FEDERAL COURT OF AUSTRALIA

Turner v Rothmore Farms Pty Ltd (in liq) [2003] FCA 710

TENNYSON TURNER v ROTHMORE FARMS PTY LTD (in liq)

S 278 OF 2002

SELWAY J

16 JULY 2003

ADELAIDE

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

THE COURT ORDERS THAT:

1.         The appeal be dismissed.

2.         The appellant pay the costs of the respondent.

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

ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

REASONS FOR JUDGMENT

1                     This is an appeal pursuant to s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) from a sequestration order made by the Federal Magistrates Court on 6 December 2002.  The appellant says that the learned Federal Magistrate erred in making that order.  He says that the learned Federal Magistrate should not have made a sequestration order until the Supreme Court of South Australia has finally determined the extent (if any) of the appellant’s indebtedness to the respondent.

2                     Pursuant to s 25(1A) of the Federal Court of Australia Act 1976 (Cth) the Chief Justice on 7 February 2003, directed that this appeal be heard by a single judge of this Court.

3                     In order to understand the issues raised on this appeal it is necessary to set out the factual background in some detail.

4                     The respondent was the trustee of the Jill Cooper Family Trust (‘the Trust’).  In that capacity it operated a farming and engineering business on a property at or near Moonta in South Australia.  In that capacity it entered into various loan agreements with various banks.  The banks sought to recover under those loan agreements from the respondent.  The respondent defaulted and was placed in liquidation.  The liquidator, on behalf of the respondent, sought to enforce against the assets of the Trust the indemnity to which the respondent was entitled as trustee.

5                     In the interim three separate transactions had been conducted by those with apparent power to do so under the terms of the Trust.  First, the respondent had been replaced as trustee by another company, Belgravia Pty Ltd.  Subsequently, the Trust was effectively ‘wound up’ and all of the assets vested in one of the family members.  Thirdly, an agreement was made between that family member and the appellant whereby the appellant agreed to sell and the family member agreed to purchase some opal for an amount in cash and the (former) assets of the Trust.  It was argued by the appellant and by the former beneficiaries of the Trust that the effect of these transactions was that the relevant assets were no longer available to meet the indemnity owed by the Trust to the respondent.

6                     These issues were considered by Mansfield J in Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745.  His Honour held that the purpose of each of the three transactions was to put the assets of the Trust beyond the reach of the respondent so that its creditors, namely the banks, could not preclude or prevent the Trust from continuing to trade by seizing the assets.  In particular, in relation to the third transaction which directly involved the appellant, his Honour found that the transaction ‘was not a genuine transaction at all’.  In consequence, Mansfield J found that the respondent under its indemnity was entitled to trace the assets of the Trust, including the proceeds from the agricultural and engineering businesses, into the hands of the appellant.  However, he also found that the appellant was entitled to be repaid the sums which he had expended in carrying on the business of the Trust.  Consequently, Mansfield J made a number of orders.  The effect of them was that the respondent was entitled to an indemnity out of the assets of the Trust to the extent of its current indebtedness to the relevant banks, and that for that purpose and to that extent the respondent had an equitable charge or lien over the relevant assets.

7                     It is plain from the terms of the orders he made that Mansfield J determined from the evidence he had heard that the assets would be insufficient to meet the amount of the indemnity.  For example, if the value of the assets would have exceeded the amount of the indemnity then provision would need to have been made as to the entitlements to the surplus.  Provision would also need to be made to reduce rateably the sums repayable by the respondent to the appellant.   It was unnecessary to do so because the assets would be insufficient.  As Mansfield J said in his reasons:

‘It is clear enough, from my findings as to the value of the assets transferred pursuant to the third transaction, that the interest of Rothmore Farms in those assets will exceed their realisable value. There will be no residual equity left for Tennyson Turner. I have therefore concluded that he is entitled to the full amount for those four items: cp Kemtron (above at 580).’

Presumably for this reason his Honour ordered that all keys etc should be delivered to the respondent and that the respondent could realize the assets and retain the proceeds even before an accounting had been made.

8                     Nevertheless, his Honour ordered that an accounting should be made.  The reasons for this were clear enough:

‘I will make…orders for such inquiry and accounts as are necessary to resolve any issues as to the assets or other monies received by Tennyson Turner to which Rothmore Farms is entitled, and as to the amounts of expenditure by Tennyson Turner or by Agri-Steel for which they are entitled to credit.’

