In Ex parte Ashworth; In re Hoare[48] Bacon C.J. expressed the opinion that the Court of Bankruptcy had, without any special enactment, power at any time for good reasons to annul any adjudication of bankruptcy. Power is vested in the Bankruptcy Court by s. 124 of the Bankruptcy Act 1924-1933 to annul sequestration orders, and it has been said that there is no power now to annul an adjudication other than this express power: See King v. Henderson[49]; In re Hester; Ex parte Hester[50]; In re Beer; Ex parte Beer[51]; In re Keet[52]; In re Gyll; Ex parte Board of Trade[53]. It is contended that the Court, having annulled the sequestration, was powerless to order any review of that order or any rehearing of the petition for the sequestration of the debtor's estate. The learned counsel who argued Ex parte Keighley; In re Wike[54] observed that before the Bankruptcy Act 1869 Imp. it was almost a matter of course to allow rehearings in the Court of Bankruptcy. However this may be, the Bankruptcy Act 1924-1933 provides in s. 26 that the Court - that is, the court having jurisdiction in bankruptcy - may review, rescind or vary any order made by it in its bankruptcy jurisdiction. The section, it should be observed, gives power to review any order. It has been said under corresponding English sections that in a proper case the power is discretionary and almost without limits (Ex parte Keighley; In re Wike[55]; In re Tobias & Co.; Ex parte H. A. Tobias[56]). Thus in a case in which a petition was dismissed and no appeal brought a rehearing was granted because the registrar came to the conclusion that he had been in error in dismissing the petition (Ex parte Ritso; In re Ritso[57]). And the English courts hold that there is jurisdiction to rescind receiving orders under the Bankruptcy Act of England (Ex parte Wemyss; In re Wemyss[58]; In re Izod; Ex parte Official Receiver[59]; In re A Debtor[60]). And an annulling order was discharged though a considerable time had elapsed since its date where the bankrupt was shown to have concealed from his creditors portion of his property (Ex parte Jarvis; In re Spanton[61]).

This power of reviewing or rehearing any order is one that must be exercised with great caution and should not be exercised unless under special circumstances (Ex parte May; In re May[62]). But a court of appeal should not interfere with the discretion exercised by the judge of the Bankruptcy Court unless there has been a plain miscarriage (Ex parte Ritso; In re Ritso[63]). In matters relating to the dismissal of petitions for a sequestration order or the discharge of receiving orders as under the English Bankruptcy Act or the annulment of a sequestration, a court should be very careful in allowing a rehearing or review, because persons may have dealt with the debtor on the faith of the petition having been dismissed or the receiving order discharged or the sequestration annulled. But that objection is met in the present case by the form of order which annulled the sequestration but directed a rehearing of the petition upon the grounds already mentioned. Much the same reason was given by Jessel M.R. in Ex parte Ritso; In re Ritso[64]: "But even that objection is met in the present case by the memorandum of the appointment of a day for the rehearing which was placed on the file of proceedings, so that anyone, who was searching the file with the view of discovering whether he might safely give credit to the debtor, would have seen the memorandum, and would thus have had notice of the rehearing in due time."

Strictly, perhaps, the Court of Bankruptcy should have discharged the order of annulment, the effect of which would have been to remit all persons interested to their original positions: See Ex parte Jarvis; In re Spanton[65]. But this, I think, is the effect if not the form of the order of 13th August 1943, for it treats the order annulling the original sequestration as no bar to a rehearing of the petition and to an order for sequestration based on the act of bankruptcy alleged in the petition. This, I think, is a matter of form which could, in any case, be corrected in this Court by an addition to the order of 13th August 1943 of an order formally discharging the annulling order of 9th August 1943.

Another contention of the appellant is that he has a counterclaim, set-off or cross demand against the respondent which equals or exceeds the amount of the judgment debt in respect of which the bankruptcy notice which founds the sequestration order in this case was issued.

