.

109 Neither party contended that s 27 of the Bankruptcy Act deprived the Supreme Court of New South Wales of jurisdiction. Nevertheless Austin J satisfied himself as to that question and said this at [8]:

110 In Geia v Palm Island Aboriginal Council [1999] QCA 389; [2001] 1 Qd R 245; (1999) 152 FLR 135, the Queensland Court of Appeal considered whether an action for breach of contract brought in the District Court by an undischarged bankrupt was properly dismissed on the ground that the cause of action had vested in the trustee. The bankruptcy had commenced before the accrual of the cause of auction. The defendant respondent contended that the cause of action was property and after acquired property within the meaning of s 58(1)(b). The appellant accepted that s 116(2)(g) did not exempt the action from the vesting provisions of the Bankruptcy Act but contended that the "common law of bankruptcy" did so. Thus, the Court of Appeal considered the English decisions on that question and the operation of s 58(1)(b). Again, no party suggested that the District Court or the Court of Appeal lacked jurisdiction to decide the question by reason of s 27. Nevertheless, the court elected to deal with the jurisdiction point. After referring to the explanation for the amendment contained in the legislative memoranda the Court said this at [19]:

111 In Scott v Bagshaw [2000] FCA 816; (2000) 99 FCR 573, the Full Court of this court again considered the source and scope of the court’s jurisdiction in bankruptcy in proceedings in which the trustee of a family trust asserted an equitable charge over three properties in support of a loan made to the registered proprietors, a husband and wife. The trustees in bankruptcy of the estate of the husband denied any entitlement in the appellant trustee to an equitable mortgage of Torrens title land and contended that the appellant’s claim related to a provable debt under s 82 of the Bankruptcy Act. The appellant required leave under s 58(3)(b) to commence the proceeding.

112 Applying the earlier authorities, the court described s 27 as the "seminal" source of the court’s jurisdiction in bankruptcy [17]. The court held that s 27 fell to be understood in context and that s 31(1)(f) elucidated what the drafter "had in mind as falling within ‘bankruptcy’ in s 27(1) as defined in s 5(1)" [18]. Thus, applications declaring for or against the title of the trustee to any property would be encompassed within the s 27 concept of jurisdiction in bankruptcy. The court distinguished Sutherland v Brien on the ground that s 31(1)(f) made it plain that as against the trustees in bankruptcy, the proceeding before the Full Court was within s 27 as a proceeding under or by virtue of the Bankruptcy Act. In Green v Schneller [2001] NSWSC 897, Barrett J after considering Sutherland v Brien and Scott v Bagshaw made this observation at [22]:

113 In the result, Barrett J concluded the Supreme Court of New South Wales did not have jurisdiction to entertain a motion for leave pursuant to s 58(3)(b) to continue the proceeding.

114 The emphasis upon s 31(1)(f) as a contextual elucidation of the s 27 jurisdiction (Scott v Bagshaw) gives emphasis to the structure of the act more generally. Section 27 confers jurisdiction in bankruptcy. Section 30(1) confers broad general powers in the exercise of that jurisdiction. Section 31 describes the matters the court shall hear and determine in open court in the exercise of jurisdiction. A proceeding engaging any of the s 31 subject matter is expressly an exercise of s 27 jurisdiction (with a statutory direction that the matter be dealt with in open court). Although the s 27 conferral goes beyond the s 31 subject matter, s 31 nevertheless gives a clear statutory indication of the classes of subject matter that the Bankruptcy Act treats as jurisdictional subject matter arising under or by virtue of the Bankruptcy Act. Each proceeding owes it authority to the Bankruptcy Act.

115 In Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 241 ALR 32, the High Court considered aspects of the exercise of jurisdiction to award costs in a proceeding by the Supreme Court of Queensland and the "inter-relationship between federal bankruptcy law and the civil procedure of the courts of that State"[1]. In the Supreme Court of Queensland, Chesterman J heard complex multi-party litigation concerning the ownership of machinery at an open cut coal mine. The plaintiff appellant Foots was unsuccessful. The defendant respondent Ensham succeeded on its cross-claim. Judgment was given on 1 September 2005 for damages for a substantial amount. On 15 September 2005, Foots entered bankruptcy. On 3 February 2006, Chesterman J ordered Foots to pay Ensham’s costs on an indemnity basis. Foots contended that the costs order was a provable debt within the meaning of s 82 of the Bankruptcy Act. Chesterman J considered s 58(3) and s 82(1) of the Bankruptcy Act and accepted that the application for costs against Foots was either a legal proceeding or a fresh step in a proceeding.(s 58(3)(b)) However, the stay effected by s 58(3) would only operate if the order for costs were a debt or liability within the meaning of s 82(1). Chesterman J framed the question as:

116 Rule 72 of the Uniform Civil Procedure Rules (UCPR) provides that if a party to a proceeding becomes bankrupt, a person may take a step in the proceeding only if the Court gives leave (among other things). Chesterman J concluded that the costs order would not be a debt provable in Mr Foots’s bankruptcy, s 58(3) was no impediment to a costs order in the exercise of the Court’s discretion and jurisdiction as to costs, and thus granted leave under r 72 to proceed and made an indemnity costs order. That order was the subject of an appeal to the Queensland Court of Appeal. Their Honours by a majority dismissed the appeal and the High Court, by a majority, Gleeson CJ, Gummow, Hayne and Crennan JJ (Kirby J dissenting) dismissed Mr Foots’s appeal. Section 27 of the Bankruptcy Act was not put in issue by any of the parties. In that sense, as an orthodox piece of inter-parties litigation, the decision is not relevant to the present questions. However, in a broader sense, it is interesting to note that in a case in which the Supreme Court of Queensland sought to exercise its general jurisdiction in an application before it that centrally engaged the operation and application of ss 58(3) and 82 of the Bankruptcy Act neither the parties, Chesterman J, the Judges of Appeal, nor any of the Justices of the High Court raised any question that the exercise of jurisdiction by the Supreme Court or the Court of Appeal engaged a jurisdiction "in bankruptcy" on the footing that the proceeding was to be characterised as one under or by virtue of the Bankruptcy Act. Perhaps that position reflects the well accepted foundation proposition of MacDonald Henry and Meek [73], although, of course, the point was simply not put in issue in the proceeding.

117 Thus, when a State court determines whether a proceeding can properly be commenced or maintained before it or whether the plaintiff has standing to engage the jurisdiction of the Court, by reason of any impediment going to the operation or application of a provision of the Bankruptcy Act, such an application is not one under or by virtue of the Bankruptcy Act. The Commission in Court Session was not exercising a jurisdiction in bankruptcy by determining the motions before it brought by Meriton and Owners.

118 Meriton and Owners are not content with the final orders made by the Full Bench of the Industrial Court and seek to bring a federal controversy to this Court. Prima facie, an attempt by the unsuccessful parties in the Industrial Court proceedings to enliven the original jurisdiction of this Court so as to agitate the merits of the same questions and seek to set aside and quash the orders made by that court, is an abuse of process. (Hunter v Chief Constable of the West Midlands Police [1982] AC 529, per Lord Diplock at p 536[C], 541[BC], Spalla v St George Motor Finance Ltd [2004] FCA 1699 per French J at [59], [67]-[70], Walton v Gardiner (1992) 177 CLR 378 per Mason CJ, Deane and Dawson JJ at p 393).

119 The attempt to frame a controversy within the jurisdiction of this Court will not constitute an abuse of process if the applicants before this Court are seeking to establish jurisdictional error on the part of the Industrial Court and orders of this Court properly lie to remedy an error of jurisdiction by the Commission in Court Session. If the jurisdiction of this Court is sought to be enlivened to remedy a perceived error of that Court within jurisdiction, the bringing of these proceedings is an abuse of process in the technical sense.

121 That question seems to turn on whether the trustee made an election for the purposes of s 60 of the Bankruptcy Act; whether the assignment to the bankrupt was valid and whether an error on the part of the Industrial Court in answer to either of those questions gives rise to an error of jurisdiction. The Full Bench determined that the trustee made a valid election for the purposes of s 60(2) of the Bankruptcy Act by the letter of 7 January 2006. It seems to be common ground that the parties both before Marks J and the Full Bench proceeded on the footing that the trustee’s letter of 7 January 2006 was the instrument of election. The parties were content to argue the legal effect of the letter. Before this Court at the hearing, argument emerged about whether the proper construction of the letter of 7 January 2006 bears an election and whether the events of December 2005 leading up to the Deed of Assignment on 20 December 2005 conveyed an election on the part of the trustee. The Statement of Agreed Facts between the parties for the purposes of these proceedings records at para 10 the fact of the letter of 7 January 2006 which for definitional purposes is described in brackets as "the election". By para 11, a copy of the letter is attached to the statement.

122 Section 60(2) makes it plain that an action commenced by a person who subsequently becomes a bankrupt is, upon becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action. By that section, the trustee is confronted with two choices. He or she must elect to prosecute or abandon the action and until one or other of those decisions is taken the action, stayed upon bankruptcy, remains stayed. Plainly enough, it would be unsatisfactory from a respondent’s position if an action remained stayed without a statutory mechanism that compelled a trustee to make an election decision or, at least in the absence of an election decision, a deemed statutory outcome took effect. Accordingly, s 60(3) creates that mechanism. If the trustee does not make an election within 28 days after notice of the action is served upon the trustee by a party, the trustee shall be deemed to have abandoned the action.

123 By these sections, the trustee must make a decision as to whether it is in the interests of the creditors to prosecute an action or abandon it. A trustee would make that decision by weighing up, among other things, the merits of the proceeding, the likely return to the estate from pursuing the proceeding, the real probability of success, the costs of the proceeding and whether the trustee might be able to obtain the support of a third party for the costs of the proceeding and an indemnity, should costs orders be made against an unsuccessful trustee. A litigation funder, for example, might be such a party. The trustee, if he or she could secure such support, might well take the view that the interests of the creditors are served by securing such support and an indemnity, in consideration of the trustee receiving a percentage of the outcome of the action, such as, for example, 30% of any damages awarded or monies recovered. These are well known practical questions which commonly arise for trustees in the administration of many bankrupt estates.

124 In this case, the trustee plainly enough formed the view that the interests of the creditors would be served by entering into a Deed of Assignment which had the effect of making an out and out disposition of the bankrupt’s interest in the action in consideration of 30% of the net proceeds of the action. Leaving aside the validity of the assignment to the bankrupt, it seems clear that the trustee shortly after his appointment as trustee turned his mind to the s 106 proceeding commenced by Rose. Rose’s solicitor (although not the trustee himself) wrote on or about 20 or 21 June 2005 to Meriton saying he expected to receive instructions from the trustee to act on the trustee’s behalf in those proceedings. On 8 December 2005, Rose’s solicitor wrote to Meriton and confirmed that he had instructions from the trustee that Rose’s action would be proceeding. It seems reasonably clear that the trustee had decided to continue that proceeding. Within a relatively short further time, 20 December 2005, Rose and the trustee entered into the Deed of Assignment which secured for the estate 30% of the net proceeds of any "award or judgment" in favour of Rose. There could be no award or judgment without the pursuit of the proceeding.