The purpose of the accounting was to determine what moneys were due to the respondent from the appellant on the basis that the realization of the assets would be insufficient.

9                     The relevant order provided:

‘6.        To the extent necessary, inquiries and accounts be conducted by the Registrar of the Court or by such other person or persons empowered to conduct such inquiries and accounts for the following purposes:

            6.1       to identify all and every of the assets of the Jill Cooper Family Trust as vested in Andrew Charles Cooper on 19 May 1998 and as subsequently transferred by him on 7 August 1998 to Tennyson Turner;

            6.2       to identify all moneys received by Tennyson Turner or by Agri-Steel Pty Ltd in the conduct of the farming business and the engineering business conducted by them or either of them on and from the property known as Rothmore Farms from 7 August 1998;

6.3       to identify all moneys paid by Tennyson Turner or by Agri-Steel Pty Ltd or either of them in the conduct of the farming business or in the conduct of the engineering business on and from the property known as Rothmore Farms from 7 August 1998,

and so that the declarations made in paragraphs 1 to 5 hereof may be given their proper force and effect.’

10                  It has been assumed and seems always to have been assumed by all parties that the only jurisdiction that this Court had to hear and determine these issues was the jurisdiction of the Supreme Court of South Australia purportedly vested in this Court under the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth) and the Jurisdiction of Courts (Cross-Vesting) Act 1987 (SA), or (perhaps) under the equivalent scheme under the Corporations Law.  Certainly nothing has been put to me to challenge that assumption.  I proceed on that basis.

11                  Mansfield J finalised the above orders on 11 June 1999.  On 17 June 1999, the High Court delivered its decision in Re Wakim; Ex parte McNally (1999) 198 CLR 511 (‘Wakim’).  The effect of that decision was that the cross-vesting of the jurisdiction of the State courts to the Federal Court was invalid.  This did not mean that the orders that had been made by Mansfield J were ineffective.  This Court is a superior court – until set aside its orders remain valid and effective notwithstanding that the legislation conferring the jurisdiction to make those orders was invalid: see Re Macks; Ex parte Saint (2000) 204 CLR 158 (‘Macks’).  Consequently the orders made by Mansfield J were not nullities.  They were not ineffective.  However, they were subject to being set aside either on appeal or in proceedings under s 75(v) of the Commonwealth Constitution.

12                  In response to the decision in Wakim,South Australia enacted the Federal Courts (State Jurisdiction) Act 1999 (SA) (‘State Jurisdiction Act’).  Relevant provisions of that Act provide:

‘4(1)    A reference in this Act to an “ineffective judgment” is a reference to a judgment of a federal court in a State matter given or recorded, before the commencement of this section, in the purported exercise of jurisdiction purporting to have been conferred on the federal court by a relevant State Act…

6(1)     The rights and liabilities of all persons are, by force of this Act, declared to be, and always to have been, the same as if:

(a)          each ineffective judgment of

(i)                the Federal Court of Australia, otherwise than as a Full Court of the Federal Court of Australia;…

had been a valid judgment of the Supreme Court constituted of a single Judge;…

7(1)     A right or liability conferred, imposed or affected by section 6:

            (a)     is exercisable or enforceable; and

            (b)     is to be regarded as always having been exercisable or enforceable,

as if it were a right or liability conferred, imposed or affected by a judgment of the Supreme Court.

10(1)   The Supreme Court may vary, revoke, set aside, revive or suspend a right or liability conferred, imposed or affected by section 6 as if it were a right or liability conferred, imposed or affected by the Supreme Court in or in relation to proceedings of the kind in or in relation to which the ineffective judgment was given or recorded.’

13                  The effect of these provisions is not somehow to render the orders of this Court into orders of the South Australian Supreme Court.  What they do is to create a new right under South Australian law in the same terms as the orders made by this Court.  See Macks at 178, 192-193, 201-202, 234, 281-284; contrast 250-253.  For convenience it is often easier to discuss these issues as if the Federal Court orders and subsequent Supreme Court orders formed one continuous chain.  Indeed, I do so in these reasons.  But this should not be confused with a proper understanding of the legal arrangements.

