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Conlan as Trustee of two Bankrupt Estates [2011] FMCA 849 (3 November 2011)

Last Updated: 7 November 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

CONLAN AS TRUSTEE OF TWO BANKRUPT ESTATES
[2011] FMCA 849

BANKRUPTCY – Delivery up order – property seizure warrant.

COURTS AND JUDGES – Validity of Federal Magistrates Act 1999 (Cth) – validity of establishment of Federal Magistrates Court – validity of commissions of appointment of federal magistrates – whether federal magistrates exercise judicial power of the Commonwealth.

CONSTITUTIONAL LAW – Validity of Federal Magistrates Act 1999 (Cth) – validity of establishment of Federal Magistrates Court – validity of commissions of appointment of federal magistrates – whether federal magistrates exercise judicial power of the Commonwealth – whether constitutional issue arises – whether notices under s.78B of the Judiciary Act 1903 (Cth) should issue.

PRACTICE AND PROCEDURE – Transfer of proceedings to the Federal Court – factors to be considered – whether in the interests of the administration of justice.


Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd & Ors (1999) 95 FCR 292; [1999] FCA 1151
Deputy Commissioner of Taxation v Cumins [2007] FMCA 1841
Federated Engine-Drivers & Firemen’s Association v Broken Hill Proprietary Co Ltd [1911] HCA 31; (1911) 12 CLR 398
Genovese v BGC Construction Pty Ltd [2006] FMCA 1507
R v Bolton [1841] EngR 193; [1835-42] All ER Rep 71
Re Boulton; Ex parte Construction, Forestry, Mining and Engineering Union (1998) 73 ALJR 129
Rentuza v Westside Auto Wholesale (2009) 236 FLR 231; [2009] FMCA 1022
Stewart v Pegasus Investments & Holdings Pty Ltd [2004] FMCA 712
SZQKE v Minister for Immigration & Anor [2011] FMCA 846
Trollope v Rambaldi as Trustee of the Bankrupt Estate of Barry Barton Trollope [2009] FCA 74

Hansard, Senate, 1 November 2011
Hansard, House of Representatives, 2 November 2011
Legal Services Direction 2005

Applicant:
MARK ANTHONY CONLAN AS TRUSTEE OF TWO BANKRUPT ESTATES

First Respondents:
THE BANKRUPTS

Second Respondents:
THE BANKRUPTS’ ASSOCIATES

File Number:
PEG 312 of 2011

Judgment of:
Lucev FM

Hearing dates:
2 and 3 November 2011

Date of Last Submission:
3 November 2011

Delivered at:
Perth

Delivered on:
3 November 2011

REPRESENTATION

Counsel for the Applicant:
Mr G D Cobby

Solicitors for the Applicant:
Jackson McDonald

ORDERS

(1) That proceedings in the Federal Magistrates Court in matter no. PEG 312 of 2011 be transferred to the Federal Court of Australia under section 39(1) of the Federal Magistrates Act 1999 (Cth).
(2) That, until further order of the Federal Court, the names of the respondents not be published in any Court documents or records, and that in all Court records:
(3) Costs in this Court in these proceedings to be costs in the cause in the Federal Court.
FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT PERTH

PEG 312 of 2011

MARK ANTHONY CONLAN AS TRUSTEE OF TWO BANKRUPT ESTATES

Applicant


And


THE BANKRUPTS

First Respondents

THE BANKRUPTS’ ASSOCIATES

Second Respondents


REASONS FOR JUDGMENT

(Edited ex tempore reasons)

