Vince v State of Tasmania [2002] FMCA 7 (27 June 2002)

Last Updated: 1 July 2002

FEDERAL MAGISTRATES COURT OF AUSTRALIA

VINCE v STATE OF TASMANIA

[2002] FMCA 7

BANKRUPTCY - Whether property vests in Trustee if subject to seizure or forfeiture order under State Legislation. CONSTITUTIONAL LAW (Cth) - State law permitting seizure of fishing vessel - whether Trustee's rights pursuant to s.58 of Bankruptcy Act 1966 (Cth) prevail if vessel property of Bankrupt - s.109 of the Constitution inconsistency between Commonwealth and State law.

The Constitution ss.106, 107, 108 & 109

Living Marine Resources Management Act 1995 (Tas) ss.200, 225, 227

Fisheries Management Act 1991 (NZ)

Judiciary Act 1903

Bankruptcy Act 1966 (Cth) s.58

The Fisheries (Abalone) Rules 2000 (Tas)

Asher v Whitlock (1865) LR1 QB1

Allen v Roughey [1955] HCA 62; (1955) 94 CLR 98

Ho Young v Bess (1995) 1 WLR 350

Attorney-General v Parsons [1956] AC 421

Storey v Lane [1981] HCA 47; (1981) 36 ALR 129

Clyde Engineering Company Limited v Cowburn [1926] HCA 6; [1926] 37 CLR 466

Cheatley v The Queen [1972] HCA 63; (1972) 127 CLR 291

The Director of Public Prosecutions: Ex parte Lawler and anor. [1994] HCA 10; (1994) 179 CLR 270

The State of New Wales v The Commonwealth of Australia and Carlton and anor [1983] HCA 8; [1983] 151 CLR 302

Ex parte McLean [1930] HCA 12; (1930) 43 CLR 472

Equal Enterprise Ltd v Attorney General (1995) 3 NZLR 293

Fisheries Inspector v Turner (1978) 2 NZLR 233

MAF v Schofield (1989) 1 NZLR 210

Williams v Attorney General (1990) 1 NZLR 646

R v Roberts (1873) L.R. 9QB 77

Clarke v Kerr [1955] HCA 55; (1955) 94 CLR 489,

Ansett Transport Industries (Operations) Pty Ltd v Wardley ([1980] HCA 8; 1979-80) 142 CLR 237

R v Cheatley [1972] HCA 63; (1972) 127 CLR 291

Swift Australian Co v South British Insurance Co Ltd [1970] VicRp 47; (1970) VR 368

Gerhardy v Brown [1985] HCA 11; (1985) 159 CLR 70

Botany Municipal Council v Federal Airports Corporation [1992] HCA 52; (1992) 175 CLR 453

Applicant:

PETER ROBERT VINCE AS TRUSTEE OF THE PROPERTY OF DAVID CAMPBELL STRACHAN, A BANKRUPT

Respondent:

THE STATE OF TASMANIA

File No:

MZ 351 of 2001

Delivered on:

27 June 2002

Delivered at:

Melbourne

Hearing Date:

4 October 2002

Judgment of:

McInnis FM

REPRESENTATION

Solicitor for the Applicant:

Mr M Lhuede

Solicitors for the Applicant:

Gadens Lawyers

Counsel for the Respondent:

Mr Thompson

Solicitors for the Respondent:

Office of Director of Public Prosecutions

ORDERS

The Application filed 3 September 2001 be dismissed.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE

MZ 351 of 2001

PETER ROBERT VINCE AS TRUSTEE OF THE PROPERTY OF DAVID CAMPBELL STRACHAN, A BANKRUPT

Applicant

And

THE STATE OF TASMANIA

Respondent

REASONS FOR JUDGMENT

Introduction

1. PETER ROBERT VINCE (the Applicant) is the Trustee in Bankruptcy of the Estate of DAVID CAMPBELL STRACHAN (the bankrupt) who became bankrupt on 7 September 1999 on the petition of the Deputy Commissioner of Taxation of the Commonwealth of Australia. A Sequestration Order was made on that date.

2. The applicant upon being appointed a Trustee of the estate of the bankrupt conducted an examination of the financial affairs of the bankrupt. In brief terms, as a consequence of that investigation the applicant became aware of the possibility that part of the bankrupt's estate included a fishing vessel registered number EZ977 known as "The Riviera" and chattels ("The Riviera"). "The Riviera" was allegedly purchased by the bankrupt in January 1997 and used for various fishing purposes which it is conceded included illegal abalone fishing.

3. Initially there was some dispute concerning ownership of "The Riviera" and affidavit evidence was produced to the Court demonstrating that the bankrupt had incurred expenses in salvaging "The Riviera" in or about April 1999 and had expended significant amounts of money repairing and refitting the vessel. The dispute concerning ownership of "The Riviera" was no longer an issue when the application was heard by the Court.

4. The amended application filed on 3 September 2001 seeks a declaration that "The Riviera" is the property of the bankrupt that vested in the applicant and further seeks a consequential order for delivery up of vessel.

5. The application was prompted by the seizure of "The Riviera" by Tasmanian Fisheries Officers on 12 March 2000 pursuant to s 200 of the Living Marine Resources Management Act 1995 (Tas), (the LMRM Act).