14                  In consequence of the State Jurisdiction Act and of the Rules of the Supreme Court of South Australia, the respondent instituted proceedings in that Court.  In those proceedings the order of Mansfield J was treated as if it was an order of a judge of that Court.  In consequence Judge Bowen Pain, a Master of the Supreme Court, carried out the inquiry and account otherwise required by Mansfield J’s order and made other orders necessary to give effect to Mansfield J’s order.  His Honour made relevant orders on 2 November 2001.  It is clear from the terms of that order that Judge Bowen Pain, like Mansfield J, assumed that the assets of the Trust were insufficient to meet the amount of the indemnity.  There is no material before me as to whether the Master made this assumption on the basis of the material that was before him, or whether he simply relied upon the assumption that was implicit in the order made by Mansfield J.  In any event, the order of Judge Bowen Pain appears to identify all of the relevant payments made and received by the respondent, and then makes the following order:

‘13.      Within 7 days of service of a sealed copy of this order on them, the third and fourth defendants pay to the plaintiff the sum of $1,189,989.’

15                  Against that background the order made by the Master is absolutely plain and clear.  Until that order is set aside or discharged the appellant is indebted to the respondent for the sum of $1,189,989.

16                  I should also mention that the Master is a member of the Supreme Court which, of course, is also a superior court.  See s 6 and s 7 Supreme Court Act 1935 (SA).  Its orders are also valid until set aside.  Those orders are not nullities and consequently they cannot be challenged in ‘collateral’ proceedings: see McHugh J in Ousley v The Queen (1997) 192 CLR 69 at 99.

17                  The appellant did seek to appeal from the order of the Master.  Apparently he did not comply with the time requirements for appeals in the Supreme Court and applied for an extension of time in which to appeal.  That application was heard by Perry J.  His reasons are given in Rothmore Farms Pty Ltd (In Liq) v Belgravia Pty Ltd & Ors [2002] SASC 302 handed down on 4 September 2002.  In his argument to Perry J, the appellant foreshadowed two arguments that he would pursue if an extension of time were granted.  The first was that the order by Mansfield J imposing liability upon the appellant was conditional upon the respondent making payment and returning property to the appellant.  Perry J correctly observed that the order was not conditional.  The second was that the extent of the liability of the appellant to the respondent was conditional upon an accounting of the extent of the indemnity of the respondent and the amount of any receipts by the respondent.  The appellant said that there should be a fresh accounting and that the orders made by the Master be stayed until that occurs.  In effect, the appellant was seeking to have the assumption made in the orders of both Mansfield J and of the Master re-examined, i.e. the assumption that the assets of the Trust would not be sufficient to meet the amount of the indemnity due to the respondent.  As Perry J made clear in his reasons, the appellant could have (in effect) appealed in the Supreme Court from the order of Mansfield J, but had not done so.  The application for an extension of time was refused.

18                  On the face of it that was an end of the matter.  However, nothing daunted, on 2 September 2002, the appellant made application in the Supreme Court for an order for an accounting by the liquidator.  Perry J made such an order on 24 October 2002, and on 13 November 2002, made a further order referring the question of that accounting by the liquidator to the Master.  Given what had gone before, and the terms of the orders actually made, it is quite apparent that these orders did not involve a re-opening of the previous orders by the Master.  Rather, they were directed to the liquidator as an officer of the Court and required an accounting by him of his actions.

19                  However, apparently these orders were the source of some confusion or misunderstanding, at least to the appellant.  The appellant appeared to understand that by this mechanism he had somehow achieved what he had failed to achieve in the purported appeal, namely a review of the orders made by Mansfield J and by Judge Bowen Pain.  In particular, following the orders made by Perry J on 24 October 2002, and on 13 November 2002, he requested information in relation to that accounting which arguably involved the issue of whether the amount of $1,189,989 was due from the appellant to the respondent.  In the result, the matter came back on before Perry J on 29 January 2003.  If it was not clear before, it is abundantly clear from the transcript of that hearing that the orders made by Perry J on 24 October 2002, and on 13 November 2002, were only intended to be in relation to the duties of the liquidator as an officer of the court to account for his actions.  As Perry J noted in argument, if that accounting by the liquidator suggested that the amount of the indemnity was less than the amount that the appellant had been ordered to pay, then this might constitute fresh evidence which might justify an appeal from the order made by Judge Bowen Pain and/or Mansfield J.  Presumably at that stage a further issue might arise as to whether the appellant has locus standi to pursue such an appeal: see Evans v Hi Fert Pty Ltd [2003] SASC 186. But, in any event, the possibility of some future appeal was not the reason for the accounting, nor did it affect the order that had been made.  His Honour made it plain:

‘The order made on [2] November 2001 was never the subject of any appeal.  It stands.  Its terms operate in full.  The parties must comply with it…. The outcome of the enquiry in accounting is crystallised in the order of 2 November 2001.  It remains written in stone.  I don’t have jurisdiction to vary it and I don’t propose to do so.  At least there is no basis for variation being referred to the court.’

20                  In confirmation of the discussion recorded on the transcript, Perry J made the following order:

‘That the matter referred to Master Bowen Pain pursuant to my order of 13 November 2002 be confined to:

(a)       an accounting by the liquidator of his receipt and payment out of moneys and of the balances currently due to the banks pursuant to the indemnity in question, to the intent that if the Master takes the view that the liquidator has failed fully and satisfactorily to account for his dealings in the affidavit and exhibits already filed by him, the Master may make such further directions as to that aspect of the matter as he may think fit; and

(b)       without in any way varying or reviewing his order of 2 November 2002, which remains in full force and effect, the Master may consider whether or not any further order or direction may be necessary in order to carry into effect the order of 2 November 2002.’

21                  Following that order the matter came back on before the Master.  I am informed that there was an argument before the Master as to what further accounting should be required of the liquidator.  I am also informed that the Master’s decision on that issue is reserved.  Of course, it is inappropriate for me to express any view in relation to that issue or on the question whether the appellant has locus standi to continue to pursue these issues before the Master.  Nothing in these reasons should be taken as suggesting or inferring that I have any view in relation to that issue or question, or that I have expressed any such view.

22                  Whilst these events were occurring, action was also taken under the Bankruptcy Act 1966 (Cth) (‘the Act’).  For present purposes the relevant provisions of that Act would appear to be:

‘Section 40 Acts of Bankruptcy

(1)       A debtor commits an act of bankruptcy in each of the following cases:

            …

            (g)     if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not:

                     (i)      where the notice was served in Australia - within the time specified in the notice; or

                     (ii)     where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service;

comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained;

…

(3)       For the purposes of paragraph (1)(g):

                        …

            (b)     a judgment or order that is enforceable as, or in the same manner as, a final judgment obtained in an action shall be deemed to be a final judgment so obtained and the proceedings in which, or in consequence of which, the judgment or order was obtained shall be deemed to be the action in which it was obtained;

            …

            (d)     a person who is for the time being entitled to enforce a final judgment or final order for the payment of money shall be deemed to be a creditor who has obtained a final judgment or final order;

            …

Section 41 Bankruptcy Notices

(1)              An Official Receiver may issue a bankruptcy notice on the application of a creditor who has obtained against a debtor:

(a)         a final judgment or final order that:

                       (i)    is of the kind described in paragraph 40(1)(g); and

(ii)     is for an amount of at least $2,000;

…

…

(5)       A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement.

(6)       Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it.

(6A)     Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:

            (a)     proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or

            (b)     an application has been made to the Court to set aside the bankruptcy notice;

the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice.

            …

(6C)     Where:

            (a)     a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and

            (b)     the Court is of the opinion that the proceedings to set aside the        judgment or order:

                   (i)      have not been instituted bona fide ; or

                   (ii)     are not being prosecuted with due diligence;

the Court shall notextend the time for compliance with the bankruptcy notice.

…

            Section 43 Jurisdiction to Make Sequestration Orders

(1)       Subject to this Act, where:

            (a)     a debtor has committed an act of bankruptcy; and

            (b)     at the time when the act of bankruptcy was committed, the debtor:

                     (i)      was personally present or ordinarily resident in Australia;

                     …

the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.