125 At some time between 21 June 2005 and 20 December 2005 and in all probability during the course of December 2005, the trustee made a decision to proceed with the action for the benefit of creditors of the estate. He then decided to secure a 30% interest for the creditors in the net proceeds of any award or judgment by assigning the action to another. The Deed of Assignment can only be consistent with a decision on the part of the trustee to preserve the action for the benefit of the creditors. Decisions by the trustee to preserve the action or continue the action may not necessarily reflect the statutory election necessary to "prosecute or discontinue" the action. However, the term "prosecute the action" in s 60(2) is juxtaposed with "discontinue the action" which gives meaning to the scope of the term "prosecute". In context, an election to prosecute the action is an election to "continue with" the action as compared with a decision to discontinue the action . The trustee might elect to continue the action for the benefit of the creditors by securing an arrangement with another to fund the prosecution of the action by the trustee with an indemnity or by, in effect, selling the action to another on terms which protect the trustee and the estate yet provide the creditors with an interest in the proceeds of the proceeding as the proceeding ultimately matures in an award or judgment. The trustee has elected to prosecute the action by both deciding to continue with the action and prosecute it by arranging for the prosecution of the action by an assignee (Brien v P & E Phontos [1999] FCA 1072; (1999) 91 FCR 209). That decision is the election.

127 The election might be made by a trustee or a trustee’s legal adviser writing a direct and uncomplicated letter to the parties in the proceeding saying that the trustee has elected to proceed with the action. In this case, the trustee did not write such a letter. However, the absence of formalism by such a letter does not prevent "writing" consistent with an election, satisfying the requirement of writing for the purposes of s 60(2). The signing of the Deed of Assignment by the trustee by which he secured a right to receive 30% of the net revenue of any award or judgment in consideration of the assignment, satisfies the requirement of writing. The letter of 7 January 2006 is not an instrument of election by the trustee. The trustee’s letter in response to the 4 January 2006 letter from the solicitors for Owners putting the trustee on notice of the proceeding is, in effect, a statement by the trustee that he has already turned his mind to the question of the s 106 proceeding and has already made a decision to preserve the action and prosecute it by assigning the proceeding to another in consideration of the benefits of accruing to the creditors. In that sense, the letter evidences the earlier decision to continue the action and prosecute it by assignment.

128 In any practical sense, the Deed of Assignment constitutes the election by the trustee for the purposes of s 60(2) of the Bankruptcy Act. Accordingly, the Full Bench with respect, reached the correct conclusion as to election by the trustee for the wrong reason.

129 The trustee elected to assign the bankrupt’s action to the bankrupt. Upon Rose entering bankruptcy the action vested in the trustee under s 58 of the Bankruptcy Act. It became property divisible amongst the creditors of the bankrupt by s 116(1) and was not taken outside the broad attraction of property so divisible by s 116(2). Similarly, prima facie, an acquisition by Rose as assignee of the trustee under the Deed was an acquisition of property made after the commencement of the bankruptcy and before discharge within s 116(1)(a) and not taken outside the net of that section by any sub-paragraph of s 116(2). Thus, on that view, the action was property divisible amongst the creditors of the bankrupt.

130 On that footing, the property so acquired was after-acquired property (s 58(6), s 116(1)) which vested in the trustee (s 58(1)(b)).

131 The trustee in assigning the action to Rose exercised a power under s 134. By s 134(1) the trustee is empowered, among other things, to (a) sell all or any part of the property of the bankrupt; (aa) accept a sum of money payable at some time in the future on terms or conditions or not, as the consideration for the sale of any property; (o) administer the property of the bankrupt in any other way.

132 Section 134 does not contain any express prohibition upon the trustee entering into any arrangement with the bankrupt either during the currency of the bankruptcy or after discharge in the exercise of any power conferred by that section. Nor do ss 116 and 58 contain any express exemption from the notion of after acquired property divisible amongst the creditors of an interest acquired by the bankrupt from the trustee during the currency of the bankruptcy, that is, prior to discharge. To the extent that s 116(1)(a) attaches property acquired by the bankrupt after the commencement of the bankruptcy, it does so only in respect of acquisitions prior to discharge. Giving full expression to the clear language of s 134 and ss 5, 58 and 116 of the Bankruptcy Act produces the result that the trustee may assign the vested action to Rose as an undischarged bankrupt as a valid exercise of conferred power, and the bankrupt’s interest in the action as assignee vests upon acquisition (that is, re-vests) in the trustee. In such a case the Deed ceases to have any role to play as the bankrupt has no interest to pursue to "award or judgment" and the Deed is rendered impossible of performance.

133 Accordingly, does the Bankruptcy Act contain a statutory intention derived from a construction of its provisions and the scheme of the Act, to exclude from after-acquired property, an interest in an action acquired by an undischarged bankrupt from the trustee in the valid exercise of the trustee’s powers. Alternatively, does the Bankruptcy Act reveal a statutory intention to exclude from the powers conferred on the trustee by s 134, a power to assign an action to an undischarged bankrupt.

134 As to the first question, s 116(1) draws the net of divisible property widely as:

135 A limitation upon divisible property arises out of s 116(2) which provides that s 116(1) does not apply to particular classes of property. Those classes include property held by the bankrupt in trust for another; the bankrupt’s household property (as defined); personal property of the bankrupt (as defined); the bankrupt’s property used by the bankrupt in earning income by personal exertion subject to the qualification in s 116(2)(c); property used by the bankrupt as a means of transport (as defined); property related to insurance, superannuation funds and retirement savings accounts (as defined); the right previously described concerning personal injury or wrong done to the bankrupt (s 116(2)(g)); amounts relating to rural support; and property the trustee is required to transfer to a spouse of the bankrupt by order made under the Family Law Act 1975.

136 Section 116 is contained within Division 3 of Part VI of the Bankruptcy Act, entitled "Property available for the payment of debts". Division 3 deals with a range of matters to secure the preservation of the property of the bankrupt for the benefit of the creditors and renders void as against the trustee certain transfers and payments (ss 120, 121, 122, 123 and 128). Division 4 of Part VI deals with the "Realisation of property" and sets out particular obligations cast on persons and rights conferred on a trustee. Section 129AA establishes a time limit for realising property disclosed in the bankrupt’s statement of affairs (other than cash) and after acquired property (other than cash). Such property if still vested in the trustee immediately before a "re-vesting time" vests in the bankrupt at re-vesting time, that is, the sixth anniversary of the date of discharge of the bankrupt from bankruptcy.

137 Section 134 setting out the powers of the trustee is contained within Division 4 of Part VI.

138 Division 4B of Part VI establishes the regime by which a bankrupt who derives income during the bankruptcy is required to pay income contributions to the estate. The Division recognises that a bankrupt will derive income during the bankruptcy (s 139L, s 139M, s 139N) and by s 139P or s 139Q the bankrupt is liable to pay a "contribution amount" (s 139S) to the trustee, of income of the bankrupt that exceeds an "actual income threshold amount" (s 139K), during a contribution assessment period (s 139K). The bankrupt must provide evidence of income (s 139U). Division 4B establishes an assessment of income and a contributions review procedure. A contribution is payable at such time as the trustee determines (s 139ZG). The payment of contributions might be managed by a supervised account regime under Division 4B. Otherwise, the bankrupt is entitled to derive and receive income.

140 A bankrupt entitled to derive and receive income subject to any contribution assessment and contribution amount payable to the trustee, might use that income to acquire property prior to discharge. Such property might well fall outside the exemption of s 116(2). Similarly, a bankrupt might earn income through the use of s 116(2)(c) property and acquire property outside the scope of s 116(2). The Bankruptcy Act does not seek to bring that property acquired through expenditure of income retained by the bankrupt under either s 116(2)(c) or Division 4B, within s 116(1) as property divisible among the creditors. Since these classes of property fall outside s 116(2) and yet do not comprise property divisible amongst the creditors for the purposes of s 116(1), it seems that the Bankruptcy Act recognises that classes of property other than the s 116(2) classes, may also fall outside the notion of property divisible amongst the creditors for the purposes of s 116 and s 58. It does not follow that because an assignment of property (whether an action or other property) by the trustee to the bankrupt is not expressly exempt by s 116(2), such an assignment is, necessarily within s 116(1) and s 58 of the Bankruptcy Act. That position is consistent with Kitson v Hardwick [1872] LR CP 473; Ramsey v Hartley [1977] 1 WLR 686; and Stein v Blake [1996] AC 243.

141 As to the second question, it seems to me that the Bankruptcy Act does reveal a statutory intention to exclude from the powers conferred on the trustee by s 134, a power to assign a legal proceeding, to an undischarged bankrupt. The reason is this. Such an assignment puts an undischarged bankrupt in a position to prosecute an action, as an undischarged bankrupt, in respect of a class of action or proceeding that the Bankruptcy Act expressly withdraws from an undischarged bankrupt. Section 58 vests the action in the trustee. Section 60 makes it plain that an action commenced by the bankrupt is stayed until the trustee makes an election in writing to prosecute or discontinue the action (s 60(2)). Section 60(3) incorporates the mechanism earlier described [122]. A failure to decide in the circumstances of that subsection results in abandonment. Section 60(1) deals with proceedings commenced against a debtor. That section deals with the potential discharge by the court at any time after the presentation of a petition, of Orders made against a debtor or the property of a debtor and a potential stay order concerning any civil or criminal process instituted against the debtor or the property of the debtor:

142 Section 60(1)(b) like s 58(3) addresses a legal process in respect of a provable debt, no doubt because a creditor has a right to prove in the bankruptcy for any provable debt. The creditor’s participation (or right to participate) in the statutory scheme for proof of debts, identification and realisation of assets and distribution of any resultant dividend stands in the place of prior rights. Section 60(2) effecting a stay of an action commenced by a debtor prior to bankruptcy attaches an action. So too necessarily does s 60(3). Section 60(4) is in these terms:

Section 60(4) isolates the only class of action a bankrupt may continue in his or her name after entering bankruptcy. Since s 116(2) reserves such a claim to the bankrupt as property outside the reach of s 116(1), such a claim may also be commenced by the bankrupt after entering bankruptcy.

143 These provisions suggest, within the scheme of the Bankruptcy Act, a statutory intention that the bankrupt be denied the pre-bankruptcy right to pursue or commence any action other than the identified class of action. So too is the bankrupt subjected to the statutory scheme which stands, as it does in respect of provable debts, in place of prior rights. The prohibition upon the bankrupt serves two immediate statutory purposes. First, to ensure that estate property is not deployed in the conduct of proceedings by the bankrupt and potentially dissipated and secondly, defendant/respondents ought not be put at further or new risk of action and irrecoverable cost. The vesting of existing actions in the trustee and confinement of the rights of the bankrupt within the limits described in respect of new actions, seeks to prevent the dilution of property divisible amongst the creditors by subjecting an existing action to the professional judgment of the trustee and imposing narrow limits on the bankrupt as to actions he or she might be entitled to continue or commence.

144 The logical answer to the second problem is an application by a defendant/respondent for an order for security for costs which if ordered would either be satisfied by those supporting the bankrupt or remain unsatisfied with a stay in place pending compliance with the security order. Ultimately, a strike-out application would be brought in the face of enduring non-compliance. However, as a matter of principle, a defendant/respondent ought not be subjected to such uncertainty and cost and hence the statutory treatment of a prohibition upon a bankrupt except within the narrow limits described. These principles are consistent with Want v Moss (1889) 10 NSWLR 274; Fuller v Beech Petroleum NL [1993] FCA 453; (1993) 43 FCR 60. An assignment by the trustee to an undischarged bankrupt to enable a bankrupt to carry on the action might render the trustee susceptible to an order for third party costs on the ground that the trustee has participated in the promotion of the action. If, in the relevant circumstances of the case, such an order was made, the trustee in the absence of misconduct would prima facie be entitled to an indemnity out of the estate assets in which event the creditors would be put at risk.