6. It is common ground that the bankrupt has numerous convictions for illegal fishing and abalone poaching in both Victoria and Tasmania dating back to as early as 1970. On 26 May 2000 the bankrupt pleaded guilty to certain charges under the LMRM Act. The bankrupt was convicted and sentenced to serve a period of 27 months and ordered to pay $393,275 in fines, special penalties and costs at the rate of $20,000 per year after release from prison. At the hearing of the charges before the Hobart Court of Petty Sessions (the Hobart Court) on 26 May 2000, an application was made pursuant to s 225(2) of the LMRM Act on behalf of two companies, namely Leiah Pty Ltd and Arcadia Engineering Pty Ltd, that an order be made that the forfeiture of "The Riviera" not be carried out (the application).

7. The application was adjourned by consent sine die. The Director of Public Prosecutions simply seeks dismissal of the application. On

27 October 2000 after a successful appeal by the bankrupt to the Supreme Court of Tasmania in relation to his sentence, the bankrupt was fined in relation to certain abalone offences and jailed in relation to three charges for breaching a Control Order contrary to the LMRM Act. As indicated the seizure of "The Riviera" on 12 March 2000 was undertaken as a consequence of the abalone offences. There is no issue taken as to the basis upon which the seizure occurred.

8. On 10 November 2000 in the Hobart Court the Court was advised that the application would continue. The matter was further adjourned to 14 December 2000 for mention and on that occasion the bankrupt's wife was made a party to the application. After further adjournment the application was again mentioned in the Hobart Court on 26 April 2001 and on that occasion the applicant was granted leave to be joined as a party to the application. It was at that stage that the Court was advised that the applicant was contemplating a commencement of proceedings under the provisions of the Bankruptcy Act 1966 (the Bankruptcy Act) seeking surrender of "The Riviera". Since that time the proceedings before the Hobart Court has been adjourned sine die and I have been advised that they are awaiting the outcome of this hearing.

9. In the amended application the applicant claims:

(1) A declaration that the motor vessel, registration number EZ977, is the property of the bankrupt which has vested in the Applicant pursuant to section 58 of the Bankruptcy Act 1966 ("the Act").

(2) An Order that the State of Tasmania having possession of the motor vessel registration number EZ977 deliver up the said motor vessel to the Applicant.

(3) Cost.

(4) Such further or other Orders that this Honourable Court may make.

10. Leave was sought to amend the application to include claims in relation to certain chattels on board "The Riviera" at the time of its seizure. That leave was granted and hence I included the chattels as part of the description of "The Riviera".

11. When the application was first listed before this Court it became clear that a central issue in the application was whether the Commonwealth Bankruptcy Act prevailed over the Tasmanian LMRM Act. Hence it was obvious that the issue involved consideration of s 109 of The Constitution. Accordingly I made orders that the applicant give relevant notices pursuant to s 78B of the Judiciary Act 1903. Orders were also made permitting the applicant to join three other parties mainly Leiah Pty Ltd, Arcadia Pty Ltd and the wife of the bankrupt as respondents to the application. Although leave was granted to join those parties, when the matter was again listed for hearing it was clear that those parties had not been joined and the application proceeded with the applicant and the respondent as named in the original application, albeit that an amended application to which I have already referred had been filed and served.

12. A significant issue in the present case is whether there is any inconsistency between the bankruptcy, the provisions of the Bankruptcy Act and the provisions of the LMRM Act. If there is an inconsistency then consideration should be given to whether the applicant is able to rely upon s 109 of the Constitution and argue that the Bankruptcy Act prevails at the expense of the State legislation. Related issues are whether there has in fact been any right to possession by the State of Tasmania of "The Riviera" and in relation to that issue the Court is required to consider whether forfeiture has been affected on conviction of the bankrupt and if there has been no forfeiture whether indeed there is still a right to possession by the applicant pursuant to the Bankruptcy Act.

Relevant legislation

13. It is appropriate to set out the legislation which I regard as relevant to the application.

THE CONSTITUTION

Section 106 -- Saving of Constitutions

The Constitution of each State of the Commonwealth shall, subject to this Constitution, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be, until altered in accordance with the Constitution of the State.

Section 107 -- Saving of Power of State Parliaments

Every Power of the Parliament of a Colony which has become or becomes a State, shall, unless it is by this Constitution exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State, continue as at the establishment of the Commonwealth, or as at the admission or establishment of the State, as the case may be.

Section 108 -- Saving of State laws

Every law in force in a Colony which has become or becomes a State, and relating to any matter within the powers of the Parliament of the Commonwealth, shall, subject to this Constitution, continue in force in the State; and, until provision is made in that behalf by the Parliament of the Commonwealth, the Parliament of the State shall have such powers of alteration and of repeal in respect of any such law as the Parliament of the Colony had until the Colony became a State.

Section 109 -- Inconsistency of Laws

When a law of a State is inconsistent with a law of the Commonwealth, the latter shall prevail, and the former shall, to the extent of the inconsistency, be invalid.

LIVING MARINE RESOURCES MANAGEMENT ACT 1995 (TASMANIA)

Section 200

A fisheries officer may seize -

(a) ...

(b) ...

(c) ...