…

            Section 44 Conditions on which Creditor may Petition

(1)       A creditor’s petition shall not be presented against a debtor unless:

            (a)     there is owing by the debtor to the petitioning creditor a debt that amounts to $2,000 or 2 or more debts that amount in the aggregate to $2,000 …;

            (b)     that debt, or each of those debts, as the case may be:

                     (i)      is a liquidated sum due at law or in equity or partly at law and partly in equity; and

                     (ii)     is payable either immediately or at a certain future time; and

            (c)     the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.

…

            Section 52 Proceedings and Order on Creditor’s Petition

(1)       At the hearing of a creditor’s petition, the Court shall require proof of:

            (a)     the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

            (b)     service of the petition; and

            (c)     the fact that the debt or debts on which the petitioning creditor relies is or are still owing;

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.

                                    …

(2)       If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

            (a)     that he or she is able to pay his or her debts; or

            (b)     that for other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition.

                        …’

23                  On 7 March 2002, the Official Receiver issued a bankruptcy notice pursuant to s 41 of the Act.  The notice was for $1,149,489 being the judgment debt of $1,189,989 under the Supreme Court order made by Judge Bowen Pain on 2 November 2001, less an amount of $40, 500 which had been paid.

24                  On 18 April 2002, the respondent filed a creditor’s petition in the Federal Magistrates Court seeking a sequestration order against the appellant.  Paragraph 4 of the petition provides:

‘The following act of bankruptcy was committed by the respondent debtor within 6 months before the presentation of this petition:

4.1       The applicant creditor obtained against the judgment debtor the judgment referred to in paragraph 1 on 2 November 2001;

4.2       The execution of the judgment has not been stayed;

4.3       The applicant creditor served on the respondent debtor in Australia on 26 March 2002 a bankruptcy notice;

4.4       The respondent debtor has not within the time specified in the notice (21 days) complied on or before 16 April 2002 with the requirements of the notice or satisfied the Court that the respondent debtor has a counter-claim, set-off or cross demand equal to or exceeding the amount specified in paragraph 1 of the bankruptcy notice, being a counter-claim, set-off or cross demand that the respondent debtor could not have set up in the action or proceeding in which the judgment was obtained;

4.5       The judgment upon which the bankruptcy notice was founded was issued by His Honour Judge Bowen Pain on 2 November 2001 in action number 1032 of 1999. This sum is specified in Order 13 of His Honour Judge Bowen Pain’s Orders.’

25                  Affidavits of the liquidator and of Mr Alistair Miller, a solicitor, were filed in support of the petition.  The matters in par 4 of the petition were properly supported by the evidence in those affidavits.  The affidavit of Mr Miller also gave evidence that the appellant had not made any application to the Federal Magistrates Court in relation to the bankruptcy notice.  A subsequent affidavit by Mr Miller made on 27 November 2002, gave evidence that no payments had been received by the respondent in relation to the debt owing.

26                  On 27 May 2002, the appellant gave notice of his intention to oppose the petition.  The basis of his objection at that time was that the order made by Mansfield J was conditional upon certain payments being made to him and those payments had not been made.  It will be recalled that that was one of the arguments rejected by Perry J on 4 September 2002.

27                  On 14 October 2002, the appellant filed another affidavit.  In this affidavit he said that he believed that the respondent had now received sufficient funds to satisfy all unsecured creditors and that he was no longer indebted to the respondent.  He referred to the proceedings in the Supreme Court of South Australia.  He also said that he had sufficient funds to meet any debt that might now be due and owing. 

28                  The petition was heard by the learned Federal Magistrate on 27 November 2002.  At the hearing the appellant renewed the two arguments in his affidavits.  As to the argument that the orders of Mansfield J were conditional, the Magistrate referred to the decision of Perry J in Rothmore Farms Pty Ltd (In Liq) v Belgravia Pty Ltd & Ors [2002] SASC 302 which was directly on point and rejected the argument. 

29                  In relation to the argument that the amount and extent of any debt due from him had not yet been finally determined and that no sequestration order should be made until it had, the learned Federal Magistrate would seem to have accepted that that might be the case.  He commented:

‘The decision of Perry J [in Rothmore Farms Pty Ltd (In Liq) v Belgravia Pty Ltd & Ors [2002] SASC 302] was unfavourable to the debtor and will be referred to later in these reasons. However, the debtor was able to take out a further application in the Supreme Court, which resulted, on 24 October 2002, in orders requiring the liquidator to furnish a report by affidavit to the court involving some further accounting on the matters which were the subject of Judge Bowen Pain’s Order 13. I was advised by the debtor (and it was agreed by the creditor) that these matters have now been referred back to Judge Bowen Pain by Perry J. It would appear that, to at least some extent, the debtor has secured by this manoeuvre a result that he was unable to obtain by reason of his failure to appeal the decision of the Master within time.’

