Martin, M.J. v The Official Trustee in Bankruptcy

[1989] FCA 764

'JUDGMENT No. ........ ........ ....... 76% W-..

IN THE FEDERAL COURT OF AUSTRALIA )

1

TASMANIA DISTRICT REGISTRY	1	T. No. G.22 of 1989
)
GENERAL DIVISION	1
BETWEEN

MARLENE JOAN MARTIN

Applicant

and

THE OFFICIAL TRUSTEE IN BANKRUPTCY

Respond

COURT :
DATE :

PLACE:

EX-TEMPORE REASONS FOR JUDGMENT

This is an application for leave to appeal from an interlocutory order made by the Supreme Court of Tasmania, constituted by Mr Justlce Wright, exercising jurisdiction in bankruptcy. The order was made on 13 October 1989 and was, in substance, an order restraining the applicant, Mrs Marlene Joan Martin, from removing from the jurisdiction certain proceeds from the sale of a house at Sandy Bay in Tasmania and authorising it to be deposited in a bank account with the Commonwealth Bank at Hobart on 24 hour call.

The proceedings in the Supreme Court were proceedings commenced pursuant to the provisions of the

Bankruptcy Act 1966 and in those circumstances the Supreme

Court was exercising powers conferred by the Bankruptcy Act. It appears that the bankrupt, Charles Terrence Martin, the husband of Marlene Joan Martin, became a bankrupt by reason of a sequestration order made on 24 March 1988. The order was based upon an act of bankruptcy which occurred on 27 January 1988. Some time prior to that the house at Sandy Bay was in the joint names of Mr and Mrs Martln, but apparently at some time in either 1985 or 1986 #r Nartln sold his interest in the house to hls wife for a figure of some $90,000. The Official Trustee in Bankruptcy is claiming that the transfer of the interest in the house by Mr Martin to his wlfe was a settlement which came within subsection 120(1) of the Bankruptcy Act. The proceedings in the Supreme Court were commenced by way of application for an order under that sub-section. That section reads:-

"120(1) A settlement of property, whether made before or after the commencement of thls Act, not belng-

(a)	a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or
(b) ...

is, if the settlor becomes a bankrupt and the settlement came into operat~on after, or withln 2 years before, the commencement of the bankruptcy, void as agalnst the trustee in the bankrutpcy."

The application under s.120 was dated 25 September 1989 and the order sought by that application was that the transfer by the bankrupt, Charles Terrence Martin, to Marlene

Joan Martin, of hls one-half share and interest in all that piece of land situated at and known as 19 Beechworth Road, Sandy Bay in Tasmania, registered on 10 April 1986, is void as agalnst the Official Trustee in Bankruptcy.

An interlocutory order was also sought as follows:-

"(a) That pendlng the determination of this application the respondent be restrarned from removing from the jurisdiction or otherwise disposing of or dealing with one-half of the proceeds of sale of the property at 19 Beechworth Road, Sandy Bay in Tasmanla.

(b) The said one-half of the proceeds of sale invested in such manner and under the control of such persons as the court shall approve with interest to be accumulated."

It should be noted that the application itself does not specify a time or date on which the application was to be heard - a point which was stressed by counsel for the

applicant on the application for leave to appeal, but on 25

September 1988, the same day as the application was issued on an ex-parte application the Supreme Court made an order that the respondents - and it should be noted that both Mr and Mrs

Martln were named as respondents to the application under	s.120 - the respondents be restrained until 9 October 1989
from removlng from the jurisdiction or otherwise disposing of or dealing with one-half of the proceeds of sale of the
property at 19 Beechworth Road, Sandy Bay in Tasmanla. On 29
September 1989 that order was varied by consent and a new order was made by the Court, constituted by Mr Justice Cox, as follows:

"The respondents be restrained until 9 October 1989 from removing from the jurisdlction or otherwise disposing of or dealing with one-half of the proceeds of sale of the property at 19 Beechworth Road, Sandy Bay in Tasmania, save and except that the second-named respondent (that is Mrs Martin) may deposlt the said one-half of the proceeds of sale with the Commonwealth Bank at Hobart on 24 hour call."

The application for the interlocutory order came on for hearing before the Court, constituted by Mr Justice Wright, on 9 October and continued on 10 and 11 October. On 13 October the order was made and reasons published by Mr Justlce Wright continuing the injunction. It is from that order that Mrs Martin now seeks leave to appeal.