145 The assignment of an action to the bankrupt by the trustee during the currency of the bankruptcy might be thought to be consistent with the first purpose as the trustee must make a professional judgment as to preservation of the action and prosecution by assignment in a way that eliminates risk to the property divisible amongst the creditors. The second purpose is defeated by exposing a defendant/respondent to uncertainty and cost as the bankrupt, as assignee, pursues the action. The substitution regime established by the Bankruptcy Act designed to reduce pre-bankruptcy rights of those with provable debts and bankrupt debtors to statutory entitlements and statutory prescriptions ought not to be defeated by, in the case of the bankrupt, enabling the bankrupt to establish a position by assignment denied to him or her by ss 58, 60 and 116 of the Bankruptcy Act. If it were not so, an undischarged bankrupt might pursue an action against a respondent exposing that party to all the costs of answering a claim which if answered would in all probability result in a crystallised costs order and thus a new provable debt. That provable debt would provide a further basis for a new bankruptcy of the bankrupt should discharge have occurred. In that sense, put anecdotally, the respondent would assume all of the risks with little counter-balancing reward if successful. The commercial pressure imposed upon a respondent to settle a claim whether meritorious or unmeritorious and avoid the irrecoverable costs would be substantial.

146 Section 60 within the scheme of the Bankruptcy Act is decisive of a limitation upon the trustee’s power to assign the bankrupt’s action to the bankrupt during the currency of the bankruptcy (Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83). No equivalent of s 60(2) or s 60(3) was present in the English legislation considered in Kitson v Hardwick (supra). Section 60 was not considered in either Re Nguyen; Ex parte Official Trustee in Bankruptcy [1992] FCA 150; (1992) 35 FCR 320 or Re Bankrupt Estate of Cirillo; Ex parte Official Trustee in Bankruptcy (1996) 65 FCR 576. In both cases, the assignee or purported assignee had been discharged from bankruptcy. Section 134(1), whether reliance is placed upon s 134(1)(a), (aa) or (o), should be construed so as to preclude any power in the trustee to assign an action to a bankrupt during the currency of the bankruptcy, that is, at any time prior to discharge. A trustee would remain free to exercise a power conferred by s 134(1) to assign the action to the bankrupt after discharge, consistent with s 129AA of the Bankruptcy Act. Such a position seems consistent with s 129AA. By s 129AA property of the bankrupt vested in the trustee remains so vested for a period of six years from the date of discharge or, in respect of after-acquired property, six years after the date of disclosure of the property to the trustee, unless otherwise alienated. The trustee is entitled to exercise the powers conferred by s 134 until re-vesting.

147 I agree with Perram J that the assignment to Rose by the deed of 20 December 2005 was invalid.

148 I have now had the benefit of reading in draft the proposed reasons of Branson J. Her Honour concludes that the question of whether or not a trustee has made an election for the purposes of s 60 of the Bankruptcy Act does not involve the exercise of jurisdiction under or by virtue of the Bankruptcy Act. Her Honour also concludes that the challenge made by Meriton and Owners to the validity of the purported exercise of the trustee’s power to sell the right to prosecute Rose’s action to Rose while he remained an undischarged bankrupt, was an application made to the Industrial Court of New South Wales by a person "affected by a decision of the trustee" for an order "in the manner as the court thinks just and equitable". Such an application may be made to the Court under s 178 of the Bankruptcy Act and if made, must be made to a court exercising jurisdiction in bankruptcy. On that view, since the proper characterisation of the applications by Meriton and Owners is one within s 178, the application is under or by virtue of the Bankruptcy Act and thus s 27 removes those applications and any exercise of jurisdiction in respect of them from the Industrial Court.

149 Were the motions brought by Meriton and Owners applications made under or by virtue of s 178 of the Bankruptcy Act or alternatively, were they applications that enlivened a jurisdiction under or by virtue of s 178?

150 Part VIII of the Bankruptcy Act is entitled "Trustees". Division 1 provides for applications to the Inspector-General in Bankruptcy for registration of an applicant as a trustee; the method of dealing with such applications; conditions attaching to registration; termination of registration; consents by a trustee to act as trustee of a debtor’s estate; appointment to act; and related matters. Division 2 provides for the regulation of the remuneration and other costs payable to a trustee. Division 3 provides for the regulation of accounts to be established by a trustee and receipt of monies in a prescribed manner. Division 4 provides for "Controls over a trustee". The trustee is to have regard to any lawful directions given by a resolution of the creditors at a meeting of creditors or by a committee of inspection (s 177(1)). Section 178 is in these terms:

151 By s 179, the Court on the application of the Inspector-General, a creditor or the bankrupt, may inquire into the conduct of a trustee and may remove the trustee from office and/or make such order as the Court thinks proper. Division 5 provides for vacation of office by a trustee.

152 Each step taken by the trustee the subject of examination by the Industrial Court (described at [52] to [73]) involved either an act, omission or decision of the trustee, including the consideration of the s 106 proceedings, the election to enter into the deed on 20 December 2005 and prosecute the action by assignment, the discussions with Rose’s lawyers in June 2005 and 8 December 2005 leading to the deed, the consideration of the letter of 4 January 2006 and the writing of the trustee’s response on 7 January 2006. In the motions before the Industrial Court, Meriton and Owners agitated the legal consequences of those acts, omissions and decisions as parties affected by that conduct.

153 If s 178 of the Bankruptcy Act renders any consideration of an act, omissions or decision of a trustee by a court in the course of an application before it by a person who is affected by that conduct, an application made or a jurisdiction enlivened under or by virtue of s 178, then any consideration of the trustee’s conduct relating to the trustee’s election and the application of s 60 must also necessarily fall within s 178. However, Meriton and Owners did not seek to enliven a jurisdiction or apply to a court to call into question an act, omission or decision of the trustee so as to invoke the Court’s supervisory jurisdiction to exercise control over the trustee, under Division 4 of Part VIII of the Bankruptcy Act notwithstanding that the acts, omissions and decisions of the trustee required examination and Meriton and Owners were affected by it. Meriton and Owners applied to the Court as respondents sued in the relevant court. They contended that the proceedings taken against them were not competent and Rose had no standing to maintain an action before that Court. The basis for that contention involved an examination of the inter-related issues of the trustee’s decision to assign the action; whether an election occurred for the purposes of s 60; and questions of law concerning the validity of the assignment. The challenge to the competency of the proceedings before the Industrial Court and Rose’s standing to sue was not made under or by virtue of s 178 of the Bankruptcy Act.

155 First, the exercise of jurisdiction by the Commission in Court Session in determining the competency of the proceedings before it was not an exercise of jurisdiction in bankruptcy. Secondly, the trustee made a decision to continue the bankrupt’s s 106 proceeding and elected for the purposes of the Bankruptcy Act to prosecute the action by assignment. Thirdly, there was no jurisdictional error on the part of the Industrial Court. Fourthly, the assignment by the trustee to Rose as an undischarged bankrupt of the right to maintain the action was not within power and thus failed. The action however remains vested in the trustee. The trustee may exercise any of the s 134 powers in respect of it. The trustee is not precluded from assigning the action to Rose as a discharged bankrupt. Fifthly, Meriton and Owners initially invoked the jurisdiction of this Court in reliance upon s 39B(1A)(c) of the Judiciary Act 1903 and s 21 of the Federal Court of Australia Act 1976 and now rely upon s 27 of the Bankruptcy Act as the source of exclusive jurisdiction in the subject matter of the applications made before the Industrial Court. They seek to set aside the orders of that court. Those orders were made within jurisdiction. Although the Industrial Court erred by concluding that the assignment by the trustee to Rose was valid, the error was an error within jurisdiction. It is true that the error results in the maintenance of proceedings before the Industrial Court that Rose has no standing to maintain. That is unquestionably an unsatisfactory situation. Should that situation be remedied by this Court? Since there is no impermissible exercise of exclusive jurisdiction in bankruptcy, nor any other demonstrated jurisdictional error, the applicants in essence seek to challenge before this Court the result of the earlier proceedings taken between the same parties in relation to the same issues. The proceedings in this Court are an abuse in the sense contemplated by the authorities at [118]. For all these reasons, the application should be dismissed with costs.

156 If however, contrary to my own view, the exercise of jurisdiction by the Industrial Court in hearing and disposing of the motions falls within s 27 of the Bankruptcy Act, this Court in principle ought to grant orders in the exercise of its original jurisdiction which restores the parties to the position prevailing at law. The Court in principle ought to declare that the determination of the motions by the Industrial Relations Commission in Court Session engaged an exercise of jurisdiction in bankruptcy exclusively vested concurrently in the Federal Court and the Federal Magistrates Court subject to the jurisdiction of the High Court under s 75 of the Constitution or the jurisdiction of the Family Court of Australia under s 35 or s 35A of the Bankruptcy Act. This Court ought to declare that the assignment of the s 106 proceeding to Rose by the Deed of Assignment of 20 December 2005 is invalid and did not assign the trustee’s rights in the proceeding to Rose; and declare that the s 106 proceeding remains vested in the trustee. The Court should order that Rose be restrained from taking any further step in the s 106 proceeding as assignee of that proceeding from the trustee under the Deed of Assignment dated 20 December 2005; and order the second respondent to pay the costs of the Federal Court proceedings.

157 If a State court has impermissibly exercised a jurisdiction that the Parliament of the Commonwealth has vested exclusively in the s 27 courts subject to the qualification in that section, orders of such a State court ought not to remain on the record. They are in truth a nullity although of course the orders remain in force and effect until set aside. Although the considerations identified by Branson J influencing the exercise of the discretion are generally persuasive especially having regard to the delay by Meriton and Owners and their failure to bring to the attention of the Industrial Court any question of jurisdiction to determine the questions they chose to put in controversy before that Court, the interests of the administration of justice are not served nor the interests of the parties by electing to leave in place orders of the Court made beyond jurisdiction. Such a course brings both the Federal Court and the Industrial Court into disregard in the eyes of the community.

158 However, in my view, the Industrial Court did not exercise a jurisdiction in bankruptcy and for the reasons already indicated the application before this Court ought to be dismissed with an order that the applicants pay the respondents’ costs of the proceeding.

I certify that the preceding One hundred and twenty-five (125) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 419 OF 2008

BETWEEN:

MERITON APARTMENTS PTY LIMITED
First Applicant

OWNERS CORPORATION SP 56443
Second Applicant

AND:

INDUSTRIAL COURT OF NEW SOUTH WALES
First Respondent

JOHN EMMANUEL ROSE
Second Respondent

JUDGES:	BRANSON, GREENWOOD AND PERRAM JJ
DATE:	13 OCTOBER 2008
PLACE:	SYDNEY

159 I have had the benefit of reading in draft the reasons of Branson and Greenwood JJ who would dismiss the proceeding. With considerable hesitation I have come to a different conclusion and it is appropriate, therefore, that I state my reasons for so doing.

160 The present Applicants apply to this Court for orders which would have the effect of preventing the Industrial Relations Court of New South Wales from proceeding to hear and determine a case currently pending before that Court. Those proceedings were commenced by Mr Rose against Meriton Apartments Pty Ltd ("Meriton") and the Owners Corporation of Strata Plan 56443 ("the Owners Corporation") pursuant to s 106 of the Industrial Relations Act 1996 (NSW). That provision permits the Industrial Relations Court to declare certain kinds of contracts to be unfair and, ancillary to such a determination, to grant other relief including compensation. A company associated with Mr Rose entered into a caretaker agreement with the Owners Corporation of a residential building known as "the Regis Towers" situated between Pitt and Castlereagh Streets in the central business district of Sydney. Mr Rose contends that the circumstances leading to the formation of that agreement together with certain deficiencies in the Regis Towers themselves have rendered the contract unfair and, hence, that he should be given relief under s 106.

161 Subsequent to the commencement of the proceedings, Mr Rose became bankrupt in consequence of which the right to bring the proceedings was vested in Mr Rose’s trustee in bankruptcy by s 58 of the Bankruptcy Act 1966 (Cth). The proceedings themselves were immediately stayed by operation of s 60(2) of the same Act. Subsequently, whilst the proceedings were still stayed, Mr Rose’s trustee in bankruptcy purported to assign to him those proceedings. At the time of the purported assignment the trustee gave no notice to Meriton or the Owners Corporation that the proceedings had been so transferred. However, shortly thereafter the solicitors for the Owners Corporation required the trustee to elect whether he proposed to prosecute the proceedings or whether, instead, he was going to discontinue them. The Owners Corporation had a right to require the trustee to make an election in writing by reason of s 60(3) of the Bankruptcy Act 1966 (Cth).