Introduction – the application

  1. There is before the Court an ex parte application for orders:
    1. under s.129(2) of the Bankruptcy Act 1966 (Cth)[1] for delivery up of keys for, and documents evidencing title to, certain equipment; and
    2. for the issuance of property seizure warrants under s.130 of the Bankruptcy Act, and costs. The value of the property concerned apparently exceeds $932,850.
  2. The application was originally made to the Federal Court in Perth. When the matter came on before the Federal Court yesterday morning it came on before a judge who was not an “eligible judge” under s.129A of the Bankruptcy Act, an “eligible judge” being a judge of the Federal Court or this Court declared to be so by the relevant Minister.[2] That judge of the Federal Court did not therefore have power to issue a property seizure warrant under s.130(2) of the Bankruptcy Act. Apparently, no other Federal Court judge who is an “eligible judge” was available to hear the matter in Perth yesterday. There was therefore an order made by the Federal Court that the matter be transferred to this Court, which as presently constituted, is constituted by a federal magistrate who is an eligible judge for the purposes of the issuance of a property seizure warrant under s.130(2) of the Bankruptcy Act.[3] The matter was listed before the Court at 3.30pm yesterday afternoon. The matter proceeded on an ex parte basis, as is appropriate, generally speaking, where a property seizure warrant under the Bankruptcy Act is sought.[4]
  3. An issue arises concerning this Court. At the outset of the proceedings the Court raised with Counsel for the Trustee an article which had appeared in The Australian newspaper yesterday relating to issues concerning this Court.[5] It would appear that the article has its genesis in a matter raised in the Senate of the Commonwealth Parliament on 1 November 2011.[6] The matter was also raised in a judgment of this Court yesterday.[7]
  4. The issues raised concern proceedings apparently taken by 58 federal magistrates against the Commonwealth[8] in order to seek to resolve an issue about the exclusion of federal magistrates from the application of the Judges Pensions Act 1968 (Cth).[9] The federal magistrate constituting the Court for the purposes of these proceedings is not a party to the Federal Magistrates Litigation. It would appear from the reports in The Australian and Hansard that there has been a recent exchange of correspondence between the solicitors for the parties in the Federal Magistrates Litigation, and notwithstanding that that correspondence was apparently written on a without prejudice basis, it has now become public.
  5. The issues which have become public raise questions about:
    1. the validity of the Federal Magistrates Act 1999 (Cth);[10]
    2. the establishment of this Court as a Chapter III Court;[11]
    1. the validity of the commissions of appointment of all of the justices, styled federal magistrates, appointed to this Court;[12] and
    1. the exercise of the judicial power of the Commonwealth by federal magistrates.
  6. As the Court indicated to Counsel it would appear, based on the Hansard report,[13] that on 11 October 2011 the Australian Government Solicitor (presumably acting on behalf of the Commonwealth) wrote to the solicitors for the 58 federal magistrates involved in the Federal Magistrates Litigation, and put forward the following view:
  7. The Court assumes that such matters would not be raised by lawyers acting for the Commonwealth (albeit in unrelated litigation to this) unless they were matters of and with substance. That is particularly so given that under the Commonwealth’s Legal Services Directions 2005, made under s.55ZF of the Judiciary Act 1903 (Cth),[14] the Commonwealth “consistently with the Attorney-General’s responsibility for the maintenance of proper standards in litigation” has an obligation to act as a model litigant,[15] which requires the Commonwealth:
    1. “to act ... honestly and fairly in handling claims and litigations brought ... against the Commonwealth”;[16] and
    2. to “... act with complete propriety, fairly and in accordance with the highest professional standards” which is an “expectation ... recognised by the Courts”.[17]