Under the Bankruptcy Act, s. 52, it is an answer to a bankruptcy notice that the debtor has such a claim which he could not have set up in the action or proceeding in which the judgment was obtained and in any case such a claim might be a sufficient cause for the exercise by the Court of its discretion under s. 56: See In re A Debtor; Ex parte Peak Hill Goldfield Ltd.[66]. But I think the argument fails in this case because the debtor had no cross claim which could at any time have been set up against the respondent's judgment debt. The judgment was obtained in proceedings based upon s. 92 of the Industrial Arbitration Act 1940 of New South Wales: "(1) Where an employer employs any person to do any work for which the price or rate has been fixed by an award, or by an industrial agreement, made under this Act, he shall be liable to pay in full in money to such person the price or rate so fixed without any deduction except such as may be authorized by any award or industrial agreement." And that person may apply for an order directing the employer to pay the full amount of any balance due in respect of such price or rate, and the order has the effect of a judgment for the amount of such money and may be recovered by process: See Act, ss. 92, 119, 123. In my opinion the effect of the Act is to guard and protect the moneys - really wages - the subject of these statutory provisions against cross claims and require payment without any deduction to the person earning the same. The Bankruptcy Act does not itself create cross claims, but it allows such as exist in point of law to be set off or used as an answer to the bankruptcy notice. No objection, I should add, was taken before the Bankruptcy Court or in this Court to the form of the bankruptcy notice in this case.

Lastly the appellant claimed the benefit of the National Security (War Service Moratorium) Regulations, Statutory Rules 1941 No. 61, as amended. But the appellant, upon whom the learned Judge in Bankruptcy placed no reliance whatever, was unable to satisfy him that he was a member of the armed forces of the Commonwealth at the time of the issue of the bankruptcy notice or the presentation of the petition in bankruptcy or any other relevant time. The onus was upon the appellant to bring himself within the Regulations, and he failed to do so. In view of the learned judge's opinion of the credibility of the appellant nothing is to be gained by further inquiry as to the precise point of time at which the appellant became a member of the Commonwealth forces. But though for the reasons already given I do not think that the default judgment for £89 19s. obtained by the appellant in the Supreme Court of New South Wales against the respondent and forming the basis of his cross claim could be set off against the judgment debt in respect of which the bankruptcy notice was issued, I should not have been prepared to accede to the view of the learned judge that he was entitled to disregard that default judgment on the ground that it was fraudulently obtained. Prima facie I should think the judgment stood until it was set aside by competent authority (Ex parte Ritso; In re Ritso[67]). And I should not have been prepared to accede to the application by the learned judge in this case of reg. 33 of the Moratorium Regulations. A bankruptcy notice or a petition presented contrary to the provisions of the Regulations is irregular, and a party is entitled ex debito justitiae to have it set aside or treated as ineffective: See and cf. Anlaby v. Praetorius[68]; Craig v. Kanssen[69].

But for the reasons already given this appeal should be dismissed and the sequestration order supported.

This was a creditor's petition, which was presented by the respondent to this appeal. The act of bankruptcy alleged was that the appellant failed to comply with the requirements of a bankruptcy notice. The appellant showed cause against the petition.

One ground upon which it was contended that a sequestration order ought not to have been made was that the appellant was, at the time the petition was presented, a member of the forces, and that, contrary to reg. 22 of the National Security (War Service Moratorium) Regulations, the petition was presented without the leave of a court having jurisdiction in bankruptcy or insolvency. The Court of Bankruptcy dismissed this objection. A ground of appeal is that the Court should have allowed it. The debtor failed to satisfy the Court that he was a member of the forces when the respondent presented the petition. This Court is unable to say that the Court of Bankruptcy ought to have been satisfied that the appellant was then a member of the forces. It is for a person, who relies on a failure to comply with reg. 22 as a cause why a sequestration order ought not to be made, to satisfy the court that he was a member of the forces at the time the petition which he is opposing was presented. There is no need to discuss this ground of appeal any further, as the appellant has failed to prove the affirmative of that relatively simple issue. It is not necessary to decide whether or not reg. 33 of the above Regulations might save a bankruptcy proceeding from invalidity if the bankruptcy petition with which it was begun were presented without obtaining leave under reg. 22.

The appellant also endeavoured to satisfy the Court, as another cause why a sequestration order ought not to be made, that he had a counterclaim, set-off, or cross demand which exceeded the amount of the respondent's judgment debt and which the appellant could not set up in the action or proceeding in which the judgment was obtained. The petition described the debt in respect of which it was presented as "the sum of £70 12s. for a wages judgment given by the Chief Industrial Magistrate on 3rd July 1942 at the Chief Industrial Magistrate's Court, Sydney." The appellant relied upon a judgment in the sum of £89 19s. to prove the counterclaim, set-off or cross demand which he set up.