(d) any vessel, vehicle, apparatus or equipment the fisheries officer reasonably believes has been used, is being used or is about to be used in the commission of an offence under this Act; and

(e) ...

(f) ...

Section 225 - Forfeiture on Conviction

(1) If a court convicts a person of an offence under this Act, any of the following is forfeited to the Crown:

(a) any fish to which the offence relates;

(b) any apparatus or equipment used, or intended to be used, in the commission of the offence;

(c) any vessel, vehicle, aircraft or other thing used in the commission of the offence.

(2) A person may apply to the court during proceedings leading to the conviction or associated with the relevant offence for an Order that forfeiture is not to be carried out.

(3) The court, if satisfied that special reasons exist, may -

(a) Make the Order applied for; and -

(b) Make any other Order it considers appropriate.

(4) In addition to any penalty imposed for an offence under this Act, a court, on application of the complainant, may order the forfeiture to the Crown of any money, cheque or other thing that is the proceeds of the sale of any fish, vessel, apparatus or equipment in contravention of this Act.

Section 227 - Forfeiture on seizure

(1) Any of the following seized under this Act is forfeited to the Crown:

(a) any fish seized under section 200(a);

(b) any noxious fish or receptacle or container seized under section 200(b);

(c) Any live fish or receptacle or container containing live fish illegally imported into the State.

(2) Forfeiture takes effect on the date of the seizure.

BANKRUPTCY ACT 1966 (CTH)

Section 58 -Vesting of property upon bankruptcy

(1) Subject to this Act, where a debtor becomes a bankrupt -

(a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee or, if, at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt by virtue of section 156A, in that registered trustee; and

(b) ...

(c) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered and enables the trustee of the estate of a bankrupt to be registered as the owner of any such property that is part of the property of the bankrupt, that property, notwithstanding that it vests in equity in the trustee by virtue of this section, does not so vest at law until the requirements of that law have been complied with.

Applicant's submissions

14. The Applicant submitted that pursuant to s 58 of the Bankruptcy Act all of the bankrupt's property including "The Riviera" vested in the Trustee automatically upon the making of the Sequestration Order on

7 September 1999.

15. It is common ground that the arrest of the bankrupt on 12 March 2000 post-dated the Sequestration Order which, as stated, had been made on

7 September 1999. Hence at the time of the arrest and seizure of "The Riviera" the Sequestration Order had already been made.

16. The Court was advised that the bankrupt had been found guilty of offences under The Fisheries (Abalone) Rules 2000 (Tas) and for breach of a control order contrary to the LMRM Act.

17. The applicant seeks to obtain an order for possession of property which is asserted is vested in him in his role as trustee of the estate of the bankrupt. It is not in dispute that formal demand had been made by the applicant to the respondent for delivery up of "The Riviera". Likewise it is not in dispute that "The Riviera" is still in possession of the respondent. The application has yet to be dealt with before the Hobart Court which may result in a decision that forfeiture is not to be carried out pursuant to s 225(2) of the LMRM Act.

18. The applicant submitted that it is not a defence to the trustee's claim to point to other persons or entities who might claim an interest in "The Riviera". It was submitted that even if the Court is satisfied that the State of Tasmania has possession pursuant to the LMRM Act that in the circumstances it is still liable to deliver up "The Riviera" to the Trustee in the present case who can demonstrate a superior right to "The Riviera" (see Asher v Whitlock (1865) LR1 QB1; Allen v Roughey [1955] HCA 62; (1955) 94 CLR 98). The applicant submits that on the evidence and pursuant to s 58 of the Bankruptcy Act the trustee has a superior title.

19. It was submitted that the only obstacle to "The Riviera" vesting in the applicant is the operation of s 225 of the LMRM Act. Specific reference was made to the meaning of the words "forfeited to the Crown" which appear in s 225. The applicant's representative cited the case of Ho Young v Bess (1995) 1 WLR 350 where the Privy Council had held that land "forfeited to the Crown" under the Aliens (Land - Holding Regulation) Act did not vest in the Crown until a declaratory order was made to that effect. It was conceded by the applicant that the Privy Council had regard to certain other provisions of the legislation which do not appear to have direct relevance to the LMRM Act. It was submitted however that s 225(2) of the LMRM Act provides a process whereby the Hobart Court may be called upon to make a determination as to whether or not the forfeiture is "to be carried out" (see Attorney-General v Parsons [1956] AC 421). It was noted that in the present case an application is currently pending in the Hobart Court and that Court has yet to determine whether the forfeiture is "to be carried out". In those circumstances it was submitted that a forfeiture cannot be said to have occurred. Until such time as that has occurred it was submitted the bankrupt's title or indeed the Trustee's title is voidable only (see Ho Young v Bess (1995) 1 WLR 350 at 356).

20. It was submitted that the Bankruptcy Act imposes duties on trustees in bankruptcy to secure possession of assets which fall into the bankrupt estate (see s 129) and realise them and distribute the proceeds in accordance with the provisions of the Bankruptcy Act (eg. ss 140 and 109).