30                  But even though the Magistrate accepted that the order may not have finally determined the matter, he was not prepared to exercise his discretion under s 52 of the Act not to make an order:

‘It would appear (I have no evidence of this) that one of the grounds for referring the calculations back to Master Bowen Pain is a suggestion that the learned Master, when making his calculations, did not properly take into account the limitation on the indemnity to be provided by the judgment debtors that arose out of the trust structure of the plaintiff creditor.  No evidence was led as to whether or not, or to what extent, that might change his Honour’s previous calculation.  I am of the view that in the absence of such evidence I should not exercise my discretion under s 52(2) to refuse to make a sequestration order in the face of a decision which was not appealed against and which has already been the subject of a lengthy judgment from Mansfield J, a judgment of Judge Bowen Pain on the assessment of damages and a considered judgment of Perry J on the application to set aside.  In this regard I note that in the judgment of Master Bowen Pain the difference between the amount due to the plaintiff gross and net after deductions is some $500,000.00 on a total net indebtedness of $1,100,000.00 odd. In the absence of any evidence whatsoever I am entitled, I believe, to express some serious doubts as to whether any revised orders of the Master will change the situation that significantly.’

31                  I am not sure that I fully understand what the learned Federal Magistrate is referring to in respect of the ‘gross’ and ‘net’ amount due.  My understanding is that the ‘net amount’ (being the amount due under the order) is not $500,000 but $1,189,989.  However, if this suggests some error by the Magistrate then, to the extent that it has any relevance to the argument, it is in favour of the appellant.

32                  The learned Federal Magistrate considered whether the petition should be adjourned to await the further accounting by the Supreme Court Master.  In the absence of any evidence to suggest that the effect of that accounting might be to reduce the amount claimed he declined to do so.

33                  Finally mention should be made of the fact that at least one other creditor appeared at the hearing.  That creditor also had an unpaid judgment debt.

34                  The Federal Magistrate made the sequestration order.

35                  There are three grounds of appeal from that order.

36                  The first is that the Magistrate erred in failing to acknowledge that the amount of the debt had not been finally determined in the Supreme Court of South Australia.  There are two answers to this:

(a)                As set out above, the Magistrate did acknowledge that the extent of the amount due might be reconsidered by the Supreme Court.  Notwithstanding that acknowledgement the Magistrate was not prepared to exercise his discretion under s 52 of the Act and not make the order for sequestration.  It was not put to me by the appellant that the Magistrate lacked jurisdiction or that the Magistrate did not have a discretion.  The issue then is simply whether the exercise of his discretion miscarried.  Given that he did consider the issues raised I cannot see that it could be said that the discretion miscarried.

(b)               However, the fact is that the extent of the amount due is not subject to any reconsideration by the Supreme Court.  The order made by Judge Bowen Pain on 2 November 2001, purports to be a final order.  It is not subject to appeal.  That has been clear at least since Perry J gave his reasons in Rothmore Farms Pty Ltd (In Liq) v Belgravia Pty Ltd & Ors [2002] SASC 302 on 4 September 2002.  Clearly the subsequent orders by Perry J did not vary that position.  Perry J has confirmed that they did not do so.

The order of Judge Bowen Pain is a Supreme Court order which finally determines the amount of the judgment debt.  True it is that if fresh evidence comes to light then this might found some application at some future time to appeal out of time from that order.  But whatever hopes the appellant may have in this regard, in the absence of very compelling evidence I would not expect them to move the Magistrate.  They do not move me.  And there is no evidence whatever.