One of the issues which arose before the Court of Bankruptcy was how this judgment was obtained. The learned judge expressed the belief, which he entertained after seeing the parties and hearing their evidence, that the respondent Cole never saw the writ which began the proceedings in which the appellant obtained the judgment, and that the writ, which was put in evidence, was not served on the respondent.

The Court, having found that the judgment was obtained by such fraud, went behind it, and inquired into the consideration for the judgment. It arrived at the conclusion that an alleged partnership between the parties which was set up as the basis of the debt for which the judgment was obtained did not in fact exist; that the true relation between the parties was indicated by the judgment against the appellant for money due and payable as wages; and that the respondent was never indebted to Cameron in any sum at all. His Honour was well fortified by authority in taking this course. The decided cases are set out in McDonald, Henry and Meek, Bankruptcy Law and Practice, 2nd ed. (1940), p. 131. Having regard to the findings of his Honour as to the means whereby the appellant obtained judgment and that there was no real consideration for it, it is impossible to sustain the ground of appeal that his Honour ought to have been satisfied upon proof of the judgment for £89 19s. that the appellant had a counterclaim, set-off or cross demand exceeding the amount of the debt upon which the petition was based.

The sequestration order which is the subject of this appeal recites the steps by which it came to be made. First, it recites that the petition came on to be heard on certain days, and on the last of those days, 22nd December 1942, a sequestration order was made against the appellant; secondly, the sequestration order recites that he made an application to annul that order and that one of the grounds of the application was that the Court failed to comply with the direction of his Honour Judge Lukin made on 22nd October 1942 that both parties were to be notified of a date to be fixed by the registrar for the hearing of the petition; thirdly, the sequestration order contains this recital: "Whereas the Court was not satisfied that the said Duncan Cameron had notice that the said petition had been set down for hearing on the said 22nd December 1942, it was on the said 9th day of August 1943 ordered that the said sequestration order be annulled and that the said petition be reheard on 13th August 1943 and that the opposition thereto be limited to the grounds set forth in foregoing paragraphs 6 and 11 of the said application"; fourthly, the sequestration order recites that the said petition came on to be heard. The subsequent recitals refer to the evidence given at the hearing, the proof of the act of bankruptcy alleged in the petition, and they are followed by the sequestration order itself, the appointment of the official receiver, and the order for costs.

The remaining grounds upon which it is contended that this sequestration order ought not to have been made are that the Court of Bankruptcy had no power to direct a rehearing of the petition limited to the last-mentioned grounds of opposition or at all, and that on the making of the annulment order the petition became exhausted and there was no available act of bankruptcy to support a rehearing of the petition.

The first sequestration order is in evidence. It purports to be a sequestration order made by the Court of Bankruptcy in the exercise of the jurisdiction in bankruptcy which is conferred upon the Court by the Act.

Where a court is a superior court of record having general jurisdiction it is impossible to treat any of its orders as a nullity. It may determine conclusively its own jurisdiction, and whether the court determines it correctly or not, its order is valid (Ex parte Williams[70]).

The Court of Bankruptcy is an inferior court relatively, but it does not follow that intrinsically it is not a superior court: See Ex parte Fernandez[71].

It is of interest to observe that in the case of Ex parte Cowan[72] the question arose whether the Court of King's Bench had authority to direct a prohibition to the Lord Chancellor sitting in bankruptcy. The Court said: "We do not decide against such an authority, because we have not heard the question fully argued. It will be time enough to decide that question when it necessarily arises, if ever it shall do so, which is not very probable, as no such question has arisen since the institution of proceedings in bankruptcy, a period little short of 300 years. If ever the question shall arise, the Court, whose assistance may be invoked to correct an excess of jurisdiction in another, will, without doubt, take care not to exceed its own"[73].

The case of In re Frost[74] is an instance in the Supreme Court of New South Wales of an application for a prohibition directed to a court constituted by a Chief Commissioner in Insolvency.