162 Although it will be necessary to return to the provisions of s 60 in more detail, it suffices for present purposes to observe that if the trustee did not make that election within 28 days of being required to do so the proceedings were thereafter deemed to have been abandoned by him. Within that 28 day period, the trustee responded to the Owners Corporation by informing its solicitors, in writing, that he had assigned the proceedings to Mr Rose. It is not self-evident that notice by the trustee of his assignment of the proceedings could be an election by him to prosecute the proceedings. However, that it could be was supported by the decision of Mason P, sitting alone, in Baker v Sheridan [2005] NSWCA 408 at [39]. No other written election was received within the 28 day period.

163 Meriton and the Owners Corporation then took the view that the Bankruptcy Act 1966 (Cth) did not permit a trustee to assign proceedings to an undischarged bankrupt so that the assignment by the trustee was ineffective. Further, and perhaps more materially, they took the view that the invalidity of that assignment meant that the letter by which the trustee had notified Meriton and the Owners Corporation of the assignment could not constitute an effective election since it presupposed, incorrectly, the existence of a valid assignment. This view was not shared by Mr Rose. Meriton and the Owners Corporation then filed motions before the Industrial Relations Court by which they sought the dismissal or striking out of Mr Rose’s proceedings on the basis that they were deemed to be abandoned by operation of s 60(3) of the Bankruptcy Act 1966 (Cth). Those motions came before Marks J who determined, first, that it was not competent for a trustee in bankruptcy to assign a chose of action to an undischarged bankrupt and, secondly, that the trustee’s letter notifying the assignment could not be an election for the purposes of s 60(3). He therefore dismissed the proceedings.

164 On appeal, the Full Bench of the Industrial Relations Court came to the opposite conclusion and vacated the orders of Marks J. The necessary consequence of its orders is that, unless prevented by this Court, the Industrial Relations Court will now proceed to hear and determine Mr Rose’s proceedings. The Full Bench’s orders were entered on 30 November 2007. Meriton and the Owners Corporation commenced the current proceeding in this Court on 27 March 2008 seeking orders quashing the orders made by the Full Bench, restraining the Industrial Relations Court from taking any further steps in Mr Rose’s proceedings and seeking declarations that those proceedings had been abandoned.

165 Notions of comity and respect dictated that the questions concerning such relief against the Full Bench of the Industrial Relations Court should only be determined by a Full Court of this Court and orders to give effect to that view were made by the Chief Justice upon the recommendation of a single Judge of this Court. In this proceeding, which although heard by a Full Court was heard in the Court’s original jurisdiction, Mr Rose then filed a motion seeking a summary dismissal of the proceeding. That motion was heard at the same time as the principal proceedings. The parties agreed a statement of facts and suggested various questions to be answered.

(a) whether the grant of exclusive jurisdiction in bankruptcy to this Court and the Federal Magistrates Court meant that the Industrial Relations Court exceeded its jurisdiction in determining the applications brought by Meriton and the Owners Corporation and whether, if so, its orders should be set aside; and

(b) whether, if those orders were set aside, this Court should determine the bankruptcy issues for itself.

168 The relevance of s 27 only emerged during the hearing in this Court. The parties provided supplementary written submissions about the point following the hearing. No party asked the Industrial Relations Court to consider the implications of the provisions and, understandably, it did not do so.

169 It is important to emphasise that Meriton and the Owners Corporation sought, by their motions, pre-emptorily to dispose of Mr Rose’s proceedings because of the operation of the Bankruptcy Act 1966 (Cth). Specifically, they argued that although s 134(1)(a) of that Act conferred a power on the trustee to sell property, properly construed, that provision did not authorise the sale of a cause of action to an undischarged bankrupt. It was also argued that the operation of s 60(3) meant that the proceedings were deemed to have been abandoned.

170 Were it not for s 27 there would be no doubt that the Industrial Relations Court had jurisdiction to determine these issues. For, subject to certain presently immaterial exceptions, s 39(2) of the Judiciary Act 1903 (Cth) invests federal jurisdiction in the several courts of the States in all matters in which the High Court has original jurisdiction or in which original jurisdiction may be conferred upon it. Section 76(ii) of the Constitution permits the Parliament to confer original jurisdiction on the High Court in any matter "arising under any laws made by the Parliament". Since the Industrial Relations Court is a State court for the purposes of s 39(2) it follows that it is invested with jurisdiction in any matter arising under a law of the Parliament. The Bankruptcy Act 1966 (Cth) is such a law. A matter will arise under a federal law if the right or duty in question owes its existence to federal law: R v Commonwealth Court of Conciliation and Arbitration; Ex parte Barrett [1945] HCA 50; (1945) 70 CLR 141 at 154 per Latham CJ; LNC Industries Ltd v BMW (Australia) Ltd [1983] HCA 31; (1983) 151 CLR 575 at 581 per Gibbs CJ, Mason, Wilson, Brennan, Deane and Dawson JJ and at 582-583 per Murphy J. Meriton and the Owners Corporation asserted rights to have the proceedings dismissed or struck out which rights owed their existence entirely to the Bankruptcy Act 1966 (Cth). But for s 27, therefore, the existence of federal jurisdiction in the Industrial Relations Court would be clear.

171 However, the general grant contained in s 39(2) cannot be used to outflank the jurisdictional limitations which are expressed in s 27. The exclusivity of this Court’s jurisdiction in bankruptcy was brought about by the passage of the Bankruptcy Legislation Amendment Act 1996 (Cth). That Act effected a partial repeal of s 39(2) so that the several courts of the State were not invested with federal jurisdiction in matters which were "in bankruptcy": Kartinyeri v Commonwealth [1998] HCA 22; (1998) 195 CLR 337 at 353 [9] per Brennan CJ and McHugh J; 369 [48] per Gaudron J; 375-376 [66]-[70] per Gummow and Hayne JJ 421 [175] per Kirby J; see also The Queen v Ward [1978] HCA 27; (1978) 140 CLR 584 at 589 per Gibbs ACJ, Stephen, Mason, Jacobs and Aickin JJ for a general discussion on the interaction between s 39(2) and the vesting of jurisdiction by other statutes.

172 That this is so follows from the High Court’s decision in Stack v Coast Securities (No 9) Pty Ltd [1983] HCA 36; (1983) 154 CLR 261 where it was accepted that a grant of exclusive jurisdiction to this Court under Part VI of the Trade Practices Act 1974 (Cth) operated to exclude the jurisdiction that the Supreme Court of Queensland would otherwise have had by reason of s 39(2). There is no precise overlap between jurisdiction exercised in respect of matters "arising under" the Bankruptcy Act 1966 (Cth) and the exercise of jurisdiction "in bankruptcy", although in practice there may tend to be some degree of coincidence between the two concepts. The distinction is important because to the extent that a matter arises under the Bankruptcy Act 1966 (Cth) but does not involve the exercise of jurisdiction "in bankruptcy", s 27 will not prevent a State court from exercising the jurisdiction conferred on it by s 39(2) of the Judiciary Act 1903 (Cth): cf Stack at 277 per Gibbs CJ. In effect, this is Mr Rose’s contention in this case. One example which illustrates the distinction would be an application to the New South Wales Court of Appeal to restrain the Industrial Relations Court from exercising any jurisdiction reserved from it by s 27 of the Bankruptcy Act 1966 (Cth), which involves a matter arising under the Act but not the exercise of jurisdiction "in bankruptcy".

173 It is therefore necessary to attend to the meaning of the expression "jurisdiction in bankruptcy" in s 27. That expression takes one to the definition of "bankruptcy" in s 5 which is in these terms:

The expression also appears in the definition of "the Court" in the same section:

174 On its face, therefore, s 27 appears to operate as a conferral on the Federal Court and the Federal Magistrates Court of jurisdiction "under or by virtue" of the Bankruptcy Act 1966 (Cth) and it is that jurisdiction – the jurisdiction "under or by virtue" of the Act – which is exclusive of all courts except the High Court under s 75. That, of course, means that the jurisdiction is also exclusive of the High Court's jurisdiction under s 76 of the Constitution (conferred by s 30 of the Judiciary Act 1903 (Cth)) which includes that court’s jurisdiction in matters arising under the Constitution or involving its interpretation: s 30(a). That may have the interesting (and probably unintended) consequence, that a challenge in proceedings under or by virtue of the Bankruptcy Act 1966 (Cth) to the constitutional validity of a provision of the Bankruptcy Act 1966 (Cth) is not within the original jurisdiction of the High Court (unless otherwise within the grant of jurisdiction under s 75).

175 Apart from that curiosity, there are textual difficulties with s 27. If jurisdiction "under or by virtue of" the Bankruptcy Act 1966 (Cth) means a jurisdiction expressly or impliedly granted by that Act then at least two problems arise. First, s 27 becomes redundant for, on this view of things, wherever the Act expressly or impliedly grants jurisdiction it has already done so without the ministrations of s 27. That view of s 27 reduces it to a role where it is not a grant of jurisdiction but rather, merely a statement of the obvious, namely, that the Act invests the Federal Court and Federal Magistrates Court with the jurisdiction it invests them with.

176 Secondly, even as a matter of plain text it is apparent that the Act assumes the exercise of jurisdiction by "the Court" where that jurisdiction is not expressly or impliedly conferred by the Act. For example, ss 31(1)(c), (e) and (f) provide:

177 Each of these provisions assumes that "the Court" has jurisdiction to hear such a suit even though no grant of any such jurisdiction is to be found in the Act. Further, this provision is not a grant of power (which might carry with it an implied grant of jurisdiction) but a direction as to whether particular aspects of the jurisdiction are to be exercised in open court. This has the consequence that the definition of "bankruptcy" in s 5, if literally applied to ss 27 and 31, renders them otiose. Such a reading should, so it seems to me, be avoided where possible. Fortunately, the context in which these provisions were enacted tells against such an interpretation, for the expression "in bankruptcy" is a venerable one in bankruptcy statutes.

178 Prior to the English Bankruptcy Act 1831 (1 & 2 Wm 4, c 56), there were no courts of bankruptcy, although the Insolvency Act 1813 (53 Geo 3, c 102) had created a court for the relief of insolvent debtors whose function was limited to allowing debtors to petition for their release from custody. Instead, following an act of bankruptcy a petition could be presented to the Lord Chancellor seeking the appointment of a person who, by commission, took control of the bankrupt’s assets: ss 11 and 12 of the Bankruptcy Act 1825 (6 Geo 4, c 16). The Bankruptcy Act 1831 was entitled "An Act to establish a Court in Bankruptcy". The Court was created as a court of law and equity and a court of record and had all of the rights, incidents and privileges of the courts of law at Westminster: s 1. There was no explicit statement of the Court’s jurisdiction but the preamble to the Act provided that it was "expedient to provide Means of administering and distributing the Estate and the Effects of Bankrupts, and of determining the Questions which from Time to Time arise touching the same". That court was continued by the Bankruptcy Act 1849 (12 & 13 Vict, c 106) and by the Bankruptcy Act 1861 (24 & 25 Vict, c 134). Despite the title of the 1831 Act the first time the expression "in bankruptcy" appeared in the substantive provisions of a statute was in the Bankruptcy Act 1869 (32 & 33 Vict, c 71).