  8. The Court therefore raised this matter, as it felt it must do so, because, if correct, the view apparently expressed by the Australian Government Solicitor (presumably on behalf of the Commonwealth) in the Federal Magistrates Litigation has implications for the validity of any delivery up order or property seizure warrant made in this matter by this Court. Further, if there is a serious constitutional issue arising from the issues raised in the Federal Magistrates Litigation it may be appropriate to:
    1. transfer this matter back to the Federal Court for determination by an “eligible judge” for the purposes of s.130(1) of the Bankruptcy Act; or
    2. adjourn the matter until such time as any issue with respect to the validity of the FM Act, the establishment of this Court, and the appointment and judicial power of federal magistrates is otherwise resolved; or
    1. consider whether the Court ought to issue notices under s.78B[18] of the Judiciary Act, and whether the proceedings ought to be adjourned pending the issuance of Section 78B Notices to the Attorneys-General of the Commonwealth and States.
  9. Section 78B of the Judiciary Act provides as follows:
  10. Each of the above possibilities was raised with Counsel for the applicant at the hearing yesterday afternoon. The Court made it clear that if the matter was to proceed in this Court then the Court would be required to give consideration to whether Section 78B Notices ought to issue, which would entail consideration of:
    1. whether there is a matter arising under the Constitution raised;
    2. if there is a matter arising under the Constitution, whether the proceedings ought to be adjourned under s.78B(2)(a) of the Judiciary Act to allow the issuance of Section 78B Notices; and
    1. whether there are issues on which the Court may continue to hear evidence and argument by reason of s.78B(2)(c) of the Judiciary Act because they are matters severable from any matter arising under the Constitution and, if so, whether they ought to be heard separately.
  11. Counsel for the Trustee, properly and prudently, indicated to the Court that even if s.78B Notices issued, and the matter was not removed from this Court, an issue might still arise as to whether delivery up orders, if made, and property seizure warrants, if issued, were valid. Ultimately, that issue might only be resolved elsewhere. Counsel indicated that, subject to instructions, a transfer of the matter back to the Federal Court was likely to be the better option for the Trustee. The Court indicated, without expressing an ultimate view as to the disposition of the matter, that it would probably be necessary for an interstate Federal Court Judge to be found to hear the matter, probably by video link. In the circumstances, the matter was yesterday adjourned to 9.00am today for further hearing.
  12. It has come to the Court’s attention this morning that yesterday afternoon the Federal House of Representatives was informed by the Attorney-General that the correspondence from the Australian Government Solicitor in the Federal Magistrates Litigation referred to above was directed to narrowing the issues in those proceedings and to avoid doubts concerning the constitutional validity of this Court and its arrangements.[19] Be that as it may, the extract quoted above from the relevant correspondence expressly raises doubts about the constitutional validity of this Court and its arrangements, and they are matters which this Court is under a duty to consider where it is aware of them,[20] and also to raise with parties before the Court out of fairness to them.
  13. Upon resumption of the hearing today, Counsel for the Trustee indicated that he had instructions to seek to have the matter transferred back to the Federal Court. So far as the Court is aware, there is no question as to the validity of the Federal Court of Australia Act 1976 (Cth),[21] the establishment of the Federal Court under the FC Act, or the appointment of the Judges of the Federal Court as justices, or the exercise by Federal Court judges of the judicial power of the Commonwealth.
  14. Counsel for the Trustee yesterday submitted, and the Court accepts, that if the matter were to remain in this Court, and whether or not Section 78B Notices were issued, uncertainty might attach to any delivery up order made or property seizure warrant issued by this Court, until ultimate resolution of the issues raised in the Federal Magistrates Litigation. In those circumstances, Counsel for the Trustee submitted that the preferable course was to transfer the matter to the Federal Court.