In the case of Ex parte Sempill; In re Wilkinson[75] a prohibition was sought against the Chief Commissioner of Insolvent Estates, who, though not a judge, exercised the insolvency jurisdiction of the Supreme Court of New South Wales. Martin C.J. and Faucett J. thought that prohibition did not lie: Hargrave J. was of the contrary opinion.

The Federal Court of Bankruptcy is not, of course, a superior court of record having general jurisdiction. The Court is created by statute and vested by statute with jurisdiction in bankruptcy. This is a special jurisdiction, and for that reason limited. Its jurisdiction is limited to bankruptcy, but it has substantially all the powers of a superior court of record as to the subject matter of its jurisdiction and its incidents. Though a court of limited jurisdiction, it is a superior court. The two characters are not inconsistent: and this is true even if prohibition would lie should the court act beyond its jurisdiction (James v. South Western Railway Co.[76]). The case of Pepper v. McNiece[77] describes the extent of the territorial jurisdiction of the Federal Court of Bankruptcy.

The subject matter of the first sequestration order is so plainly within the jurisdiction of the Court that I think it is not possible to treat the order as being a nullity until the order of annulment was made by the Court. Although it was shown upon the application for this order of annulment that the appellant did not receive notice of the hearing of the petition, the Court did not go beyond its jurisdiction in making the sequestration order. It was within its jurisdiction to determine conclusively (subject only to appeal) whether the conditions precedent to the exercise of its power to make the sequestration order were fulfilled. It is not to be presumed that at the hearing it was not satisfied that every such condition was fulfilled. The order made upon the petition operated according to its tenor as a sequestration order until it was annulled.

However, it was clearly a good ground for the annulment of the sequestration order that the judge made it, but not knowingly, in violation of the rule audi alteram partem. The authorities which are cited by the Chief Justice make it plain that, apart from s. 71 (18), s. 124 completely regulates the annulment of any sequestration order made under the Act. By force of s. 124 (2) the validity of any administration done under the order was confirmed and the debtor's property reverted to him.

It may be that the Court could not properly have directed the rehearing of the petition if the appellant had had a fair opportunity of showing cause against it and the sequestration order was annulled on a ground going to the merits, for then the power of the Court to hear the petition and make a sequestration order might have been exhausted by the making of the first sequestration order.

The order for the rehearing of the petition relates to subject matter which is within the jurisdiction in bankruptcy which the Act confers upon the Court; it was within the jurisdiction of the Court to make such order.

It is a necessary preliminary to a sequestration order which would exhaust a petition that the debtor should have a fair opportunity of showing cause against the making of the order. Here that preliminary was not fulfilled before the first sequestration order was made. The petition upon which the sequestration order, the subject of this appeal, was made was, therefore, not spent by reason of the making of the first sequestration order, and the order directing the rehearing of the petition was a proper exercise by the Court of its jurisdiction. In my opinion all the grounds of objection which have been taken to the making of the sequestration order on the rehearing should fail.

On 8th September 1942 the respondent Cole presented a petition to the Court of Bankruptcy alleging that on 21st August 1942 the appellant Cameron had committed an act of bankruptcy and praying that his estate should be sequestrated under the provisions of the Commonwealth Bankruptcy Act 1924-1933. The date of the hearing stated in the indorsement was 20th October 1942. The petition was duly served on Cameron on 21st September 1942. When the petition came on for hearing Cameron asked for an adjournment, which was granted, and an order made that the Registrar of the Court should inform the parties of the date of the adjourned hearing. The date of the adjourned hearing was fixed for 22nd December 1942. On that date the petition came on for hearing before the learned Judge in Bankruptcy, but Cameron did not appear. His Honour, after holding that the alleged act of bankruptcy had been committed, made a sequestration order and appointed A. V. Richardson official receiver of the estate.

The effect of the sequestration order was to vest the property of the bankrupt in the official receiver (s. 60). Subject to certain exceptions, to which I need not refer, this property included all the property of the bankrupt which belonged to or was vested in him at the commencement of the bankruptcy or was acquired by or devolved on him prior to his discharge (s. 91 (i)).

As no earlier act of bankruptcy within six months next preceding the presentation of the petition was proved, the commencement of the bankruptcy was 21st August 1942 (s. 90).