179 That Act made extensive provision for the courts dealing with bankruptcy and s 59 of that Act mentioned, for the first time, the jurisdiction of courts "in bankruptcy": ss 59, 69 and 72. Shortly after the passage of the Bankruptcy Act 1869, the nature of this jurisdiction "in bankruptcy" was explained by Lord Selborne LC in Ellis v Silber (1872) LR 8 Ch App 83 at 86 in these terms:

180 Lord Selborne’s early doubts as to the breadth of the jurisdiction were shared by Jessel MR in In re Pollard; Ex parte Dickin (1878) 8 Ch D 377 at 386. However, on the assumption that the jurisdiction was broad, he was of the view that its exercise was discretionary (at 386). James and Bramwell LJJ agreed (at 387). Despite having been party to the decision in Ex parte Dickin, James LJ went on to hold in In re Shanks; Ex parte Swinbanks (1879) 11 Ch D 525 that the jurisdiction was "almost unlimited" but at the same time coupled with a discretion to refuse to exercise it (at 532), a view shared by Brett LJ (at 535) and Cotton LJ (at 537). Despite the early doubts of Lord Selborne and Jessel MR, it was established by 1879 that the jurisdiction was of the very broadest kind but its breadth was tempered by a discretion against its exercise. It was this view that prevailed and became orthodox: In re Harrison; Ex parte Butters (1880) 14 Ch D 265 at 267 per James and Baggallay LJJ at 267, Bramwell LJ at 207. A useful summary of the practice which developed on the question was provided by Clauson J in In re Horder [1936] 1 Ch 744 at 746-747 in these terms:

181 The local position in the Australian colonies was a little different. The Bankruptcy Act 1841 (5 Vict, c 17) in New South Wales did not create a separate bankruptcy court. Instead, s 104 conferred jurisdiction on a Supreme Court judge "for all the purposes of this Act". This was followed by s 127 of the Bankruptcy Act 1887 (51 Vict, c 19) which conferred jurisdiction "in insolvency" on a Supreme Court judge. A similar jurisdiction "in insolvency" was conferred by s 87 of the Victorian Insolvency Act 1897 (61 Vict, c 1513) on the Court of Insolvency. This jurisdiction was interpreted in Howden v Cock [1915] HCA 44; (1915) 20 CLR 201 at 209 by a majority of the High Court as extending to:

182 It was against these established backdrops that both the English Bankruptcy Act 1914 (4 & 5 Geo 5, c 59) and the Bankruptcy Act 1924 (Cth) were introduced. Section 96 of the former created the High Court and the county courts as the courts having jurisdiction "in bankruptcy". Similarly, the courts which had jurisdiction "in bankruptcy" were enumerated in s 18 of the latter. These included any federal courts of bankruptcy which had been created – there were none in 1928 when the Act was proclaimed – together with the Supreme Courts of each State other than Victoria and South Australia where there were specialist bankruptcy courts.

183 The word "bankruptcy" was defined in s 4 of the Bankruptcy Act 1924 (Cth) to mean:

This definition was absent from the English Act of 1914. Its use of the word "includes" is of significance for present purposes because it is that word, and only that word, which is absent from the present definition. Although a single word, its presence has a considerable effect. Because of the inclusive nature of the definition, the grant of "jurisdiction in bankruptcy" to the courts listed in s 18 was not an empty statement that those courts had the jurisdiction expressly or impliedly conferred by the Act; rather, it was a statement that their jurisdiction included that jurisdiction. Given the way that jurisdiction in bankruptcy had been interpreted this was not surprising. There was every reason to think that the jurisdiction thereby conferred included the pre-existing notion of jurisdiction in bankruptcy and it was perfectly logical to expand that jurisdiction to include any other jurisdiction conferred by the terms of the Act itself.

184 In Re Hawkesford (1937) 10 ABC 26 Lukin J considered the breadth of this grant of jurisdiction. He concluded, based on the High Court’s decision in Howden v Cock [1915] HCA 44; (1915) 20 CLR 201, that a proceeding in relation to a deed of assignment was within the jurisdiction "in bankruptcy". In reaching that conclusion his Honour (at 29-30) explicitly relied upon each of the English decisions to which reference has been made and in so doing accepted the breadth of the jurisdiction. More importantly for present purposes, his Honour also held that the expression "any jurisdiction or proceedings under or by virtue of this Act" in s 4 had the effect of giving to the definition of bankruptcy "a wider meaning than that obtaining in the English Act" (at 29). There was also no suggestion in academic writings at the time that the 1924 Act had narrowed the scope of the bankruptcy jurisdiction. For example, Lewis’ Australian Bankruptcy Law (2nd ed, Law Book Company of Australasia, 1934) dealt in some detail with what was within the grant of jurisdiction in bankruptcy and what was not (at pp 34-37). There is singularly absent any suggestion that the notion of jurisdiction in bankruptcy had been narrowed by the passage of the 1924 Act.

185 The Bankruptcy Act 1966 (Cth) replaced the 1924 Act. Section 27 of the 1966 Act, in its original form, was not dissimilar to s 18 of the 1924 Act which it replaced. Section 27(1) listed the State courts having jurisdiction "in bankruptcy" and s 27(2) then invested those courts with "federal jurisdiction in bankruptcy". The expression "bankruptcy" was defined in s 4 to mean:

186 The definition was identical save that the word "includes" was replaced with the word "means". Although that was only a single word, the effect of the alteration was to make the definition exhaustive rather than merely inclusive as it had been in the 1924 Act. The difficulties that an exhaustive definition poses to the current form of the Act have already been noted at [17]-[18]. For present purposes, however, it is to be noted that those difficulties afflicted the Act as originally passed. So too, ss 31(1)(e) and (f) appeared to grant power to make certain kinds of order where, if the definition was strictly applied, there was no jurisdiction. Finally, s 30(1)(a) in its original form provided:

187 The expression "in any case of bankruptcy" did not correspond with the notion of conferral of jurisdiction "in bankruptcy" if that notion was limited to jurisdiction "under or by virtue of" the Act. Of course, it made sense if the traditional notice of jurisdiction in bankruptcy was preserved.

188 At the time of the introduction of the 1966 Act there was nothing to indicate that Parliament understood itself to be changing the nature of jurisdiction in bankruptcy. Nothing in the speeches of the Attorney-General or the Leader of the Opposition during debate on the bill suggests any intention to alter what had previously been understood: Australia, House of Representatives, Debates (1965) Vol HR47, pp 30-31. Academic works written at the time did not note any alteration in the nature of the jurisdiction: Lewis’ Australian Bankruptcy Law (5th ed, Law Book Company of Australasia, 1967) at pp. 19-22.

189 Yet it seems that this was apparently what was achieved by the deletion of the word "includes". Nothing in the parliamentary speeches throws any light on why that word was deleted. For myself, it is difficult to conclude that Parliament intended a root and branch alteration of the jurisdiction of the Courts having jurisdiction in bankruptcy without any discussion thereof and by the replacement of a single word. Further, to think that this is what occurred leads to various provisions being redundant and others empty. It is established that general words in a statute may be constrained by their context: Network Ten Pty Ltd v TCN Channel Nine [2004] HCA 14; (2004) 218 CLR 273 at 280-281 [11]- [12] per McHugh ACJ, Gummow and Hayne JJ. The same case establishes the relevance of the inconvenience and improbability of a reading of s 27 in 1966 which would have resulted in a fundamental alteration of the nature of jurisdiction in bankruptcy: [12]. This case is one of those cases where the history of the statute illuminates its present meaning: cf CTM v The Queen [2008] HCA 25; (2008) 247 ALR 1 at 48 [205] per Heydon J.

190 In this case, the history and context make it appropriate to conclude that in 1966 the replacement of the word "includes" with the word "means" in the definition of "bankruptcy" did not alter the content of that concept. This requires the definition of that expression to be read in an inclusive rather than an exhaustive fashion. And, of course, the opening words of s 5 "unless the contrary intention appears" provide yet further scope for such an approach. Although the textual matters just considered were never closely analysed, a number of subsequent cases about the 1966 Act correctly confirm that the grant of jurisdiction under s 27 was as broad as the former grant under the 1924 Act.

191 In Re Lamb; Ex parte Melsom [1980] WAR 129 Brinsden J concluded that he had power to consolidate two bankrupt estates pursuant to s 30(1)(b) even though no jurisdiction to make an order consolidating proceedings was expressly or impliedly granted by any provision of the Act. More importantly, there then followed four decisions of the Full Court of this Court affirming a similar approach. The first was Morris v Maroudas (1986) 12 FCR 346. In that case, Morris had applied to the Federal Court for orders setting aside a judgment given in the Western Australian District Court on the basis that the judgment had been entered against Morris at a time when the effect of a Part X arrangement was that he was no longer indebted to the Plaintiffs creditors. Toohey J applied what had been held by Lukin J in Re Hawkesford to come to the conclusion that the jurisdiction in bankruptcy was broad (at 359). Spender J did not apply that approach but came to the view that it was within jurisdiction in any event. Northrop J dissented.

192 The breadth of the jurisdiction was again confirmed in the second decision of the Full Court in Forshaw v Thompson [1992] FCA 150; (1992) 35 FCR 320 at 334 per Lockhart J with Black CJ and Sweeney J agreeing. Lockhart J thought that the width of the jurisdiction was "exemplified by the wide definition of the term ‘bankruptcy’ in s 5(1)". For myself, the breadth of that term springs from an understanding that the definition is inclusive rather than exhaustive. So viewed, it is a conclusion which reflects the view of Lukin J in Re Hawkesford.

193 Forshaw v Thompson was, in turn, followed by a third Full Court in Farrow Mortgage Services v Aberratne (1993) 47 FCR 208 at 215 per Northrop, Sheppard and Wilcox JJ, and a fourth in Re Dingle; Westpac v Worrell (1993) 47 FCR 478 at 484-485 per Wilcox, Ryan and Cooper JJ. By 1994, two years before the 1996 amendments, Lewis’ Australian Bankruptcy Law (10th ed, Law Book Company of Australasia, 1999) at p 20 noted the broad nature of the "powers" involved, citing the Full Court’s decision in Morris v Maroudas (although presumably its authors are to be taken as referring to jurisdiction). Thus, immediately prior to 1995 when the Federal Court’s jurisdiction was made exclusive, it was plainly established that jurisdiction "in bankruptcy" in s 27 was a broad concept. Further, historically, the breadth of the jurisdiction – the perils of which had been early recognised – was tempered by a discretion not to exercise the jurisdiction.

194 It is convenient to record at the outset my conclusion on this question – the question of whether the deed of assignment was valid is a question which must be determined "in bankruptcy" for it determined the title of the trustee to Mr Rose’s right of action. On the other hand, the question of whether the proceedings in the Industrial Relations Court were stayed (by s 60(2)) or deemed to have been abandoned (by s 60(3)) was not such a question. My reasons for these conclusions are as follows.

195 It was well established by the end of the nineteenth century that questions which affected the position of a trustee (or at that time, assignee) were part of jurisdiction in bankruptcy: see for example In re Pollard; Ex parte Dickin (1878) 8 Ch D 377 at 386 per Jessel MR with whom James and Bramwell LJJ agreed; In re Harrison; Ex parte Butters (1880) 14 Ch D 265 at 267 per James LJ, 268 per Baggallay and Bramwell LJJ; In re Shanks; Ex parte Swinbanks (1879) 11 Ch D 525 at 532 per James LJ, 535 per Brett LJ, 537 per Cotton LJ. They remained such when the 1924 Act was passed and, for the reasons I have given, when the 1966 Act was passed. Consistent with the existence of that jurisdiction was the requirement that its exercise take place in open court: s 21(d) of the 1924 Act; s 31(1)(f) of the 1966 Act.

