FEDERAL COURT OF AUSTRALIA Srinivasan v Bank of Western Australia Ltd [2012] FCA 319 Citation: Srinivasan v Bank of Western Australia Ltd [2012] FCA 319 Appeal from: Bank of Western Australia v Srinivasan [2012] FMCA 177 Parties: MAHALINGHAM SRINIVASAN v BANK OF WESTERN AUSTRALIA LTD File number: NSD 432 of 2012 Judge: RARES J Date of judgment: 19 March 2012 Catchwords: COURTS AND JUDGES – apprehension of bias – no reasonable apprehension of bias by Federal Magistrate exercising the jurisdiction of the Federal Magistrates Court merely because many Federal Magistrates party to proceedings involving constitutional questions as to their remuneration or pension entitlements. PRACTICE AND PROCEDURE – stay – significance of public interest as prime consideration in assessing balance of convenience Legislation: Bankruptcy Act 1966 (Cth) s 52(3) Constitution s 71 Cases cited: Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 applied Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 applied Ebner v Official Trustee in Bankruptcy (2001) 205 CLR 337 applied Date of hearing: 19 March 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 15 Counsel for the Appellant: Bruce Levet Solicitor for the Appellant: Francisco Gutierrez, Avondale Lawyers Counsel for the Respondent: Peter Russell Solicitor for the Respondent: David Greenberg, Ashurst Australia IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 432 of 2012 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: MAHALINGHAM SRINIVASAN Appellant AND: BANK OF WESTERN AUSTRALIA LTD Respondent JUDGE: RARES J DATE OF ORDER: 19 MARCH 2012 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The appellant's interlocutory application for a stay be dismissed. 2. The appellant pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 432 of 2012 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: MAHALINGHAM SRINIVASAN Appellant AND: BANK OF WESTERN AUSTRALIA LTD Respondent JUDGE: RARES J DATE: 19 MARCH 2012 PLACE: SYDNEY REASONS FOR JUDGMENT (REVISED FROM THE TRANSCRIPT) 1 This is an application for a stay of a sequestration order made by the Federal Magistrates Court on 12 March 2012. The trial judge granted a stay pursuant to s 52(3) of the Bankruptcy Act 1966 (Cth) up to and including today. 2 The appellant seeks to extend the stay granted by his Honour pending the determination of his appeal. The grounds of appeal assert that his Honour erred in failing to (1) recuse himself for apprehended bias, (2) transfer the matter to this Court and (3) find that the Federal Magistrates Court had no jurisdiction to entertain the matter. Those grounds are based on the issue whether the Federal Magistrates Court is presently not constituted because there are no Ch III judges on it who have adequate pension arrangements. That issue is the subject of proceedings brought by about 58 Federal Magistrates against the Commonwealth. Those proceedings were originally commenced in the High Court and were remitted to this Court. That matter is in the docket of Buchanan J (the Pension case). Background 3 The appellant did not dispute before the trial judge that he had failed to comply with a bankruptcy notice served on him on 10 August 2011 within the time limited by that notice, so that an act of bankruptcy occurred on 13 September 2011. He took no issue with the validity of the bankruptcy notice, its service, or the act of bankruptcy relied on by the creditor, Bank of Western Australia Ltd, in its petition. There was no other suggestion, that but for the arguments relating to the pension arrangements of judges of the Federal Magistrates Court, a sequestration ought not to have been made. The petitioning creditor relied on a judgment debt established by a decision of the Supreme Court of New South Wales on 21 July 2011. At the time of the hearing before his Honour the outstanding balance of that debt amounted to $1,360,198.20. The appellant had submitted a statement of affairs in support of a proposed Part X personal insolvency arrangement that he subsequently withdrew. His statement of affairs showed he had assets of about $5,000 and total unsecured liabilities of about $6,850,500. He did not claim that there existed any other sufficient cause why a sequestration order ought not to have been made by a court of competent jurisdiction. 4 However, the appellant argued below that, first, the Federal Magistrates Court was incompetent to adjudicate upon the petition. He said that this was because it had no jurisdiction to do so since none of its judges had been properly appointed by reason of the deficiencies alleged in the Pension case in the making of appropriate pension arrangements for them. Secondly, he argued that the trial judge erred in failing to recuse himself by reason of an apprehension of bias. Thirdly, he argued that his Honour erred in failing to transfer the matter to this Court so that the appellant could pursue his argument in relation to the Federal Pension case as it affected the jurisdiction of the Magistrates Court. The third ground can be dismissed as hopeless. Had the matter been transferred to this Court, it undoubtedly had jurisdiction to order the sequestration of the appellant's estate and on the material before me would have done so. The appellant's argument for a stay 5 The appellant argued that, were no stay granted, he may have difficulty because of the impact of the bankruptcy in pursuing his appeal based on the alleged incompetence of the Federal Magistrates Court to hear and determine any matter. He contended that the trial judge should have recused himself because of the issues in the Pension case and also his Honour's abstention from participating in it. He further argued that his Honour ought to have disqualified himself because another bankruptcy matter was in the list for directions before him when he pronounced his judgment on 12 March 2012. During the course of discussions with counsel in that other matter, his Honour said that if it was at all possible he would decide that matter without deciding the question ultimately in issue in the Pension case, just as he had done in the present case. Consideration 6 The appellant unquestionably should have his estate sequestrated, being completely insolvent and having failed to comply with a bankruptcy notice last year. Counsel for the appellant was unable to identify any prejudice that would accrue to his client were a stay refused. 