Transfer to the Federal Court
Application to transfer – legislation

  1. The making of an order to transfer proceedings from this Court to the Federal Court is discretionary.[22] Any order made is not one in respect of which an appeal lies.[23] There are certain mandatory factors which this Court is required to take into account under the FM Act, as follows:
  2. The Federal Magistrates Court Rules 2001 (Cth)[25] provide for other factors to be considered, as follows:

Application to transfer – factors

Pending proceedings in an associated matter in the Federal Court

  1. There are no pending proceedings in an associated matter in the Federal Court.

Sufficiency of resources of this Court to hear and determine proceeding

  1. This Court has sufficient resources in the Perth Registry to deal with the Trustee’s application.

Question of general importance

  1. There is no question of general importance involved in the subject matter of the application itself which would warrant transfer to the Federal Court.

Cost and convenience of hearing and determination

  1. There is likely to be a saving of judicial time and cost to the parties if the matter is transferred to the Federal Court. If the issues raised by the Australian Government Solicitor in the Federal Magistrates Litigation are valid, or even arguable, it is possible that there will be unnecessary wastage of time, money and resources for the parties and the courts if the matter stays in this Court.
  2. It will therefore probably be more convenient and less costly for the parties if the matter is dealt with in the Federal Court.

Earlier hearing of proceedings

  1. It is not entirely clear how long it might take the Federal Court to list the matter, but based on enquiries made by the Court with the Western Australian Registry of the Federal Court, any delay is unlikely to be undue, and in any event preferable to the matter remaining in this Court with its possible associated jurisdictional difficulties.

Availability of particular procedures appropriate for the class of proceeding

  1. Given the concurrent jurisdiction of this Court and the Federal Court in bankruptcy matters, and the harmonisation of the bankruptcy rules for both courts, there is little practical difference in the particular procedures available for dealing with the matter in this Court or the Federal Court.

Wishes of the parties

  1. The Trustee wants a transfer of these proceedings to the Federal Court. Because the matter was heard ex parte the wishes of the respondents have not been heard, but it is doubtless in their interests, and the public interest, that the matter be heard by the Federal Court, where no question arises concerning jurisdiction.
  2. The Court also notes that the matter was originally commenced in the Federal Court.

The interests of the administration of justice

  1. The interests of the administration of justice are directed to a consideration of the interests of the management of justice, that is, the management of the proceedings pending before the Court.[27]
  2. The Court considers, particularly with respect to the discussion above concerning the possible jurisdictional difficulties associated with this matter proceeding in this Court, and the possible consequent cost and inconvenience to all parties, that the best management of the matter would be achieved by having it dealt with in the Federal Court.

Transfer - conclusion

  1. The exercise of discretion to transfer a matter does not require a court, absent statutory direction to the contrary, to give equal weight to all factors to be considered in the exercise of the discretion.[28]
  2. In this case the following factors which favour transfer to the Federal Court:
    1. the lesser cost, and greater convenience, of the matter being heard in the Federal Court whilst there is an apparently serious issue concerning this Court’s jurisdiction;
    2. the wish of the Trustee to have the matter heard in the Federal Court; and
    1. the interests of the administration of justice,

outweigh other factors which are neutral or against the transfer of the matter to the Federal Court, and the Court has concluded that there ought to be a transfer to the Federal Court. There will be an order accordingly.

  1. In making an order to transfer the matter to the Federal Court the Court has not lost sight of the fact that it is the first duty of a court to determine whether it has jurisdiction to deal with a matter.[29] However, there is authority for the transfer of a matter in which this Court does not have jurisdiction to the Federal Court. In Stewart v Pegasus Investments & Holdings Pty Ltd[30] this Court held that “a proceeding can be transferred in circumstances where there might not be jurisdiction”.[31] A possible want of jurisdiction does not therefore preclude this Court from transferring a matter to the Federal Court.

Section 78B Notices

  1. By reason of the order transferring the matter to the Federal Court it is unnecessary to further consider whether Section 78B Notices ought to issue in this matter.

Publication of names of the respondents

  1. As indicated above, because of the nature of this matter, it proceeded ex parte. Written submissions were lodged on behalf of the Trustee that if notice were given to the respondents of the proceedings, the property the subject of the proceedings (apparently valued at not less than $932,850) might be moved beyond the Trustee’s reach, or damaged. Whether or not that is likely to occur it is not presently necessary to finally determine, but it is a possible risk. It is however appropriate, in circumstances where the application for a delivery up order and a property seizure warrant, remain to be determined (usually ex parte), that orders be made which prevent the publication of the names of the respondents in this judgment, and otherwise. That is because by reason of the publication of this judgment, the respondents might be alerted to the matter prior to it being considered by the Federal Court if their names were included in the judgment, and were otherwise available in Court records. The Court has power to restrict publication of parties’ names in order to prevent prejudice to the administration of justice.[32] This is a case in which the administration of justice might be prejudiced, for the reasons set out above, if the respondents’ names were to be published. There will therefore be orders that the proceedings be entitled “Conlan as Trustee of two bankrupt estates”, that the applicant be entitled “Mark Anthony Conlan as Trustee of two bankrupt estates”, the first respondents be identified as “The Bankrupts”, and that the second respondents be identified as “The Bankrupts’ Associates” for the purposes of this judgment and otherwise in the Court’s records.