196 Once that is accepted, as I think it must be, it follows that jurisdiction to determine the trustee’s title to Mr Rose’s right of action was exclusively vested in this Court and the Federal Magistrates Court. The existence of that jurisdiction is demonstrated by s 31(1)(f) which requires this Court to exercise the jurisdiction to declare the title of the trustee to the right of action in open court. It is important to emphasise that s 31 is not a grant of power but a requirement that certain powers be exercised in open court. It seems to me that the question of the title of a trustee might come up in a number of different ways "in bankruptcy" and not just by way of the declaration referred to in s 31(1)(f). This underscores that s 31(1)(f) is not a grant of jurisdiction itself, and therefore that the real question is not whether a court is being asked for such a declaration, but rather whether it is purporting to determine the title of the trustee. Once that receives an affirmative answer, it follows that the matter lies in this Court’s exclusive jurisdiction.

197 Be that as it may, I do not think that the question of whether an election by the trustee took place within the meaning of s 60(2) or whether the proceedings were deemed to be abandoned by force of s 60(3) were questions which arose "in bankruptcy". This is because, first, s 60 was not present in the nineteenth century English statutes so that there is no warrant for concluding that those questions are historically "in bankruptcy"; secondly, the evident purpose of s 60 was to replace certain antiquated procedures and to achieve, in the court concerned, a more efficient outcome than that provided for by those former procedures: Fuller v Beach Petroleum NL [1993] FCA 453; (1993) 43 FCR 60 at 64. As Gummow and Whitlam JJ demonstrated in that case, the purpose of s 60 was to obviate the plea in bar of pius darrein continuance (see Bennett v Gamgee (1877) 36 LT 48 at 49 per Cockburn CJ) and a corresponding practice in chancery. If decisions about s 60(2) and (3) were "in bankruptcy" that simplifying function would be thwarted. Those two matters lead me to conclude that the determination of whether the matter is stayed or deemed to have been abandoned is not a question which involves the exercise of "jurisdiction in bankruptcy". For completeness, it goes without saying that no provision of the Act confers jurisdiction to determine the issues posed by ss 60(2) and (3).

Subsequent amendments have brought the provision into its current form, however, none of those amendments is presently material. The principal matter to be noted is that jurisdiction "in bankruptcy" was made exclusive of the courts of the State.

199 While the second reading speeches for the bill throw no light on why the jurisdiction was made exclusive, the explanatory memoranda do. Paragraph 29.1 of the memorandum provided to the Senate said:

200 A similar memorandum was provided to the House of Representatives. The report of the Senate Legal & Constitutional Legislation Committee’s review of the bill assumed that jurisdiction "in bankruptcy" under s 27 was the same concept as that involved in the notion of an application made under the Bankruptcy Act 1966: see [1.180]-[1.181]. It will be apparent that this was an erroneous understanding of the jurisdiction "in bankruptcy". If given full effect, the consequence of s 27 will be that the broad and discretionary jurisdiction described by James LJ as "almost without limit" (In re Shanks; Ex parte Swinbanks (1879) 11 Ch D 525 at 532) will be rendered exclusive of the jurisdiction of State courts. The practical difficulties presented by such a state of affairs have been experienced before: cf Stack v Coast Securities (No 9) [1983] HCA 36; (1984) 154 CLR 261. It was not then regarded as a desirable outcome. It should not now be so regarded.

201 This may appear to create something of a conundrum from the standpoint of statutory interpretation. However, to my mind at least two propositions may be extracted from the terms of the amended s 27, the explanatory memoranda and the Committee report. First, Parliament did not intend to alter the nature of the jurisdiction in bankruptcy; secondly, it did intend to render that jurisdiction exclusive. That Parliament’s position was based upon an erroneous understanding of the content of "jurisdiction in bankruptcy" is not to the point. It is not for this Court to rewrite the statute so that it says what this Court thinks it might have said if Parliament had appreciated the meaning of jurisdiction in bankruptcy.

202 If the amendment had removed a fundamental common law assumption there might be some warrant for seeking to reinterpret "jurisdiction in bankruptcy": cf CTM v The Queen [2008] HCA 25; (2008) 247 ALR 1 at 13 [35] per Gleeson CJ, Gummow, Crennan and Kiefel JJ, 17 [57] per Kirby J. However undesirable it may be to make a broad and discretionary jurisdiction exclusive – and the decision in Stack v Coast Securities (No 9) Pty Ltd [1983] HCA 36; (1983) 154 CLR 261 shows just how undesirable that can be – it is not possible to describe that principle of constitutional prudence as a fundamental common law right. Once that is accepted it must follow that there is no warrant for approaching the notion of "jurisdiction in bankruptcy" any differently merely because the jurisdiction has been made exclusive of the jurisdiction of the State courts. The grant of jurisdiction must have had the same content both immediately before and immediately after the amendment; all that changed was the identity of the courts which could exercise it.

203 It is then necessary to turn to the decisions which have been reached since the introduction of exclusive jurisdiction in bankruptcy. In Sutherland v Brien [1999] NSWSC 155; (1999) 149 FLR 321 proceedings were brought to determine the ownership of some moneys in a trust account. It was contended that certain arrangements were void against the trustees in bankruptcy. Austin J said (at 323 [8]):

204 In light of what has been said, I do not think, with respect, that this can be correct. It is inconsistent with the longstanding concept of jurisdiction in bankruptcy. For reasons I have already given, the reliance placed by Austin J on the definition in s 5 cannot bring about a different result.

205 In Baral v Official Trustee [1999] FCA 77; (1999) 89 FCR 422 Lehane J considered whether an earlier decision given by the Supreme Court was given without jurisdiction by reason of s 27. The question in those proceedings concerned whether a deed by which a discharged bankrupt had acquired a right of action from his trustee in bankruptcy was valid. At the time, such an assignment required the consent of creditors which had not been obtained. The Supreme Court had concluded that the assignment was invalid and that the defendants in the suit had standing to challenge the validity of the assignment. In the proceedings in the Federal Court Lehane J said of s 27 (at 429-430 [34]-[35]):

206 However, the question of whether jurisdiction in bankruptcy was exercised is not a function of whether it is purportedly exercised for that forms no part of the definition. Rather, it is a question of whether the jurisdiction exercised can be said to fall within the concept of jurisdiction in bankruptcy. Since it concerned the title of the trustee it was within the jurisdiction.

207 The correctness of Sutherland v Brien came before a Full Court of this Court in Scott v Bagshaw [2000] FCA 816; (2000) 99 FCR 573 which distinguished it on the basis that the subject matter of the case before it could be said to be "under or by virtue" of the Act. In my opinion, this Court should go further and overrule Sutherland v Brien. In that circumstance, it is unnecessary to comment on the decisions in Green v Schneller [2001] NSWSC 897; (2001) 189 ALR 464 and Anderson v Peldan (2004) 212 ALR 291 both of which narrowed the effect of Sutherland v Brien. Stone J applied Green v Schneller in Porteous v Donnelly [2003] FCA 783; (2003) 200 ALR 274 at 277-278 [11]- [12] to conclude that the exclusive jurisdiction was engaged and the jurisdiction of the Supreme Court of Western Australia was excluded. The result in that case would not be altered by the approach to s 27 exhibited in these reasons.

208 In Geia v Palm Island Aboriginal Council [2001] 1 Qd R 245 the Queensland Court of Appeal considered the effect of s 27. The question was whether a bankrupt employee's action should be dismissed as incompetent. No party argued that s 27 deprived the State court of jurisdiction. However, the court said this (at 253 [18]-[19]):

209 The question of whether the proceedings were vested in the trustee was a question about the title of the trustee and hence, as the Court of Appeal recognised, was within the jurisdiction of this Court. But it followed, in my opinion clearly, that if that question were within this Court’s jurisdiction, it could not at the same time be within the jurisdiction of the Court of Appeal because the inconvenient concept of exclusivity permits no other outcome.

210 The application of those principles to the current facts is not straightforward. The Industrial Relations Court had jurisdiction to determine whether the trustee had elected to prosecute the proceedings under s 60(2) and it likewise had jurisdiction to determine whether those proceedings had been abandoned under s 60(3). However, it was forbidden by s 27 to examine any issue which affected the title of the trustee and this necessarily included the validity of the deed of assignment.

211 It might have been possible for the Industrial Relations Court to have determined the s 60 issues without recourse to the issue of the validity of the deed of assignment. It could, for example, have concluded that the letter alleged to be an election was such without considering the deed of assignment’s validity. However, it did not do so. It is clear that both Marks J and the Full Bench considered the validity of the deed of assignment and, in both cases, that consideration was an indispensable step in the process of making their orders. It follows that their orders resulted from the impermissible exercise of a non-existent jurisdiction.

212 This Court has jurisdiction in matters arising under laws of the Parliament: s 39B(1A)(c) Judiciary Act 1903 (Cth). Accordingly, this Court has jurisdiction to determine whether the effect of s 27 of the Bankruptcy Act is to exclude from a State court's jurisdiction some particular matter. Because both the Industrial Relations Court and the Supreme Court of New South Wales are state courts they too have the jurisdiction to consider the effect of s 27 on proceedings before them. Their consideration of those issues is warranted by s 39(2) of the Judiciary Act 1903 (Cth). Thus, had the question of s 27 been raised before the Industrial Relations Court, it would have had jurisdiction to determine the effect of s 27. Further, the Supreme Court would have had jurisdiction to confine the Industrial Relations Court under the same source of jurisdiction.

213 This Court's jurisdiction under s 39B(1A)(c) is no different. Since the matter arises under the Bankruptcy Act 1966 (Cth), once this Court is satisfied that there is a jurisdictional excess by the Industrial Relations Court, it may correct it. The situation is analogous to that obtaining in The Queen v Ross-Jones; Ex parte Green [1984] HCA 82; (1984) 156 CLR 185 where the High Court granted prerogative relief against the Family Court. Of course, there are two distinctions – first, the High Court was there exercising the jurisdiction conferred by s 75(v) of the Constitution and, secondly, the principle it was concerned with was the maintenance of federal superior courts within their assigned jurisdictions. However, there seems to be no reason in principle why this Court, in the exercise of the jurisdiction conferred by s 39B(1A)(c), cannot keep State courts within their federally defined limits. This Court therefore has power to set aside the orders of the Industrial Relations Court.

214 The question then becomes whether that power should be exercised in favour of the Applicants. I agree with Branson J that the exercise of that power is discretionary. Against the granting of relief seem to me to be the following:

(a) the Applicants did not raise s 27 until the hearing in this Court; indeed, it was they who invoked the jurisdiction of the Industrial Relations Court in the first place;

(b) the New South Wales Court of Appeal has jurisdiction to entertain a claim that the Industrial Relations Court does not have jurisdiction by reason of s 27. Such a proceeding would not be "in bankruptcy" and would be a matter arising under the Bankruptcy Act 1966 (Cth) within the meaning of s 39(2) of the Judiciary Act 1903 (Cth).

(c) there is much to be said for the view that, generally speaking, State remedies should be exhausted before any approach is made to this Court. Applications of the present kind have a tendency to diminish the established jurisdictions of State courts; and

(d) the period of time which has elapsed since the Industrial Relations Court’s proceedings were commenced is substantial.

215 On balance, however, I do not think these considerations should prevail. This is for a number of reasons. First, s 27 operates not only as a command that the Industrial Relations Court should not determine the issue in bankruptcy but as a command that this Court or the Federal Magistrates Court should. To decline to set aside the orders of the Industrial Relations Court would operate effectively as a refusal by this Court to carry out the functions assigned to it by s 27. Secondly, had any party approached this Court at an earlier stage relief would have been refused on the basis that the Industrial Relations Court had jurisdiction to determine whether its jurisdiction under s 39(2) of the Judiciary Act 1903 (Cth) was excluded by s 27, for a superior court has jurisdiction to determine whether it has jurisdiction. The force of the delay argument is, therefore, much diminished. Thirdly, all parties were involved in the failure to observe the effect of s 27 which was raised only for the first time by this Court during argument. Since both parties were included in that failure, it would be unjust to punish one of them by declining relief for discretionary reasons. More is this so where the identity of the party punished is an arbitrary function of which party lost before the Full Bench and hence which was the Applicant in this Court. For those reasons I would quash all of the orders of the Industrial Relations Court and would prohibit that Court from further considering the question of the validity of the deed of assignment other than to give effect to this Court's view on that issue.