The effect of the sequestration order was that Cameron became a bankrupt, and would continue to be a bankrupt until an order of discharge was issued to him or the sequestration order was annulled (s. 54 (2)). But all transactions by a bankrupt with any persons dealing with him bona fide and for value, in respect of property, whether real or personal, acquired by a bankrupt after the sequestration, are, if completed before any intervention by the official receiver, valid against him and any estate or interest in such property which by virtue of the Act is vested in the official receiver determines and passes in such manner and to such extent as is required for giving effect to any such transaction (s. 98 (1)). Transactions can be bona fide within the meaning of the section although a person dealing with a bankrupt has notice that he is a bankrupt (Hunt v. Fripp[78]; Dyster v. Randall & Sons[79]).

On 17th June 1943 Cameron applied to the Court to have the sequestration order annulled on a number of grounds, one being that he had not received notice of the date of the adjourned hearing.

On 9th August 1943 the learned judge made an order annulling the sequestration order of 22nd December 1942, and also ordered that the above petition be reheard on certain specified grounds and that all acts by the official receiver relative to Cameron's estate should be validated.

On 13th August 1943 his Honour made a second sequestration order on this petition based on the same act of bankruptcy of 21st August 1942 and again appointed A. V. Richardson the official receiver of the estate.

An important question that arises upon this appeal is whether his Honour had power under the Bankruptcy Act, in annulling the sequestration order of 22nd December 1942, to order the petition to be reheard and to make a second sequestration order on the rehearing.

Powers to annul sequestration orders are conferred upon the Court of Bankruptcy by ss. 71 (18) and 124 of the Act.

These sections correspond to ss. 21 and 29 of the English Bankruptcy Act 1914. But under that Act the initial step upon a petition is to make a receiving order for the protection of the estate. A receiving order does not divest a bankrupt of his property (Rhodes v. Dawson[80]). After a receiving order has been made the creditors meet, the debtor submits his statement of affairs, he is publicly examined, and is given an opportunity to propose a composition or scheme of arrangement for the acceptance of his creditors and its approval by the Court before the further step is taken of adjudicating him bankrupt. Section 16 (16) provides that if a composition or scheme is accepted by the creditors and approved by the Court but there is default in payment of any instalment or the composition cannot on account of legal difficulties or for any other sufficient cause proceed without injustice or delay or the approval of the Court was obtained by fraud, the Court may adjudge the debtor bankrupt and annul the composition or scheme, without prejudice to any sale, distribution or payment duly made or thing done under or in pursuance of the composition or scheme. The sub-section also provides that where a debtor is so adjudged bankrupt, any debt provable in other respects, which has been contracted before the adjudication, shall be provable in the bankruptcy. Where a composition or scheme is not accepted by the creditors or approved by the Court the debtor is adjudicated bankrupt and his property becomes divisible amongst his creditors and vests in his trustee. Section 29 of the English Act is the same in substance as s. 124 of the Commonwealth Act, but s. 21 of the English Act contains two provisions which do not appear in s. 71 of the Commonwealth Act, namely, that where the composition is annulled on one of the grounds therein mentioned (which are the same as the grounds in s. 16 of the English Act and s. 71 of the Commonwealth Act), the Court may adjudge the debtor bankrupt, and that when the debtor is adjudged bankrupt any debts provable in other respects which have been contracted before the adjudication shall be provable in the bankruptcy. When a debtor is adjudged bankrupt under ss. 16 or 21 no available act of bankruptcy is required, so that the doctrine of relation back does not apply and the property which vests in the trustee is the property which the debtor owns at the date of adjudication (In re McHenry; Ex parte McDermott[81]).

In the Commonwealth Act the only power conferred upon the Court by Parts IV. to VIII. to make a sequestration order is where the debtor commits an act of bankruptcy, so that in the case of all sequestration orders made under these Parts the doctrine of relation back must apply. Where a sequestration order is made pursuant to s. 161, the Act also provides for relation back (s. 52 (l)).

The order of annulment of 9th August 1943 was made under s. 124. The effect of the order was that on 9th August 1943 Cameron ceased to be a bankrupt (s. 54 (2)), and that, by virtue of s. 124 (2), subject to all sales and dispositions of property and payments duly made, and all acts theretofore done by the official receiver being validated, Cameron's property reverted to him for all his estate and interest therein. Sub-section 3 of s. 124 requires that notice of the order annulling the sequestration order stating the name, address and description of the debtor, the dates of the sequestration order and order annulling such sequestration order, and the date of the petition shall be published in the Gazette and in such other manner as is prescribed.

