R v Federal Court of Bankruptcy [1937] HCA 54; (1937) 57 CLR 765 (3 September 1937)

A bankrupt, William John Lowenstein, applied for an order of discharge from bankruptcy under sec. 119 of the Bankruptcy Act 1924-1933. The Federal Court of Bankruptcy, acting under sec. 217 of the Act, having reason to believe that the bankrupt had been guilty of an offence against sec. 209 (g) of the Act, charged him with the offence and proceeded to try him summarily. When the charge was called the defendant pleaded not guilty and objected that sec. 217 was invalid in so far as it authorized the court to make a charge, serve a copy of the charge and to prosecute the bankrupt, as well as to conduct the trial, because it attempted to confer other than judicial power upon a Federal court. This, it was contended, was prevented by sec. 71 of the Constitution, which vests only judicial power in Federal courts. It was also objected that the charge made did not disclose an offence and that sec. 209 (g) is invalid. Sec. 209 provides that "whoever ... (g) being a bankrupt, has omitted to keep such books of account as are usual and proper in the business carried on by him and as sufficiently disclose his business transactions and financial position during any period within the five years immediately preceding the date of his bankruptcy ... shall be guilty of an offence." The objections were that the offence could be committed only if the defendant was a bankrupt at the time of the omission to keep books; that the charge did not allege an intent to defraud, and that such an intent was a necessary element in the offence; and that sec. 209 (g) was invalid because it was not bankruptcy legislation, being really legislation relating to the general conduct of business. Both parties joined in asking the judge to state a case under sec. 20 (3) of the Bankruptcy Act for the opinion of the High Court upon the questions raised. The learned judge took the view that he could only state a case after he had determined "the ultimate facts" in the proceedings, that is, after he had heard the evidence upon the trial and decided all questions of fact arising. Reference was made to such cases as Merchant Service Guild of Australasia v. Newcastle and Hunter River Steamship Co. Ltd. [No. 1][1], Schumacher Mill Furnishing Works Pty. Ltd. v. Smail[2] and Boese v. Farleigh Estate Sugar Co. Ltd.[3]. The bankrupt obtained an order nisi for a mandamus directing the judge to state a case and an order nisi for prohibition to prevent the continuance of the proceeding under sec. 217.

Sec. 20 of the Bankruptcy Act contains the following provisions: "(3) If in any bankruptcy proceeding in a court any question of law arises which all the parties thereto desire, or which one of them and the judge of the court desire, to have determined in the first instance in the High Court, the judge shall—(a) state the facts in the form of a special case for the opinion of the High Court; and (b) transmit the special case and the proceedings, or such of them as are required, to the High Court for the purposes of the determination."

It will be observed that the section provides that the High Court shall give an "opinion" upon the "question of law" which it may be asked to "determine." The High Court does not under this provision receive the whole matter into its jurisdiction. Only such of the proceedings as are required are transmitted to the High Court "for the purposes of the determination." Thus the High Court does not give the decisive judgment or make the decisive order as if the whole proceeding had been transferred to it from the Court of Bankruptcy. Accordingly, there is nothing in the frame of the section which would prevent the High Court from determining a question arising at the beginning of or during the course of the bankruptcy proceeding.

It was argued, however, that the requirement that the judge should "state the facts" means that he should state the whole of the facts in relation to which a decision has to be reached before the bankruptcy proceeding in which the question of law arises can be completed. But it is not necessary to construe the words "state the facts" in such a manner. They are satisfied by the statement of only such facts as are required to enable the High Court to determine the question of law which has arisen. Sometimes a statute expressly authorizes the statement of a case "at any stage" in proceedings: for example, Commonwealth Conciliation and Arbitration Act 1904-1934, sec. 31 (2). There are no such express words in sec. 20 of the Bankruptcy Act. But the words of the section do not exclude the possibility of the statement of a case during the course of proceedings and before all the facts have been determined if it is possible to state facts upon which the question of law arises in respect to which it is desired to obtain the opinion of the High Court. There is no rule that to "state the facts" must mean to state all the facts. The facts which must be stated are the facts which it is necessary to know in order to decide the question of law: "It is absolutely settled law both in England and in Australia that the expression state a case involves stating facts, that is, the ultimate facts, requiring only the certainty of some point of law applied to those facts to determine either the whole case or some particular stage of it—the stage at which the case is stated" (Australian Commonwealth Shipping Board v. Federated Seamen's Union of Australasia[4]). Under sec. 20 of the Bankruptcy Act the facts to be stated must be "ultimate facts" in the sense explained in Merchant Service Guild of Australasia v. Newcastle and Hunter River Steamship Co. Ltd. [No. 1][5]. But it is sufficient to state such facts as require only a binding legal opinion for the determination, not of the whole proceeding, but of the question of law which arises.

In the present case, the question of law arose when the charge was made and the accused pleaded not guilty and raised the objections mentioned. It is sufficient to state these facts, which are ultimate facts for the relevant purpose, in order to raise the questions of law. Sec. 20 provides that if both parties desire a question of law to be determined by the High Court, the judge "shall" state a case. This provision does not mean, in our opinion, that the parties are entitled to insist upon the judge making piecemeal decisions upon partial evidence, but this has not been done in the present case, where the necessary facts mentioned are already ascertained beyond dispute. The order for mandamus to state a case should therefore be made absolute.

The court has heard argument upon the application for prohibition, which is based upon the contention that sec. 217 is invalid for the reasons indicated. A decision upon the prohibition proceedings would not really determine the questions which arise in this matter, because, if it were held that the Court of Bankruptcy could not itself try the bankrupt under sec. 217 (1) (a), it may reasonably be presumed that the judge would simply commit him for trial before a court of competent jurisdiction under sec. 217 (1) (b), the validity of which is not attacked. The questions which arise upon the mandamus proceedings would still have to be determined. The contention that sec. 217 (1) (a), sec. 217 (2) and sec. 217 (3) are invalid raises an important question. As it will be necessary for the parties to appear again before this court upon the argument of the special case, it is desirable to mould the grounds of the order nisi for mandamus so that the whole matter will be before this court for argument upon the special case.

Grounds of application for order nisi for writ of mandamus amended by adding the following:—(a) Whether the Court of Bankruptcy has jurisdiction to hear and try the said charge. (b) Whether sec. 217 (1) (a), sec. 217 (2) and sec. 217 (3) of the Bankruptcy Act 1924-1933 are within the powers of the Commonwealth Parliament. Order nisi for writ of mandamus made absolute. Application for writ of prohibition adjourned and all questions of costs reserved till hearing of special case.

[1] [1913] HCA 76; (1913) 16 C.L.R. 591.

[2] [1916] HCA 11; (1916) 21 C.L.R. 149.

[3] [1919] HCA 35; (1919) 26 C.L.R. 477.

[4] (1925) 36 C.L.R., at p. 450.

[5] [1913] HCA 76; (1913) 16 C.L.R. 591.

High Court of Australia

R v Federal Court of Bankruptcy [1937] HCA 54; (1937) 57 CLR 765 (3 September 1937)

HIGH COURT OF AUSTRALIA