7 If I were to grant a stay in this matter, the consequence would be to suggest that every decision and order made by the Federal Magistrates Court had no validity. Were the appellant's argument accepted, it could make it impossible for any Federal Magistrate to hear and determine any matter filed in the Federal Magistrates Court. That is a serious step for any court to take. I am of opinion that the appellant's argument must be rejected. 8 The principles on which interlocutory relief, such as the stay sought by the appellant, is granted in cases involving challenges to the validity of a statute were discussed by Mason ACJ in Castlemaine Tooheys Ltd v South Australia (1986) 161 CLR 148 at 153-157: approved in Australian Broadcasting Corporation v O'Neill (2006) 227 CLR 57 at 82 [66] per Gummow and Hayne JJ with whom Gleeson CJ and Crennan J agreed at 68 [19]. Mason ACJ identified the public interest as a prime consideration in assessing the balance of convenience in such a case. In the ordinary course, the balance of convenience requires a person who challenges the Constitutional validity of a law to obey that law pending the Court's decision: Castlemaine Tooheys 161 CLR 155. Here the balance of convenience is overwhelmingly against the grant of a stay. 9 The Federal Magistrates Court was created by Parliament pursuant to s 71 of the Constitution. It has a wide jurisdiction. The question of the pension arrangements for its judges goes to the adequacy with which they may be remunerated. That question is pending before Buchanan J in the Pension case that is proceeding to a full hearing in due course. 10 In the meantime, it is the duty of the Federal Magistrates Court to hear and determine all matters within its jurisdiction. That is the duty of every judge of every Court: Ebner v Official Trustee in Bankruptcy (2001) 205 CLR 337 at 348 [19] per Gleeson CJ, McHugh, Gummow and Hayne JJ. The principle of necessity requires that judges sit in cases where there is no practical alternative. In a case such as the present that principle justifies judges of the Federal Magistrates Court exercising the jurisdiction vested in a Court that was constituted by a prima facie valid Act of the Parliament. 11 The test for ascertaining whether a judge is disqualified for apparent bias is if a fair-minded lay observer would reasonably apprehend that the judge would not bring an impartial mind to the question he or she was deciding, for example because he or she was a party or of his or her interests may conceivably be affected by the decision. Indeed, in Constitutional questions, the High Court sometimes faces that very situation, but is charged under the Constitution as being the final arbiter of the ambit of power of the three arms of government created by the Constitution itself. However, Gleeson CJ, McHugh, Gummow and Hayne JJ recognised that qualifications of waiver and necessity applied to situations in which a judge might otherwise be disqualified for apparent bias: Ebner 205 CLR at 344 [6] and 359 [63]. 12 In my opinion, no fair-minded lay observer would consider that the Federal Magistrates Court as a whole or any of its judges, whether or not he or she was or was not a party to the Pension case, should not continue to hear and determine any matter prima facie within the jurisdiction of that Court simply by reason of the existence or pendency of that case or that judge's participation, or abstention from participation, in it. A fair-minded lay observer would not be capable of reasonably apprehending that any of the judges constituting the Federal Magistrates Court might not bring an impartial mind to the resolution of any question before them in any individual litigant's case merely by reason of the pendency of the Pension case. A fair-minded lay observer would regard any Federal Magistrate sitting to hear and determine any matter before him or her as simply doing the very task which judges of that Court are charged by the Constitution and the Acts under which they exercise their jurisdictions to do. 13 The appellant also argued that the fact that in this case the trial judge had abstained from being party to the Pension case indicated that his Honour may have had a view about its likelihood of success or otherwise. I fail to see how that would influence a fair-minded lay observer's assessment that his Honour would do anything other than bring a fair and impartial mind to the resolution of the dispute and, indeed, how any person could have thought that the result in the appellant's matter was anything but inevitable and entirely appropriate. 14 In my opinion, the remark made by his Honour during the directions hearing on 12 March 2012 was entirely appropriate. It would not suggest to a fair-minded lay observer that his Honour had entered into any prejudgment in relation to the present proceedings or any other proceedings. Judges do not have to decide questions that are not necessary to the resolution of proceedings. By saying that, to the extent that it was not necessary to decide a matter, he would not decide it, did not reveal any prejudgment by his Honour of the issues the subject of the complaint in this case or any other case. 15 In my opinion, the overwhelming public interest is that the appellant should have his estate sequestrated and controlled by an independent trustee in bankruptcy. I am unable to detect any prejudice to him in refusing a stay. Accordingly, I dismiss the interlocutory application for a stay and I order the appellant to pay the respondent's costs of that application. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares. Associate: Dated: 29 March 2012