The whole structure of the section indicates an intention that an order of annulment shall finally conclude an existing bankruptcy. The grounds on which the order can be made, namely, that the debtor should not have been made bankrupt, or that, if he was properly made bankrupt, his debts have been paid in full or that he has obtained a legal acquittance of his debts, indicate an intention to that effect. This intention is strengthened by sub-ss. 2 and 3 of the section. Sub-section 2 contains a number of provisions appropriate only to a complete disposal of the bankrupt's assets, while sub-s. 3 provides for a public notification that the bankruptcy proceedings commenced by a particular petition have been concluded. Further, it is to be noted that, under s. 21 of the English Act and s. 71 of the Commonwealth Act, the conditions upon which, in the case of the former Act, the English Court can make an order for adjudication and annul the composition (which in effect revives the bankruptcy from the date of the order for adjudication), and, in the case of the latter Act, the Commonwealth Court can annul the composition (which would appear to have the same effect), are stated with particularity, but s. 29 of the English Act and s. 124 of the Commonwealth Act do not contain any conditions upon which the annulment order can be set aside. Thus s. 71 does, but s. 124 does not, contemplate a revival of a bankruptcy.

Further, under s. 81, the only creditors who are entitled to prove in a bankruptcy are creditors to whom the bankrupt is indebted at the date of the sequestration order or to whom he may become indebted before his discharge by reason of any obligation incurred before the date of sequestration: Cf. s. 30 of the English Act. If it was intended under s. 29 of the English Act that an adjudication could be set aside and an order made for a readjudication in respect of the same bankruptcy it would appear to be plain that the English section would have contained a provision relating to debts contracted before the date of readjudication similar to those contained in ss. 16 and 21. The omission of such a provision is, therefore, a further indication that in the case of s. 29 it was not intended to authorize the Court to annul an adjudication order and to make a fresh order for adjudication. As s. 124 of the Commonwealth Act is modelled on s. 29, it would appear to follow that the same construction should be placed on s. 124. Further, if it was intended that a petition could be reheard under s. 124, one would have expected that the section would have contained a provision relating to subsequent creditors similar to that contained in the English Act.

It is, of course, a fundamental rule of British justice that a party should have notice of any legal proceedings that are brought against him, so that the requirements with respect to the service of a bankruptcy petition are strictissimi juris (In re A Debtor[82]). The Commonwealth Act, s. 56 (2) (a), provides, inter alia, that the Court shall require proof of the service of the petition, and the Court should equally require proof that the debtor has notice of the date of any adjourned hearing. In the present case the petition was duly served, and, at the adjourned hearing, there was evidence that notice of the date of the adjourned hearing had been given to Cameron, but on the application to annul the sequestration order his Honour was not satisfied that this notice had in fact reached him. Under the Act, s. 56 (3), the Court is not bound to dismiss the petition if it is not satisfied with proof of the service of the petition, and, in many cases, as the Master of the Rolls pointed out in In re A Debtor[83], it would be proper to adjourn the hearing in order that proper service could be effected. But it is clear that Cameron was entitled to have an opportunity of being heard in opposition to the making of a sequestration order, so that the order which was made in his absence was fundamentally defective, and, if he had known that the order had been made in time to appeal against it, this Court would have set it aside (Ex parte Phillips; Re Phillips[84]; Bear v. Official Receiver[85]). But I am unable to agree with the contention that because Cameron did not receive notice of the adjourned hearing the order of 22nd December 1942 was a nullity. Where service of a particular nature is required to give an inferior court jurisdiction, failure to effect such service will make all the subsequent proceedings null and void (Craig v. Kanssen[86] and In re the Affairs of Hart[87], referred to in the judgment of my brother Rich). But the authorities to which my brother Rich has referred show that an order made by a superior court, however fundamentally impeachable, is voidable and not void.