21. The applicant submitted that s 225 of the LMRM Act to the extent that its intended effect might be to appropriate property which has become part of a bankrupt estate and which in turn is subject to the provisions of the Bankruptcy Act is inconsistent with Commonwealth legislation. It is therefore to that extent submitted that the State legislature is void by force of s 109 of the Commonwealth Constitution. In general terms it was submitted that by applying s 109 of the Constitution, the Bankruptcy Act would prevail against all other competing interests which in the present case may arise under the State legislation to which I have referred. It was submitted that the Bankruptcy Act prevails against any attempt by a third party be it by legislature or otherwise, to attempt to take property which is otherwise available to creditors outside the realm of the Act.

22. During the course of submissions I put to Counsel for the applicant that the submission, if accepted, may lead to an ironical outcome that the vessel could be sold by the Trustee and the net proceeds be sufficient to satisfy one if not all of the creditors and lead to other consequences such as early discharge of the bankruptcy whereby the bankrupt may still get the advantage indirectly of ownership of the property which he would not get in terms of being able to satisfy creditors in the absence of bankruptcy due to the vessel being forfeited. When that proposition was put to the applicant's Counsel he agreed that that would be "a very unpalatable situation". It was conceded that further complications arise if upon sale of the assets the amount received for the sale by the trustee exceeded the debts leaving the bankrupt with a surplus which he would otherwise receive. Counsel for the applicant did not seem to resist the conclusion put to him by the Court that in the circumstances the bankrupt was in a better position than a person who is not bankrupt despite the fact that both might have used a vessel for unlawful purposes which then made the vessel subject to forfeiture under the Tasmanian legislation.

23. It was submitted that there is a direct conflict between the Bankruptcy Act and the LMRM Act. Counsel was unable to provide any specific authorities which deal with this apparent conflict. In the present case it was submitted that there has not in fact been forfeiture but rather in applying s 225(2) of the LMRM Act it is clear that there cannot be forfeiture because had there been forfeiture the sub section would not provide that an order be made that "forfeiture is not to be carried out".

24. It was said that there appears to be some degree of inconsistency between s 225(1) which refers to the vessel being forfeited upon conviction compared with s 225(2) which suggests that "forfeiture is not to be carried out".

25. Reference was made to s 226 of the LMRM Act and to s 227. Section 226 it was pointed out makes provision for forfeiture of acceptance on an infringement notice and provides a timeframe during which forfeiture takes effect. Section 227 which deals with forfeiture on seizure in relation to fish or receptacles refers to forfeiture taking effect "on the date of the seizure". That is an express provision and it was noted both provisions in fact provide a different mechanism as to when forfeiture shall take effect. It was submitted that the comparison provides some understanding of the meaning of s 225 and that this effectively qualifies s 225(1) of that section as the forfeiture is not to be carried out until determination of an application under s 225(2). Otherwise it is submitted the State could exercise its power of sale and other powers it may have if the forfeiture was automatically operational. In making these submissions and comparing the provisions to which I have referred, it was conceded by the applicant's Counsel that each section is designed to deal with different circumstances and different procedures to be followed. It was conceded that under s 225 forfeiture occurs upon conviction whereas in s 226 it occurs upon refusal of an application and in the other provision occurs following the effluxion of time from the date of serving of an infringement notice. In essence the submission made by the applicant is that where s 225 refers to the items being forfeited I should interpret the language as meaning "shall be liable to be forfeited".

26. I was referred again to the decision of Ho Young v Bess at page 355 where the Court states:

"The position in relation to section 4 is similar. It follows that the words `shall be forfeited' in sections 3 and 4(2) must be construed as `shall be liable to be forfeited' and' the time when forfeiture took place' is the time when the liability for forfeiture arose".

27. During the course of submissions reference was made to other decisions concerning the issue of forfeiture although essentially it was submitted that the Court is entitled to look at the LMRM Act to determine what is meant by s 225 and to decide whether in fact forfeiture has occurred. It was submitted that forfeiture does not occur until such time as the application is dealt with under s 225(2) of the LMRM Act.

28. Reference was made to the general duty of Trustees under the Bankruptcy Act and for the purpose of this decision it is sufficient to note that there are duties clearly provided under the Bankruptcy Act which apply to Trustees to take possession of the assets of the bankrupt estate and then deal with those assets for the benefit of creditors and that s 129(2) of the Bankruptcy Act allows the applicant to make his application before this Court and provides power to the Court to grant the relief sought and if necessary reliance is placed also on s 30 of the Bankruptcy Act. It was conceded that both sections may operate together or independently.

29. During the course of submissions I was referred to the decision of the High Court in Storey v Lane [1981] HCA 47; (1981) 36 ALR 129 and in particular the decision of the Court dealing with the general proposition that the essential feature of any modern systems of Bankruptcy Law where provision is made for appropriation of assets of the debtor and their equitable distribution amongst his creditors and for the discharge of the debtor from future liability for his existing debts. (See Storey at

p 134). As I understand it reliance was placed on that case to establish the general basis upon which the applicant can exercise powers under the Bankruptcy Act and to also draw the Court's attention to the development of the bankruptcy laws in Australia to the point where a system has been developed for the collection of assets and payment of debts of bankrupt persons.

30. It was further submitted that if I were to find that "The Riviera" had already been forfeited then I should make a declaration that the forfeiture was invalid by reason of the operation of s 109 of the Constitution as there is a conflict between the operation of the State Legislature and the powers and obligations granted to the Trustee under the Bankruptcy Act.