There are a number of grounds upon which leave to appeal has been sought, and I will refer to them in a moment, but before doing that it is important to note that the order made is an interlocutory order; that under s.38 of the Bankrtupcy Act, an appeal from a judgment or order of a State Court exercising jurisdiction in bankruptcy is to be brought in the Federal Court of Australia and not otherwise, and

under sub-section 24(1) of the Federal Court of Australia Act 1976 the Federal Court has jurisdlction to hear the appeal.

Sub-section 24(1A) is set out:-

"(1A) An appeal shall not be brought from a judgment referred to in sub-section (1) that is an interlocutory judgment unless the Court or a Judge gives leave to appeal."

There is no doubt that the order in the present case is an interlocutory order. That is made clear by a reference to the case of Adam P. Brown Male Fashions Pty. Limited v. Philllp Morris Incorporated (1981) 148 C.L.R. 170. Under s.25 of the Federal Court Act, the appeal must be heard by a Full Court but sub-section 25(2) allows an application for leave to appeal to be made to a single Judge. That

sub-sect~on is set out:-

" (2) Appllcatlons for leave or special leave to appeal to the Court or for an extention of tlme within which to institute an appeal may be heard

and determined by a slngle Judge or by a Full Court 8 ,

... .

That posltion is made clear by 0.52 Divlsion 1 of the Federal Court Rules whlch has application to the facts here. See particularly 0.52 r.3. It is important to note that this is a true alternative. An applicant seeking leave to appeal must elect whether to go to a single Judge or a Full Court, and if application is made to a single Judge, there can be no appeal from the order of that single Judge.

This election is of importance because where an application for leave to appeal is made to a slngle Judge, there are inhibitions placed in the way of the single Judge dealing wlth the application for leave to appeal. This is made clear by a number of authorities, two of which are reported in 37 F.L.R., the flrst one being Federal Commissioner of Taxation v. Forsyth at p.430 and the other one, Federal Commissioner of Taxation v. Nixon at p.135. The relevant passages were read out in the course of submissions but the substance of those authorities is that on applications for leave to appeal comlng before a single Judge, that Judge is not in a position to consider whether the Judge from whom the appeal is sought was in error or not. This is made quite clear by reference to Nlxon at p.136, where Lockhart J. cltes a judgment of Toohey J. rn Lombardo v. Federal Commissioner of Taxation, 9 A.T.R. 550.

The general approach to be taken in cases of this kind is stated by me in Forsyth at p.432 as follows:-

"Where the application comes before the Federal Court constituted by a single judge, of necessity inhibitions are placed on the matters that may be considered in determining whether leave be granted and in particular whether the decision challenged is correct or not. In this respect I agree with the vlews expressed by Toohey J. in ~ombardo v. Federal Commissioner of Taxation and Lockhart J. in Federal Commissioner of Taxation v. Nixon. At the same time these inhrbitions prevent the court from becominu involved in the ~roblem of hearlna - - -- . . ~ - - ..

argumenf on the merits of the-decision from whic; leave to appeal is sought, a problem similar to that discussed bv the Full Court of the Suureme court of ~ictozia in Niemann v. ~1ect;oniri Industries Ltd. [l9781 V.R. 431."

A reference to p.434 illustrates the application of

this principle:-

"In my opinion there is a substantial or real question to be answered on the appeal. In so far as it does not raise the correctness or otherwrse of the decision of the Supreme Court of Victoria, in my opinion the appeal raises an arguable question, but in this respect I prefer to base my decision in part on the existence of a substantial or real question to be answered. Although the amounts involved cannot be said to be large, they are of a recurring kind. I was not referred to any decision where a Supreme Court has had to conslder

the application of s.51 of the Act to facts slmilar to those of the present cases. The commissioner should have the opportunity to test thls matter in an appellate court exercising federal jurisdiction. If leave to appeal is not granted, the decision of the Supreme Court would become the accepted precedent to be applied to facts slmilar to those ~n the present case. As time passed, the commissioner would find it increasingly difficult to test that principle in an appellate court. In all the circumstances it is reasonable that leave to appeal should be granted."

In that case, leave to appeal was being sought wlth respect to a final order.

Reference 1s also made to the decision of Adam P. Brown, referred to a short time ago, where the High Court drew attention to the fact that special care must be taken when the appeal is from an interlocutory order involving a matter of practice and procedure. There the High Court quoted wlth approval the vlews expressed by Sir Frederick Jordan in the case of In re Will of F.E. Gilbert deceased

(1946) 46 S.R. (N.S.W.) 318 at 323 as follows:

l ' . . . I am of the opinion that, ... there is a material difference between an exercise of

an exercise of discretion whlch determines

discretion on a point of practlce or procedure and

substantive rights. In the former class of case, if a tlght rein were not kept upon interference w ~ t h the orders of Judges of flrst instance, the result would be disastrous to the proper administration of justlce. The dlsposal of cases could be delayed interminably, and costs heaped up indefinitely, if a litigant wlth a long purse or a litigious disposition could, at will, in effect transfer all exercises of discretion in interlocutory applications from a Judge in Chambers to a Court of Appeal."