There is certainly nothing inherently "inferior" in the bankruptcy jurisdiction, nor in the courts administering it. On the contrary the history of bankruptcy shows that it has always been recognized to be a superior jurisdiction. Indeed, it was long thought that it would be impossible for anyone but the Lord Chancellor himself to administer the jurisdiction (Holdsworth, History of English Law, 6th ed. (1938), vol. 1, p. 471), and, until 1831, it was in fact administered by him (ibid., p. 443).

In Ex parte Cowan[88], decided in 1819, the Court of King's Bench gave no encouragement to the idea that a prohibition would lie to the Lord Chancellor for an alleged excess of jurisdiction when exercising jurisdiction in bankruptcy (as would have been the case if, when exercising that jurisdiction, he became an inferior court), although prohibition would lie to any court, however high, exercising ecclesiastical jurisdiction (Mackonochie v. Lord Penzance[89]).

In 1831, by the Act 1 & 2 Wm. IV. c. 56, a Court of Bankruptcy was set up to exercise the jurisdiction previously exercised by the Chancellor. This consisted of a chief judge and three judges, who were required to be serjeants or barristers of ten years standing, and six commissioners, serjeants or barristers of seven years standing. It was a court of law and equity, a court of record, and had all the rights, incidents and privileges as fully as the same were used, exercised and enjoyed by any of His Majesty's courts of law or judges at Westminster.

In 1869 the London Bankruptcy Court was established. There was a chief judge assisted by such other judges of the superior courts of law and equity as the Chancellor might appoint, with all the powers, jurisdiction and privileges possessed by any judge of the superior common law courts or the Court of Chancery. The Court itself was a principal court of record, and every local court (and these included county courts) was to be deemed the same court (i.e., a part of one and the same court) and to have the jurisdiction of the Court of Chancery. Orders of the court were to have the same force as if they were judgments of the superior courts of common law or decrees in chancery. It was held that not only was the London Court a superior court, but the local courts (which were otherwise inferior courts) became superior courts when exercising bankruptcy jurisdiction, so that their judgments could not be treated as nullities even if made in excess of jurisdiction (Revell v. Blake[90]).

It has been held that if an inferior court is, when exercising a particular jurisdiction, invested with the powers and jurisdiction of a superior court, it becomes itself a superior court when exercising that jurisdiction and therefore not subject to the prerogative writs (In re New Par Consols Ltd. [No. 2][91]; Skinner v. North Allerton County Court Judge[92]); nor can its judgments be treated as nullities even if made in excess of jurisdiction (Revell v. Blake[93]). In the light of those authorities, I should take leave to doubt whether the case of R. v. Wallace; Ex parte O'Keefe[94] can be taken to have correctly decided that the Victorian Court of Insolvency was an inferior court.

In the case of the Federal Bankruptcy Court the qualifications prescribed for a judge are the same as those prescribed for a Justice of the High Court. By s. 18, the Supreme Courts of the States, which are all superior courts, are vested with Federal jurisdiction in bankruptcy. Section 20 provides that every court having jurisdiction in bankruptcy shall have the same powers and rights to commit for contempt of court as belong to the High Court or the Supreme Court of a State; that any proceeding in bankruptcy may be transferred from one court to another; and that every order, decision or award of the Court may be enforced in the same manner as a judgment of the High Court. By s. 22, all courts having jurisdiction in bankruptcy shall act in aid of and be auxiliary to each other in all matters of bankruptcy. Thus the jurisdiction which the Federal Court of Bankruptcy has been set up to administer is essentially the jurisdiction of a superior court, the Court is associated in the exercise of this jurisdiction with courts which are superior courts, and its decisions are enforceable in the same manner as decisions of the High Court. The jurisdiction of the Court is limited by s. 25 to any proceedings in bankruptcy, but in such proceedings the Court has full power to decide all questions of law or of fact which arise no matter what the nature or the value of the subject matter may be.

The case of Ex parte Fernandez[95] is a clear authority that a court with a limited jurisdiction may be a superior court, provided that it possesses and exercises the superior rights, privileges and authorities of those whose functions it has superseded. Where a new court is created by an Act, it may be created as a superior court by express words or by necessary implication (Mayor &c. of London v. Cox[96]). Thus in Forster v. Forster[97], the majority of the court seemed to have been of opinion that prohibition would not lie to the Divorce Court set up in 1857 by 20 & 21 Vict. c. 87. For the constitution of this Court, see Board v. Board[98]. Lord Blackburn's doubt on the point was probably due to the fact that the new court was exercising to a great extent an ecclesiastical jurisdiction.