31. The applicant relied on the High Court's decision in Clyde Engineering Company Limited v Cowburn [1926] HCA 6; [1926] 37 CLR 466 and in particular the passage at page 477 as follows:

"In the circumstances we think we should say that it appears to us that the test is not sufficient or even appropriate in every case. Two enactments may be inconsistent although obedience to each of them may be possible without disobeying the other. Statutes may do more than impose duties: they may, for instances, confer rights; and one statute is inconsistent with another when it takes away a right conferred by that other even though the right be one which might be waived or abandoned without disobeying the statute which conferred it".

32. It was submitted that in the present case any State Act which seeks to interfere with the operation of the Bankruptcy Act and is in direct conflict with it then the State Act must be read down and the Bankruptcy Act should prevail. Arising from Cowburn's case it was submitted that it was possible to determine that inconsistency can exist in any one of three situations namely where simultaneous obedience is impossible, where one law takes away a right or privilege conferred by the other and where the State law invades a field which the Commonwealth law was intended to cover or deal with exclusively and exhaustively.

33. I was referred during the course of submissions to the decision of Cheatley v The Queen and others [1972] HCA 63; (1972) 127 CLR 291 and a further decision of Re Director of Public Prosecutions: Ex parte Lawler and anor [1994] HCA 10; (1994) 179 CLR 270. That case was one which involved a prerogative writ brought in the High Court of Australia seeking an order in relation to the operation of the Commonwealth Fisheries Legislation.

34. In Lawler's case the applicants owned a New Zealand registered fishing vessel. They had entered into an agreement with a company for the lease and sale and two individuals had guaranteed the agreement with one or other of them to be master of the vessel. The vessel was then boarded whilst in the Australian fishing zone and the master charged with using a foreign fishing boat for commercial fishing within that zone contrary to the Fisheries Management Act. The applicants in that case contended that the forfeiture order under the Fisheries Management Act authorised forfeiture of the vessel from innocent third parties namely the owners and was therefore invalid by reason that it authorised acquisition of property other than on just terms as required by s 51(xxxi) of the Constitution. It was held in that case that the prescription of forfeiture of the property used in the commission of a fisheries offence was within the power conferred by s 51(x) of the Constitution notwithstanding that the owner was innocent of complicity in the commission of the offence. The legislative prescription of forfeiture was not a law for the acquisition of property within s 51(xxxi).

35. Counsel for the applicant sought to argue that the facts in Lawler's case were not unlike the facts of the present application. It was argued that when the case is useful in terms of understanding the policy behind forfeiture legislation. As I understood the argument it was suggested that by the State of Tasmania seeking to impose a penalty by forfeiture of the vessel that this would be in direct conflict with the rights, duty and obligations of the trustee. During the course of this submission I again raised with counsel the difficulty that might arise if the forfeiture power of the State was to have a different effect upon a bankrupt offender compared with an offender who is not bankrupt. The bankrupt offender may avoid the effect of forfeiture and even obtain the benefit of a surplus after sale by the trustee if the vessel was converted for an amount great than the amount owed to creditors by the trustee. This might encourage would be offenders to become bankrupt in order to ensure that the vessel used in the commission of offence was not forfeited but simply retained by a trustee to be distributed to creditors with the surplus, if any, distributed to bankrupt offender. It was submitted in a response to that proposition that the bankruptcy could then be deemed an abuse of process.

36. It was submitted that the Bankruptcy Act is intended to cover the field in relation to realisation and distribution of property of a bankrupt. The response to a question from the court that effectively the suggestion of a direct conflict toward the Commonwealth seeking to cover the field would be to impose a restriction on the extent to which penalties provided in State legislation would apply including the penalty of forfeiture. It was submitted that that might be the direct result.

37. The court was referred to the High Court Decision in The State of New Wales and others v The Commonwealth of Australia and Carlton and another [1983] HCA 8; [1983] 151 CLR 302 and in particular the following passage at p 316 being part of the joint judgment of Gibb CJ with Murphy and Wilson JJ,

"The first of these submissions requires that the field said to be exhaustively covered by the Commonwealth law be clearly identified and that the State laws be shown to enter upon that field. Mr Hughes described the field in somewhat general terms as the operation of Commonwealth law in its relation to registered hospital benefits organizations. If that is the field, then it is quite clear from the Act that there is no intention on the part of the Parliament to cover it. The Act does not create the organizations."

38. During the course of submissions I was referred to the passage from Dixon J in Ex parte McLean [1930] HCA 12; (1930) 43 CLR 472 at page 483 as follows:

"When the Parliament of the Commonwealth and the Parliament of the State each legislate upon the same subject and prescribe what the rule of conduct shall be, they make laws which are inconsistent, notwithstanding that the rule of conduct is identical which each prescribes, and sec 109 applies. That this is so is settled, at least when the sanctions they impose are diverse (Hume v Palmer [1926] HCA 50; (1926) 38 CLR 441). But the reason is that, by prescribing the rule to be observed, the Federal statue shows an intention to cover the subject matter and provide what the law upon it shall be. If it appeared that the Federal law was intended to be supplementary to or cumulative upon State law, then no inconsistency would be exhibited in imposing the same duties or in inflicting different penalties. The inconsistency does not lie in the mere coexistence of two laws which are susceptible of simultaneous obedience. It depends upon the intention of the paramount Legislature to express by its enactment, completely, exhaustively, or exclusively, what shall be the law governing the particular conduct or matter to which its attention is directed. When a Federal Statute discloses such an intention, it is inconsistent with it for the law of a State to govern the same conduct or matter".