Having noted these principles, it is important to

note the grounds upon which it is sought leave to appeal in this case. The matter before the Supreme Court was an application under s.120 of the Bankruptcy Act. That application has not been heard. In the exerclse of the powers conferred by sub-section 30(1) of that Act the Supreme Court has made interlocutory orders which in substance constitute preservation of the property in dispute pending the hearing and determination of that application. The Court considered it desirable in order to enable it to exercise its jurisdiction to make such an order. In the course of the hearlng before me much was made of the fact that his Honour considered to some extent the nature of a Mareva injunction and discarded the view that this was a Mareva type situation and thus the restrictions imposed on the granting of such an injunction had no appllcatlon. His Honour expressed no final view about those matters.

It was also argued before me that as part of this approach his Honour was wrong in considering the appllcatlon of the principles of traclng, see for example the cases of Brady v. Stapleton 99 C.L.R. at 322 and in re Hallet (1879)	13 C.D. 696. Those matters can glve rise, and do give rise,	to very interesting questions of law but in reality what we
are concerned with is a question of maintaining a position pending determination of an issue pending in the Supreme Court of Tasmania. The real issue is the application of sub-section 120(1) of the Bankruptcy Act. This issue has not been considered by the Supreme Court except a finding has been made that a prima facie case exists. That may be too strlct a requirement. Another attack was made as to the form of the affidavits in that they did not comply with the Bankruptcy Rules as to the source of information. On one view it may well be that the affidavit in its last paragraph does constitute sufficient compliance with the rules but in a case of thls klnd it is not for me to express any view on those matters. I am satisfied that the relevant matters contained in the affidavits were before the Supreme Court. This evldence was before the Supreme Court. Hls Honour heard both affidavit material and oral evidence and the point was argued that he could not hear oral evidence as to the source of information and belief wlthout re-reading the affidavits and applying the material contained in the affidavits. To say the least of this submission, there is no merit in such an argument.
It was also argued that Hls Honour acted upon material which was not in evidence, that the trial Judge erred regarding the affidavit relating to hearsay in that the deponent did not state the source of his information and belief, and thls could not be cured by the subsequent oral evidence. On this point I allowed evidence to be glven, on the hearing of this application, as to what occurred before
Mr Justice Wright. It was urged that His Honour was in error in believing that the proceeds of the sale, when mlxed wlth other assets, could no longer be traced - that is the tracing point I referred to earller - and that Hls Honour did not take into account the fact that once a house had been sold and the half share converted into money it no longer was a
question of preserving subject matter. This could well be an
issue arising in the applicatlon under 5.120.
His Honour did refer to the fact that the order when first made in September was at a tlme prlor to the sale being settled, prior to the money being pald, but that the Official Trustee took the view that it would be better to allow the sale to take place and to flght over the half share of the proceeds rather than, possibly, to cause greater hardship by preventing the sale taklng place at all.
In all the circumstances of thls case, havlng regard to the following facts: an application is being made for a speedy hearing of the application under s.120; if a speedy hearing 1s granted it could be heard in February, or possibly March of next year; if a speedy hearlng is not ordered the applicatloin will probably come on for hearing in April of next year; that the next Full Court sittings of this Court in Hobart is not until march of next year, the nature of the proceedings pendlng before the Supreme Court; the matter belng an interlocutory order relating to practice
merits or otherwise of the law applied by #r Justlce Wrlght and procedure, thls Court can express no vlew as to the
and the matters sought to be ralsed on the appeal are not directly related to the applicatlon and will not determine the application but could inhiblt the exercise of power by the trial Judge; it is my opinion this is a case where the applicant should not be granted leave to appeal. It comes within the type of case referred to by Sir Frederick Jordan.
This is a case where the parties should proceed to seek an early hearing of the substantive application as speedily as possible and I have no ob~ection if, on Monday, either party, or both parties, express the view to the Supreme Court that I have expressed the view that this is a matter that should be heard speedily.
There has been no evidence put before me of any substantial damage or prejudice being suffered by MrS Martin by not being able to use the money, apart from the fact of being deprived of the money to which in due course she might become entitled. This has special reference in regard to what was said by the High Court in the Adam P. Brown case.
In all the circumstances the application for leave to appeal is refused wlth costs.