37                  The second argument is that the learned Federal Magistrate could not determine matters which could only be determined by the Supreme Court of South Australia.  I do not fully understand this argument.  I assume it is an argument that the Federal Magistrate is bound by the conduct of the proceedings in the Supreme Court and, to that extent, is bound to await the outcome of those proceedings.  Again there are two answers:

(a)        As a matter of fact the Magistrate did not go behind the orders of the Supreme Court.  On a fair reading of his reasons, what the Magistrate did was attempt to understand and apply the orders of the Supreme Court.  In apparently accepting some of the arguments that were put by the appellant as to the effect of some of those orders the Magistrate may well have misunderstood them.  But that misunderstanding was in favour of the appellant. 

      The real complaint that the appellant makes on this ground is that the Magistrate did not entirely adopt the appellant’s assertions as to the meaning of the Supreme Court orders.  But as the above discussion highlights, the appellant has entirely misunderstood the effect and meaning of those orders. This is clear from the terms of the orders themselves – it has been made absolutely clear by the most recent comments and orders by Perry J referred to above.

(b)        In any event, the authority binding upon me is that the Federal Magistrate can go behind the orders of the Supreme Court in order to determine if the relevant debts are owing.  I refer to the decision of the High Court in Wren v Mahony (1972) 126 CLR 212 as to the power of the then Court of Bankruptcy to go behind an order of the Supreme Court of New South Wales.  I also refer to McDonald, Henry & Meek, Australian Bankruptcy Law and Practice, 1996-  at 2892 ff and the cases cited therein.  A Federal Magistrate exercising jurisdiction under the Act can go behind an order of an Australian superior court. 

            In the absence of that authority I would have thought that there might well be constitutional difficulties with attempting to confer a jurisdiction to go behind the orders of an Australian superior court.  I refer, for example, to s 118 of the Commonwealth Constitution.  Even as a matter of statutory interpretation it might be thought that the specific provisions dealing with the procedure applicable where a judicial order is under challenge (see s 41(6A) of the Act) might suggest that the powers in s 52 of the Act would not be read as including a power to go behind a superior court order.

       However, given the long line of authority on the point it is clear that the Magistrate had a discretion to go behind the order of Judge Bowen Pain.  Of course the existence of that discretion does not mean that the Magistrate was obliged to exercise it.  In my view it is clear that this was not an appropriate case for its exercise.  In light of the orders made by the Supreme Court and the absence of any cogent evidence from the appellant the only appropriate course was that taken by the learned Federal Magistrate – to make the sequestration order.

38                  The final argument put by the appellant was that the Federal Magistrate failed to give sufficient weight to the non-compliance of the respondent with the pre-conditions imposed in the order of Mansfield J.  Again there are two short answers:

(a)        As Perry J found in Rothmore Farms Pty Ltd (In Liq) v Belgravia Pty Ltd & Ors [2002] SASC 302 at [18] there were no pre-conditions within the order.  That is clear from the orders themselves.  It is also clear from the reasons of Mansfield J in Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745 at [193].

(b)        Given the findings by Mansfield J as to the value of the synthetic opal (see Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745 at [145]) it is clear that even if the Magistrate had been prepared to go behind the order of Judge Bowen Pain so as to determine that the obligations of the respondent to the appellant pursuant to the orders of Mansfield J had not been properly taken into account by Judge Bowen Pain in the accounting, nevertheless the appellant remained indebted to the respondent for a very substantial sum.

39                  Notwithstanding the apparent complexity of all that has occurred, the current position can be stated quite simply:

(a)        Pursuant to the State Jurisdiction Act the rights and liabilities of the appellant to the respondent under the laws of South Australia are as set out in the orders of Mansfield J as finally made on 11 June 1999.

(b)        In relation to those rights and liabilities Judge Bowen Pain has made a final order that the appellant owes to the respondent $1,189,989.

(c)        Whatever hopes the appellant may have of one day being able to challenge that order on some future appeal there is no current process or basis for him to do so.

(d)        A bankruptcy notice was issued for the judgment debt.  It was not complied with.

(e)                On the hearing of the creditor’s petition no evidence was produced to the Court to show that the debt was not due or that the judgment order had been improperly made.  The appellant seems to have been able to convince the Magistrate that the order of Judge Bowen Pain had not finally determined the issue, although this was, in fact, untrue.  Even so the sequestration order was made.

40                  The sequestration order made by the learned Federal Magistrate was plainly appropriate.  The appeal will be dismissed with costs.

Associate:

Dated:              16 July 2003