39. In the present case it was submitted that following the decisions to which I have referred there is a direct conflict between the Bankruptcy Act and the State legislation and therefore s 109 of the Constitution requires that s 225 of the LMRM Act should be read down.

Respondent's submissions

40. It was submitted on behalf of the Respondent that forfeiture is a mechanism by which ownership and possession of the asset is transferred to another by operation of law. (Equal Enterprise Ltd v Attorney General (1995) 3 NZLR 293 at 298). By s 225(1) of the LMRM Act forfeiture occurs automatically upon conviction. It was submitted there is forfeiture without the need for an order to that effect. (See Fisheries Inspector v Turner (1978) 2 NZLR 233).

41. It was then submitted therefore that where legislation imposes forfeiture automatically on conviction with power of the Court to order non forfeiture the forfeiture ends on the making of the order (See MAF v Schofield (1990) 1 NZLR 212 at 217). Any subsequent revoking of the forfeiture is not retrospective (See Williams v Attorney General (1990) 1 NZLR 646 at 671).

42. In the present case it was submitted there has been no order that the forfeiture not be carried out and therefore forfeiture has been effected. Until there is an order made under s 227(3) of the LMRM Act then the vessel belongs to the State of Tasmania. The vessel cannot form part of the bankrupt estate to which the trustee would have an entitlement to possession according to the submissions made on behalf of the Respondent.

43. In the alternative it was submitted that even if there has been no forfeiture there is still no right to possession by the trustee. It was submitted that the trustee has no power to recover possession under

s 129(2) of the Bankruptcy Act. It was submitted the trustee cannot have better rights than the bankrupt had if he had not been made bankrupt. The trustee takes property subject to the rights and interests of third parties (See Halbury's Laws of England Fourth Edition Volume 3(2) page 203; R v Roberts (1873) L.R. 9 QB 77).

44. The Respondent submitted that s 129(2) of the Bankruptcy Act must be construed in that context and that any statute which is intended to interfere with rights in property must do so in clear terms. In the present case it is submitted that the vessel had been seized under

s 200(d) of the LMRM Act and that seizure is an act of taking possession of an asset so that after seizure the bankrupt would have no right to possession even if he were not bankrupt. If the bankrupt as owner would not have right to possession even if not bankrupt, it was submitted that the trustee cannot obtain a better right to that vessel in circumstances where it had been seized lawfully under the relevant Tasmanian legislation. In those circumstances it is the State of Tasmania, according to the submissions, which has the right to the immediate possession of the vessel. It is clear that seizure and forfeiture can be effected against an innocent owner of a vessel (See Cheatley v The Queen [1972] HCA 63; (1972) 127 CLR 291).

45. Reference was made to the issue of whether there has been forfeiture by reason of the conviction. It was submitted that there was no automatic operation effected by s 225 of the LMRM Act and a distinction was made between forfeiture and seizure. It was submitted that forfeiture is more than simply a transfer of ownership, it is complete depositing of interest both possessory and equitable in the assets in the person to whom the property is forfeited. Reference was made to a number of New Zealand decisions where factual situations, which it was said are similar to the present case though not involving bankruptcy, had been decided. The court was referred to the Court of Appeal New Zealand decision in Equal Enterprise Ltd v Attorney General (1995) 3 NZLR 293. In that case the owner of a fishing vessel had given security interest by way of a debenture and mortgage to a bank. As a result of convictions under the New Zealand Fisheries Act the vessel was forfeited by the owner to the Crown pursuant to provisions of the New Zealand legislation. Relief was then sought by the bank as mortgagee under a provision which gave the Minister a discretion to release forfeited property. A declaration was sought by the bank that its security charges continue to subsist against the vessel after and despite forfeiture and it was argued then that the vessel would transfer to the Crown upon forfeiture subject to the security charges. I was referred to the following passage from the judgment of the Court at p 297,

"Section 107B(2) provides that on conviction `Any property used in respect of the commission of the offence ... shall be forfeit to the Crown' and in terms of s 107B(1) `property' means any vessel or other defined item. In each case the property described is a physical asset. The definition is not concerned with ownership or other interests in the property. Next, what is forfeit under s 107B(2) is property, the actual vessel, not interests in property. `Forfeit' has its ordinary meaning, namely that the property in question is `given up' or `surrendered' to the Crown. Further, whether or not a particular item of property is forfeit depends on how it was used. It is whether the property itself was used in respect of the commission of the offence, not who owned it or whether it was mortgaged. The only escape from forfeiture on conviction is where the Court thinks fit to order otherwise `for special reasons relating to the offence'. The focus is on the offence. It is only after the forfeiture of the physical asset employed in the offending has occurred that the adverse consequences for those who have legal or equitable interests in the property fall for consideration. And they fall for consideration under the administrative regime provided for by

s 107C.