Conclusions and orders

  1. For the reasons set out above the Court has concluded that:
    1. this matter ought to be transferred to the Federal Court, and there will be an order to transfer the matter to the Federal Court; and
    2. it is necessary to make an order prohibiting the publication of the respondents’ names both in these Reasons for Judgment, and otherwise in the Court records.
  2. There will also be an order that costs in this Court be costs in the causes in the Federal Court.
  3. The Court requests that the District Registrar of the Federal Court facilitate all possible expedition of the matter.

I certify that the preceding 35Error! Style not defined.!Syntax Error, !Error! Style not defined.Error! Style not defined.!Syntax Error, !thirty-fivethirty-five (35) paragraphs are a true copy of the reasons for judgment of Lucev FM


Date: 3 November 2011

[1] “Bankruptcy Act”.
[2] Bankruptcy Act, s.5(1)
[3] Bankruptcy Act, s.5(5).
[4] Trollope v Rambaldi as Trustee of the Bankrupt Estate of Barry Barton Trollope [2009] FCA 74 at para.43 per Ryan J; “The scheme of s130 contemplates that a Trustee’s application for the issue of a warrant is to be made ex parte.”
[5] Chris Merritt “Suit puts ‘court’s decision at risk’”, The Australian November 2, 2011, page 3.
[6] Hansard, Senate, 1 November 2011, pages 96-98.
[7] SZQKE v Minister for Immigration & Anor [2011] FMCA 846.
[8] “the Federal Magistrates Litigation”.
[9] “JP Act”. Under s.4(1) of the JP Act a “Judge means, amongst other things, “a Justice or Judge of a federal court (other than the Federal Magistrates Court)”.
[10] “FM Act”.
[11] FM Act, s.8.
[12] FM Act, s.8(4).
[13] Evidence Act 1995 (Cth), s. 154
[14] “Judiciary Act”.
[15] Legal Services Direction 2005, Appendix B, cl.1.
[16] Legal Services Direction 2005, Appendix B, cl.2.
[17] Legal Services Direction 2005, Appendix B, Note 2.
[18] “Section 78B Notices”.
[19] Hansard, House of Representatives, 2 November 2011, page 62.
[20] See para.30 below and footnote 29 below; see also Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd & Ors [1999] FCA 1151; (1999) 95 FCR 292 at 298-299 Per French J; [1999] FCA 1151 at paras.16, 19 and 20 per French J (“Berbatis”).
[21] “FC Act”.
[22] FM Act, s.39(1) and (2).
[23] FM Act, s.39(6).
[24] FM Act, s.39(3)(a)-(d).
[25] “FMC Rules”.
[26] FMCA Rules, r.8.02(4)(a)-(e).
[27] Genovese v BGC Construction Pty Ltd [2006] FMCA 1507 at para.28 per Lucev FM.
[28] Deputy Commissioner of Taxation v Cumins [2007] FMCA 1841 at para.47 per Lucev FM.
[29] R v Bolton [1841] EngR 193; [1835-42] All ER Rep 71 at 73-74 per Lord Denman CJ; Federated Engine-Drivers & Firemen’s Association v Broken Hill Proprietary Co Ltd [1911] HCA 31; (1911) 12 CLR 398 at 415 per Griffith CJ, at 428 per Barton J and at 454 per Isaacs J (“FEDFA”); Re Boulton; Ex parte Construction, Forestry, Mining and Engineering Union (1998) 73 ALJR 129 at 133 per Kirby J; Rentuza v Westside Auto Wholesale [2009] FMCA 1022; (2009) 236 FLR 231 at 237 per Lucev FM; [2009] FMCA 1022 at para.23 per Lucev FM. Contrast SZQKE cited above where the issue of whether or not the Court has jurisdiction was not expressly considered, or it appears, argued.
[30] [2004] FMCA 712 (“Pegasus Investments”).
[31] Pegasus Investments at para.14 per Phipps FM (and the Federal Court authorities there cited).
[32] FM Act, s.61(b) and (f).

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