216 During oral submissions, counsel for Mr Rose sought to outflank the effect of s 27 by resorting to covering clause 5 of the Commonwealth of Australia Constitution Act (63 & 64 Vict, c 12) which provides:

217 In Claflin v Houseman [1876] USSC 38; (1876) 93 US 130 (at 136 per Bradley J) the basis on which the courts of the States of the United States decided federal questions was explained thus:

218 The language of the first sentence was the language of the second paragraph of Article VI of the United States Constitution which provides:

219 Mr Rose's argument is effectively an application of the reasoning in Claflin to covering clause 5. There are clear textual similarities between Article VI and covering clause 5. In my opinion, however, it is inappropriate to apply Claflin to the situation obtaining under this country’s constitutional arrangements. That is because the provisions of Chapter III of the Australian Constitution deal expressly with the topic of the relationship between federal law and State courts in a way in which is wholly absent from Article III of the US Constitution. Section 77 permits the vesting in State courts of federal jurisdiction with respect to the defined heads of jurisdiction enumerated in ss 75 and 76.

220 Were the reasoning in Claflin applied in the present circumstance those provisions would be rendered otiose because each of the heads of jurisdiction in ss 75 and 76 would already be vested by covering clause 5. Further, the careful structure of ss 75 to 77 and, in particular, the ability to vest some, but not all, of the jurisdiction in ss 75 and 76 would be defeated by such a reading of covering clause 5 as would the ability to render such jurisdiction exclusive. There are other difficulties too: the vesting of jurisdiction worked by covering clause V would not be limited, as ss 75 and 76 are, by the notion of a "matter". It would, therefore, be possible for a State court, in pursuance of the jurisdiction conferred by the clause, to give an advisory opinion on a question of federal law, a result which has been emphatically denied in federal jurisdiction: In re Judiciary and Navigation Acts [1921] HCA 20; (1921) 29 CLR 257.

221 So too, as Claflin shows, when a State court’s jurisdiction is exercised on this basis it is not "federal jurisdiction" and the orders of a State court do not take effect as an exercise of the judicial power of the Commonwealth. Rather, under Claflin, a State court’s determination of a federal question takes effect as an exercise of the judicial power of the State. That observation means that the provisions of s 73 of the Constitution, which establish the appellate jurisdiction of the High Court, become frustrated. Section 73 guarantees to the High Court appellate jurisdiction from all courts exercising federal jurisdiction. The evident motive for that arrangement is to bring about a uniform interpretation of federal law. If covering clause 5 permits federal questions to be decided other than in federal jurisdiction that function is undermined. A State court exercising jurisdiction under covering clause 5 is not exercising federal jurisdiction with the consequence that no appeal to the High Court is guaranteed by s 73. To take a concrete example, if s 27 of the Bankruptcy Act 1966 (Cth) renders the jurisdiction of this Court exclusive of the Industrial Relations Court but covering clause 5 confers the same jurisdiction on that court, then there is no mechanism by which that court's conclusions about the Bankruptcy Act 1966 (Cth) may be tested in the High Court for federal jurisdiction has not been engaged. A construction of covering clause 5 which leads to that result should be rejected.

222 It may well be that in the period prior to the passage of the Judiciary Act 1903 (Cth) that covering clause 5 was a source of jurisdiction for State courts although for myself the difficulties for the appellate jurisdiction of the High Court make that problematic. However, after the power to confer federal jurisdiction was first engaged by the passage of the Judiciary Act 1903 (Cth) it is difficult to accept that covering clause 5 was intended to subvert the careful delineation of jurisdiction in Chapter III. That covering clause 5 ceased to be a source of jurisdiction for State courts to decide federal issues after the passage of the Judiciary Act 1903 (Cth) was accepted by Higgins J in Lorenzo v Carey [1921] HCA 58; (1921) 29 CLR 243 at 255 and by Windeyer J in Felton v Mulligan [1971] HCA 39; (1971) 124 CLR 367 at 395. More recently Spigelman CJ (with whom Ipp JA agreed) accepted as much in Attorney-General (NSW) v 2UE Sydney Pty Ltd (2007) 236 ALR 385 at 394 [48]-[50]. For those reasons, contrary to Mr Rose’s submissions, covering clause 5 cannot have been the source of the Industrial Relations Court’s jurisdiction in this case.

223 On the view I take, the orders of the Industrial Relations Court should be set aside. If that is done then it is necessary to consider the bankruptcy issues. These are whether the deed of assignment is valid, whether the proceedings were stayed and whether the proceedings are deemed to have been abandoned. It is useful to deal with them in turn

224 The proceedings before the Industrial Court were brought pursuant to s 106 of the Industrial Relations Act 1996 (NSW). Mr Rose had no underlying chose in action which the proceedings under s 106 were to vindicate. Rather, his entitlement was the bare right to bring an application for s 106 orders: Majik Markets Pty Ltd v Brake and Service Centre Drummoyne Pty Ltd (1992) 28 NSWLR 443 at 461 per Mahoney JA and 467 per Handley JA. Section 58(1)(a) of the Bankruptcy Act 1966 provides:

The provision operated to vest Mr Rose’s "property" in the trustee. Section 5 defined property as:

225 Where the word "property" is used in a modern statute it may, depending on its context, include rights and interests created by statute which would not otherwise be regarded as proprietary by traditional conveyancing law: Fuller v Beach Petroleum NL [1993] FCA 453; (1993) 43 FCR 60 at 67 per Gummow and Whitlam JJ. Thus, it is clear that a right to appeal to the Full Court of this Court is "property" which vests in a trustee: Fuller at 68. It was assumed by the Court of Appeal in Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 that the right to seek certiorari in respect of orders made by the former Industrial Relations Commission was "property" which vested in the trustee. There is no reason to doubt the correctness of that assumption. It follows that a right to seek orders under s 106 is also "property" which vests in a trustee in bankruptcy. Mr Rose’s submissions to the contrary should be rejected.

226 A consequence of the breadth of the definition of "property" is that s 58(1) can operate to vest property in the trustee which would not otherwise be capable of assignment at law: Fuller v Beach Petroleum NL [1993] FCA 453; (1993) 43 FCR 60 at 67. That is significant because of s 134(1)(a) of the Bankruptcy Act 1966 (Cth) which provides:

227 In terms, this provision authorises the sale of "property" which, generally speaking, bears the same broad meaning it bears in s 58. As a matter of logic this entails that the trustee may assign property vested in him which otherwise would not be assignable at law. In particular, the old common law doctrine that bare rights to litigate could not be assigned since that practice was either champertous or smacked of maintenance was inapplicable where the assignor was a trustee in bankruptcy: Seear v Lawson (1880) 15 Ch D 426 at 433 per Jessel MR, 434 per James and Brett LJJ; Guy v Churchill (1889) 40 Ch D 481 at 488-489 per Chitty LJ; Campbells Cash & Carry Pty Ltd v Fostif Pty Ltd [2006] HCA 41; (2006) 229 CLR 386 at 428 [75] per Gummow, Hayne and Crennan JJ (Gleeson CJ agreeing at 407 [1]); Stein v Blake [1996] AC 243 at 258 per Lord Hoffman (with whom each of the other Law Lords agreed at 249-250).

228 It follows that there can be no inherent objection to a trustee in bankruptcy assigning a bare right to sue such as is encompassed in Mr Rose’s rights under s 106 of the Industrial Relations Act 1996 (NSW). It is necessary then to attend to the deed of assignment. Its critical components were as follows:

229 It will be seen that the literal effect of these provisions was not to assign to the trustee the right to seek orders under s 106 but rather to assign the proceedings themselves. It is doubtful whether the proceedings, as opposed to the rights underpinning the proceedings, constitute a species of property. However, the Applicants did not seek to put such an argument. In any event, it is tolerably plain what the parties to the deed were seeking to do. The deed, being essentially a commercial arrangement, should be interpreted in a way which avoids making it a commercial nonsense: Bowen Investments Pty Ltd v Tabcorp Holdings Ltd [2008] FCAFC 38; (2008) 166 FCR 494 at 511-512 [53] per Rares J. Thus the expression "assign the action" should be interpreted as if it meant "assign the right to bring the action".

230 The Applicants argue that this deed was ineffective to assign the right to bring the action for two reasons: first, it was said that if the right to bring the action were to be assigned to an undischarged bankrupt it would immediately revest in the trustee as after-acquired property. Secondly, it was said to be contrary to the policy of the Bankruptcy Act 1966 (Cth). To understand these arguments it is necessary to have regard to s 58(1)(b) which provides:

232 Pivotal in these provisions is the concept of "property that is divisible amongst the creditors of the bankrupt". That concept is explicated by s 116. Section 116 contains many provisions most of which are not relevant for present purposes. However, subs (1)(a) and subss (2)(b), (ba), (c), (ca) and (g) are of importance because they indicate the ability of an undischarged bankrupt to own some species of property. They provide:

233 The Applicants contend that the moment the deed of assignment operated to transfer the right to bring the proceedings to Mr Rose that right fell within s 116(1)(a) and hence was "property that was divisible amongst the creditors of the bankrupt". The consequence was, therefore, that it was "after-acquired property" within the meaning of s 58(6). It followed that s 58(1)(b) operated to revest the assigned right back to the trustee. This either showed that the assignment was forbidden and ineffective or, at the very least, ineffectual.

234 It may be accepted, I think, that this argument has considerable initial appeal. However, it is not an appeal which withstands analysis. The Bankruptcy Act 1966 (Cth) does not prohibit a bankrupt from owning property. It is apparent, for example, that the parts of s 116(2) set out above contemplate a range of property which may be owned by an undischarged bankrupt. It is also clear that, subject to certain presently irrelevant limits, income earned by a bankrupt does not vest in a trustee in bankruptcy. In Re Gillies; Ex parte the Official Trustee in Bankruptcy [1993] FCA 289; (1993) 42 FCR 571 French J traced the legislative history of the current provisions dealing with the income of a bankrupt to show that this was so. So much is clear. However, once it is accepted that a bankrupt may own some property, be it by way of household goods or by way of income, the Applicants’ argument proves too much. It has, for example, the consequence that that property which the bankrupt is permitted to own may not be used to acquire any other property for any such property, once acquired, immediately revests in the trustee. Taken to its extreme this means that although the Act permits a bankrupt to earn an income, it does not permit the bankrupt to acquire any property with that income.

235 The obvious injustice of that situation was accepted in Kitson v Hardwick (1872) LR 7 CP 473. In that case, the bankrupt acquired from the trustees the right to bring certain proceedings. It was argued by the defendants to those proceedings that the bankrupt could not sue because the assignment to him of the causes of action was ineffective, the action having immediately revested in the trustees by reason of s 15(3) of the Bankruptcy Act 1869 (32 & 33 Vict, c 71) (which was not materially different to s 58(1)(b)). Willes J said (at 479, Keating J agreeing at 480):

236 The soundness of this argument was accepted by the Court of Appeal in Ramsey v Hartley [1977] 1 WLR 686 at 693-694 per Megaw LJ, 698 per Lawson LJ and 699-700 per Geoffrey Lane LJ and that decision was approved by the House of Lords in Stein v Blake [1996] AC 243 at 249-250 and 258 per Lord Hoffman.