There are three further considerations which support the conclusion that the actual vessel is forfeited to the Crown, not just ownership interests with the Crown taking subject to existing encumbrances. First, the property used in the offending is forfeit even if not owned by the offender. Forfeiture extinguishes all ownership interests, even where the vessel had been stolen. There can be no justification in principle for differentiating between ownership interests and financial interests and preferring encumbrances to innocent owners. Second, to make forfeiture subject to security interests would frustrate the purpose of the legislation. The owners could ensure that by mortgaging their vessels and equipment to family or third parties they had little or no equity in the property and little or nothing to lose in that regard in the event of forfeiture. Third, in providing that where property is forfeit to the Crown the Minister may, subject to the provisions of the section, `dispose of that property as the Minister thinks fit', s 107C is proceeding on the premise that the property had passed to the Crown. The Minister's ability to sell the property is inconsistent with the continued existence of mortgagee's rights in relation to the property'.

46. Reference was also made to a New Zealand decision in Fisheries Inspector v Turner (1978) 2 NZLR 233 which dealt with an appeal from a decision of a Magistrate not to convict where a charge was proved because conviction would mean automatic forfeiture with no discretion and it was considered that would be a harsh outcome. The issue which arose was the minimum penalty provision which had to be utilised by the Court in the situation. As I understood it, reference was made to that case to show that there is a discretion in relation to forfeiture and in particular after referring to that case reference was made to s 225(1) of the LMRM Act to demonstrate that no order of the Court is required to effect a forfeiture.

47. I was referred to the decision of MAF v Schofield (1989) 1 NZLR 210 where the court dealt with the issue of forfeiture of property as a consequence of a conviction under the New Zealand Fisheries Act. Specifically the Court considered the issue of forfeiture on conviction and found that in relation to the specific section of the legislation that forfeiture results not from an order of the court but from the operation of the statute itself.

48. A further case was referred to namely Williams v Attorney General (1990) 1 NZLR 646. In that case the Court had to consider a claim for damages by the innocent owner of a boat for damage done to the boat during a period of forfeiture and prior to any subsequent waiver of forfeiture entitling him to take ownership and possession of the boat again. The Court dealt with the issue of waiver or forfeiture and at page 671 of the judgment having considered the issue of waiver the court states,

"I accept the argument for the Crown that a waiver under section 287 is not retrospective. It follows that from March 1979 to April 1982 the `Nomad' was the property of the Crown. This being the linchpin of the argument for the Crown".

49. It was submitted that although the Williams case was a civil action that the principles referred to in that case may be applied to the present case when considering the application of s 225(2) of the LMRM Act. It was submitted that based on the authorities to which I have referred there can be forfeiture on conviction, a subsequent period of time when the Crown remains as forfeitee, the owner of the asset, and then what is termed there a waiver. It was noted that s 225(2) refers to an order that the forfeiture is not carried out.

50. It was conceded that the current application seeking to persuade the Hobart Court that the forfeiture should not be carried out is still a matter which can be agitated at the appropriate time. This is despite the reference to the fact that there has been a conviction and that there has been a forfeiture though it has not yet been, to use the language of the legislature, has not been carried out.

51. In relation to the inconsistency between the Bankruptcy Act and the LMRM Act I was again referred to the principles to be applied in considering whether there is pursuant to s 109 of The Constitution an inconsistency between the State Act and the Commonwealth Act. Reference was made to the concept of whether the Commonwealth Act is intended to cover the field or whether there is a direct inconsistency between provisions (See Clarke v Kerr [1955] HCA 55; (1955) 94 CLR 489, 504 cited by Stephen J in Ansett Transport Industries (Operations) Pty Ltd v Wardley [1980] HCA 8; (1979-80) 142 CLR 237, 251).

52. It was submitted that in the present case the "covering the field" criterion does not arise. The only issue is whether there is a "direct inconsistency" between the legislation.

53. It was submitted that the vessel formed part of the bankrupt estate when seized and that seizure is lawful even if the asset were not property of the Defendant or even if it belongs to an innocent party (See R v Cheatley [1972] HCA 63; (1972) 127 CLR 291 at 296). In this context the Respondent again repeated the proposition that a trustee holds estate property subject to the interests of others constituting encumbrances. It was submitted that s 129(2) of the Bankruptcy Act is not intended to create interests in property which would create an otherwise non existent right to possession prevailing over that enjoyed by the State. It was submitted that the section is merely procedural to facilitate to the orderly administration of the bankrupt estate. Any creation of rights would have to be expressed in clear terms.

54. It was argued that the trustee's rights are now subject to those of the State of Tasmania. From the date of seizure the State had an interest in possession and the trustee's interest in the vessel must be subject to that interest.

55. It was therefore submitted that there is no inconsistency in the legislation and that s 129(2) does not purport to create rights to possession inconsistent with those of s 200(d) of the LMRM Act which confers the right of seizure. It was further submitted that in the circumstances the court should accept that there has been forfeiture and the State therefore enjoys an absolute interest subject only to losing that interest by Court order.

56. It was finally submitted that the Court should not in any event be prepared to make a declaratory order in circumstances where such an order would be merely advisory. It was submitted that declarations of that type should not be made (See Swift Australian Co v South British Insurance Co Ltd [1970] VicRp 47; (1970) VR 368).