237 The force of the argument may be accepted. There must, however, be some limits to it. If the argument in its full form be correct it means that nothing acquired by a bankrupt ever becomes after-acquired property. If this is so, it leaves very little work for s 58(1)(b) to do. Further, as a matter of statutory interpretation it is a difficult to discern precisely which provision of the Bankruptcy Act 1966 (Cth) is being interpreted. One view might be that the definition of after-acquired property in s 58(6) is read so that property acquired by the bankrupt for good consideration is not included within that definition. Another approach, which commended itself to the Full Bench of the Industrial Relations Court in the proceedings under review, was to read s 58(1)(b) so that it did not apply to property acquired by a bankrupt from a trustee: Rose v Meriton Apartments Pty Ltd [2007] NSWIRComm 264 at [76].

238 It is not, however, necessary to express a concluded view on this question because the assignment may be impugned for another reason, namely, that the assignment was contrary to the policy of the Bankruptcy Act 1966 (Cth). Whereas the objection based on s 58(1)(b) was an objection which, taken to its limits, applied to any property acquired by a bankrupt, this objection fixes upon the nature of assigned proceedings and the risk such proceedings, in the hands of a bankrupt, pose to defendants. Thus it is said that s 60 exhibits an essential hostility to a bankrupt standing possessed of curial proceedings. Section 60 provides:

239 Of those provisions, Gummow and Whitlam JJ said in Fuller v Beach Petroleum NL [1993] FCA 453; (1993) 43 FCR 60 at 68:

240 Unlike other property which vests in a trustee in bankruptcy, rights of action that subsist in an actual proceeding present a particular risk to the defendants in that proceeding viz the risk of having to expend legal fees in one’s own defence which may never be recovered. It might be thought that this view of things pays insufficient attention to the line of cases starting with Kitson v Hardwick (1872) LR 7 CP 473. However, the English bankruptcy statutes have never had an equivalent to ss 60(2) and (3). Even at the time that Ramsey v Hartley [1977] 1 WLR 686 was decided an equivalent provision was still absent. Indeed, whilst s 9 of the English Bankruptcy Act 1914 stayed proceedings against a bankrupt, s 105(4) merely permitted the judge making a receiving order to order the transfer of the proceedings to him or her. In Fuller v Beach Petroleum NL [1993] FCA 453; (1993) 43 FCR 60 Gummow and Whitlam JJ traced the legislative history of s 60 back to s 33 of the New South Wales Insolvency Act 1841 (5 Vict, c 17) and, in that regard, said (at 65) that the colonial provisions "had marched in advance of England". Those antipodean provisions exhibited a distinct hostility to a bankrupt’s conduct of proceedings. In Want v Moss (1889) 10 NSWR (L) 274 Manning J (at 279) said:

241 This matter was, therefore, something entirely absent from the considerations in Kitson v Hardwick (1872) LR 7 CP 473. The same may be said of Ramsey v Hartley [1977] 1 WLR 686 and Stein v Blake [1996] AC 243.

242 Uninstructed by direct authority, therefore, it would appear to be the case that s 134(1)(a) should be read so that "property" does not include rights of action where the assignee is an undischarged bankrupt. I note that neither party sought to rely on s 12 of the Conveyancing Act 1919 (NSW) for the efficacy of the assignment.

243 It is useful to turn to the small number of Australian decisions dealing with the issue. In Re Nguyen; Ex parte Official Trustee in Bankruptcy [1992] FCA 150; (1992) 35 FCR 320 French J dealt with an application by the Official Trustee to assign a chose in action to the bankrupts. At 325-326 his Honour noted and applied Kitson v Hardwick (1872) LR 7 CP 473. There was no discussion of the implications of s 60 and, indeed, no argument appears to have been addressed on that point. It will be obvious from the foregoing that the argument in Kitson v Hardwick is entirely sound so long as there is not present a provision such as s 60. Since his Honour’s attention was not drawn to the provision the result was inevitable.

244 Branson J considered the issue in Re Cirillo; Ex parte Official Trustee in Bankruptcy (1996) 65 FCR 576. In that case, of course, as the report shows at 581, Mr Cirillo had been discharged from bankruptcy at the time of the proposed assignment. Her Honour however said this (at 583):

245 Two things are to be noted about this. First, strictly this was an obiter dictum since Mr Cirillo was no longer a bankrupt; secondly, and more importantly, no argument as to the impact of s 60 was addressed to her Honour. The issue was next examined by Wheeler J in Temsign Pty Ltd v Biscen Pty Ltd (1998) 157 ALR 83. Her Honour noted the passage from Kitson v Hardwick set out above. Her Honour thought that the policy expressed in s 60 outweighed that consideration (at 91) and that s 60 and this Court's decision in Fuller v Beach Petroleum NL meant that the policy of the Act was against such assignments.

246 The Full Bench of the Industrial Court approached matters differently. First, it did not advert to Fuller. Instead, it said (at [80]):

247 In fact, there was such a proper basis and that was the reasoning of the Full Court of this Court in Fuller and what had been said by Manning J in Want v Moss. Secondly, their Honours failed to observe that there was no equivalent provision to s 60 in the English legislation so that the usefulness of the English cases starting with Kitson v Hardwick was much diminished. In all of the circumstances, it seems to me that s 60 does demonstrate that s 134(1)(a) should not be interpreted as permitting the assignment of rights of action to an undischarged bankrupt. It is necessary formally to overrule Re Nguyen to arrive at this result and that should be done. That being so, this Court should declare pursuant to s 31(1)(f) of the Bankruptcy Act 1966 (Cth) that the deed of assignment was invalid.

248 I agree with Branson J that s 178 is capable of providing an alternate mechanism by which the policy disclosed by s 60 may be achieved. Thus, a party confronted with a bankrupt litigating a cause of action which has been assigned to him or her may seek to review the trustee's decision in this Court. However, although that would be one way of resolving the issue it still leaves the defendant to the bankrupt's proceedings in the position that it must incur legal expenses in seeking to review the trustee's decision, not all of which may be recovered. Given that Gummow and Whitlam JJ were of the view in Fuller that such a defendant should not even be put to the trouble of a security for costs application this is a sufficient prejudice to fall foul of the policy underlying s 60. Thus, although I see the force of the argument, I am reluctantly unable to accede to it.

249 Both of these questions are ones which are within the jurisdiction of the Industrial Relations Court by reason of s 39(2) of the Judiciary Act 1903 (Cth) since they are not, for reasons already given, questions which are "in bankruptcy" within the meaning of s 27. On the view I take of things, the orders of the Industrial Relations Court should be set aside for a jurisdictional error having its source in s 27. If those orders are set aside then the questions raised by s 60(2) and (3) will not have been determined. Either that Court or this Court – pursuant to s 39B(1A) of the Judiciary Act 1903 (Cth) – could resolve that issue. However, I do not think that this Court should do so. Its role in this proceeding has been to declare that which only it can declare by reason of s 27. Once it has performed that function there is no obvious reason why it should carry out a function which has many practical connexions with the Industrial Relations Court and almost none with this Court. The questions of whether the proceedings are stayed and whether they are deemed to have been abandoned are questions about proceedings before that court and, it might ordinarily be thought, pre-eminently questions for that court. If the Industrial Relations Court decides those questions erroneously it will do so in federal jurisdiction and the High Court may, if it is minded to do so, correct that error pursuant to s 73 of the Constitution.

250 It is not the role of this Court to ensure that State courts do not commit federal errors of law where those errors are not jurisdictional. Meriton and the Owners Corporation argued that the effect of s 60(2) and (3) was jurisdictional. However, it seems to me that s 39(2) is a decisive answer to that point vesting, as it does, federal jurisdiction in the Industrial Relations Court to decide questions which arise under the Bankruptcy Act 1966 (Cth) (apart from those covered by s 27). The question of whether proceedings are stayed under s 60(2) or are deemed to have been abandoned under s 60(3) is a question arising under the Bankruptcy Act 1966 (Cth) and hence jurisdiction to decide such a question is explicitly granted to the several courts of the States by s 39(2) of the Judiciary Act 1903 (Cth). Finally, it is to be borne in mind that it was Meriton and the Owners Corporation which first asked the Industrial Relations Court to decide the questions under s 60 and it is their motions which, on the view I take of things, are now pending in the Industrial Relations Court. Meriton and the Owners Corporation should be bound by the choice of court they originally made. This Court should decline to decide the issues which arise under ss 60(2) and (3) and those issues should be left to the Industrial Relations Court to decide.

251 Mr Rose made a number of other submissions which may be dealt with shortly. First, it was said that this Court had no jurisdiction because the matter before the Industrial Relations Court arose under s 106 of the Industrial Relations Act 1996 (NSW) and hence was not in federal jurisdiction. Whether that is so or not, the issue is not whether those proceedings were in federal jurisdiction but whether this one is. Here it is said that the Industrial Relations Court was prevented from taking further steps by reason of a federal law, the Bankruptcy Act 1966 (Cth). This proceeding is, therefore, necessarily a matter within federal jurisdiction.

252 Secondly, it was said that the attempt by Meriton and the Owners Corporation to invoke this Court's jurisdiction was colourable because the Applicants were seeking "a legal review of the merits". That is not an accurate description, however, of the application which was made. Accordingly, the submission should be rejected. Thirdly, it was said that no jurisdictional error was shown. In light of my opinion on the issue of s 27, this argument must be rejected. Fourthly, it was said that the orders of the Industrial Relations Court were protected by s 179 of the Industrial Relations Act 1996 (NSW). To the extent that s 179, a State law, would operate to hamper the ability of this Court to grant relief to vindicate the operation of a federal law, it would be plain that it could not be picked up by s 79 of the Judiciary Act 1903 (Cth). It would accordingly have no application in proceedings such as the present.

253 Fifthly, it was said that s 118 of the Constitution required full faith and credit to be given to the orders of the Industrial Relations Court. While that may be so, s 118 does not require this Court to decline to set aside orders made by a State Court where those orders are made in excess of a federal jurisdictional limitation. Sixthly, it was said that the proceedings before the Industrial Relations Court were proceedings covered by s 60(4)(a). Strictly, it is not necessary to answer that question, however, it should be rejected as being contrary to the Court of Appeal's decision in Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45. The Court was invited not to follow that decision but I would decline that invitation. Seventhly, Mr Rose contended that since he has now been discharged from bankruptcy, s 153(5) means that "all proceedings taken in or in respect of the bankruptcy shall be deemed to have been validly taken". The short answer to this is that the proceedings brought by Mr Rose were commenced prior to the bankruptcy and cannot be described as proceedings "taken" in or in respect of his bankruptcy.

(a) the question of whether particular property is vested in a trustee in bankruptcy involves the exercise of jurisdiction in bankruptcy;

(b) accordingly, the Industrial Relations Court did not have jurisdiction to decide whether the deed of assignment was valid;

(c) the orders of the Industrial Relations Court should be set aside and it should be prohibited from further considering the issue of the validity of the deed of assignment;

(d) this Court should declare pursuant to s 31(1)(f) of the Bankruptcy Act 1966 (Cth) that the deed of assignment was invalid; and

255 This does not represent a victory for either party and there should be no order as to costs. I would decline to answer the separate questions and would dismiss Mr Rose’s motion.

I certify that the preceding ninety-seven (97) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perram.

Counsel for the Applicants:	Mr SD Robb QC with Mr DM Shoebridge

Solicitors for the First Applicant:	Meriton Group

Solicitors for the Second Applicant:	Rockliffs Solicitors

Counsel for the Respondents:	Mr AW Street SC with Ms LAR Goodchild

Solicitors for the Second Respondent:	Barwick Legal

Date of Hearing:	27 August 2008

Date of Judgment:	13 October 2008

Federal Court of Australia - Full Court

Meriton Apartments Pty Limited v Industrial Court of New South Wales [2008] FCAFC 172 (13 October 2008)