57. In support of the submissions for the Respondent a number of examples were given where property may be seized by the State from a bankrupt and then forfeited and/or destroyed. In those circumstances it was submitted the Bankruptcy Act could not be said to cover the field or provide for a trustee in bankruptcy to take precedence. Specifically an example was given of cattle which may be seized by the State and destroyed because of foot and mouth disease. An absurd outcome would be that the Bankruptcy Act would prevail and the trustee should have the right to possession of the property despite the existence of the relevant legislation enabling seizure and destruction of cattle subject to foot and mouth disease.

Reasoning

58. When considering s 109 of The Constitution it is useful in my view to understand that s 109 stands as a corollary to s 106, 107 and 108 of The Constitution. Section 106 is of course the provision which saves The Constitutions of each State whilst s 107 provides for the saving of the State Parliaments. The laws of the States continue and are protected by

s 108.

59. In my view it cannot be suggested that the State of Tasmania is not entitled to legislate in relation to the issues covered by the LMRM Act. Hence the LMRM Act could not be considered to be an unlawful Act of Parliament for the State of Tasmania. It is appropriate in the circumstances to consider s 109 of The Constitution in the light of the decision of the High Court in Gerhardy v Brown [1985] HCA 11; (1985) 159 CLR 70 at p 81 per Gibbs CJ where the Court said,

"Section 109 of The Constitution, which provides for the consequences of inconsistency between State and Commonwealth laws, operates only when both laws are in existence and s 107 preserves the powers of the Parliament of the States unless exclusively vested in the Parliament of the Commonwealth or withdrawn from the Parliament of the State."

60. In the present case I accept the submissions made for and on behalf of the Respondent that there is no direct inconsistency between the Commonwealth and State legislation.

61. The Commonwealth legislation is legislation designed to provide for the administration of bankrupt estates. An essential part of the legislation is the vesting of property upon bankruptcy and the trustee pursuant to s 58 of the Bankruptcy Act. Once vested the property is divisible among creditors pursuant to s 116 of the Bankruptcy Act and there are certain other provisions which provide powers to the trustee in relation to the property and otherwise dealing with the onerous duties which a trustee in bankruptcy performs in the administration of a bankrupt estate. I do not need to refer to other provisions of the Bankruptcy Act for the purpose of this judgment.

62. In my view it is clear that the property which vests in the trustee is vested subject to encumbrances which may then be in existence effecting the rights of the bankrupt. The trustee cannot take any better right than the rights possessed by the bankrupt. I am satisfied that in the present case the Riviera was seized according to the powers provided in s 200(d) of the LMRM Act on 12 March 2000. That seizure applying the authorities to which I have been referred by the Respondent was a lawful seizure and involved taking possession of the Riviera. Once possession has been obtained then the bankrupt is denied possession. Just as the bankrupt is denied possession the trustee in bankruptcy is likewise denied possession and in the circumstances any vesting which occurred of the property and in particular the Riviera pursuant to s 58 of the Bankruptcy Act must be subject to possession as a result of seizure by the State of Tasmania.

63. To find otherwise would be contrary to the powers of seizure and indeed forfeiture which I am satisfied can be effected against even an innocent owner of a boat (See Cheatley v R [1972] HCA 63; (1972) 127 CLR 291).

64. I am further satisfied that in the present case on a proper interpretation of s 225(1) of the LMRM Act that forfeiture has occurred upon conviction. That section in my view clearly provides for the forfeiture to occur upon conviction. Conviction has occurred and the forfeiture provision applies. The mere fact that there is a further sub-section which allows Court proceedings which may lead to an order that forfeiture not be carried out is irrelevant. At present both seizure and forfeiture in my view have occurred and accordingly the trustee cannot take a better right entitled to the forfeited vessel than the right which the bankrupt has in the circumstances. If the trustee in bankruptcy were to obtain rights despite the seizure and forfeiture then that would place the trustee in bankruptcy in a special position which does not appear to be contemplated by the State legislation. Nor as a matter of law in my view is it contemplated that property that vests in a trustee is vested in the trustee notwithstanding any other encumbrances including forfeiture orders to the Crown.

65. At present there has not been any order that forfeiture not be carried out. During the course of the hearing there was some degree of confusion in my view as to whether or not the application that the forfeiture not be carried out has been made at the appropriate time. Section 225(2) clearly provides for an application to made "during proceedings leading to the conviction". It is assumed for the purpose of this application that there is indeed a proper application yet to be determined by the Hobart Court.

66. In the present case I am satisfied that the Bankruptcy Act is not a Commonwealth law where it could properly be said that the Federal Powers in that Act expressly provide for the exclusion of State law in relation to proprietary interests in vessels which have been the subject of forfeiture and/or seizure by States. I am not satisfied that the Commonwealth law has evinced an intention to cover the field in the area which I find to be the proprietary interest of chattels and power to order forfeiture, by application of laws in relation to the administration of bankrupt estates. Hence, in the absence of the Commonwealth law evincing an intention to cover the field in the area s 109 of The Constitution does not apply as it could not be said that the State law is inconsistent with the Federal law (See Botany Municipal Council v Federal Airports Corporation [1992] HCA 52; (1992) 175 CLR 453).

67. Accordingly it follows that the Application filed 3 September 2001 should be dismissed.

I certify that the preceding sixty-seven (67) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 27 June 2002