In the present case it follows, in my opinion, by necessary implication from the circumstances to which I have referred, that the Federal Court of Bankruptcy is a superior court, and I do not regard the statutory provisions with respect to contempt of court as intended to confer part of the jurisdiction of a superior court on a court intended to be in other respects inferior and therefore prima facie able only to deal with contempt committed in facie curiae (R. v. Lefroy[99]), but as inserted, ex abundante cautela, to remove any possibility of doubt as to the scope of the Court's jurisdiction in contempt in a jurisdiction in which this offence is apt to be rife. When, therefore, the Federal Court of Bankruptcy has made a sequestration order under the Act, it is not, in my opinion, a nullity, so that, even if it has been irregularly obtained, it operates until it is set aside and causes the debtor to become a bankrupt and his property to vest in the official receiver: Cf. Smallcombe v. Olivier[100]; Boaler v. Power[101]; In re Forder; Forder v. Forder[102].

Speaking generally, a court has an inherent power to set aside an order which has been made against a person without that person having notice of the application (Craig v. Kanssen[103]). The way is then open for a rehearing of the application upon proper conditions. But the effect of a sequestration order is to vest the property of the bankrupt in the official receiver and the official receiver then proceeds to realize that property for the benefit of the creditors. If the Court were simply to set aside such an order under its inherent jurisdiction complete justice would not be done, because such of the bankrupt's property as has not been disposed of would still remain vested in the official receiver. The Court would therefore have to order the official receiver to do such acts and execute such instruments as were necessary to vest the property in the bankrupt. An order simply to set aside a sequestration order under the inherent jurisdiction of the Court or to rescind it under s. 26 would not, therefore, be completely effective. This and other difficulties are recognized and provided for by s. 124, which clothes the Court with special powers upon a rehearing where an application is made to annul a sequestration order.

By s. 124 (1) (a) the Court is given the fullest power to remedy any injustice that the debtor may have suffered through a sequestration order having been improperly obtained. It can annul the order whenever, in the opinion of the Court, it ought not to have been made. It can decide, therefore, at a properly constituted hearing whether the order should have been made on the merits in the light not only of the evidence which was available at the date the sequestration order was made, but also of any evidence that has subsequently become available before the date of the application to annul, so that I agree with the statement of the learned author of Williams on Bankruptcy, 15th ed. (1937), at p. 143, that there is no power to annul other than the express power conferred by the section: See per Cave J. in In re Gyll; Ex parte Board of Trade[104] and In re Hester[105]; per Vaughan Williams J. in In re Painter[106] and in In re Burnett; Ex parte Official Receiver[107]; and per Manning J. in In re Griffiths; Ex parte Huntley[108].

When it was brought to his Honour's notice that the sequestration order of 22nd December 1942 had been obtained without notice of the adjourned hearing having been given to Cameron, it was his duty to inquire whether, in all the circumstances, that order should not have been made. In order to determine that question he could have reviewed its propriety in the light, inter alia, of the objections which Cameron alleged that he could have raised against the making of that order if he had had an opportunity of being heard. If his Honour had considered that there was no substance in these or any subsequent objections, he could have refused to annul the order. If, on the other hand, he had considered that, if these objections had been raised, he would not have made the order, he could have annulled it. This view accords, mutatis mutandis, with that expressed by Kelly C.B. in Revell v. Blake[109] where he said: - "In any case where a person interested failed to appear through some accident on the first hearing, he might apply for a rehearing and state the reason for his non-appearance, and show that the debtor carried on business in London; and it might be the duty of the judge, if satisfied of the facts, to rescind the order of adjudication, and leave the petitioning creditor to take proceedings in the London Court."

But his Honour first of all annulled the order and then proceeded to make a second sequestration order. Under this order the bankruptcy would again commence on 21st August 1942, and all the property which the bankrupt owned at that date and any property which he acquired or which devolved on him after that date but prior to his discharge would vest in the official receiver appointed by the second order. During the operation of the first order, some of this property might have been disposed of to purchasers by the official receiver, and persons might have acquired title to some of it under s. 98. If a second order could be made on the same petition the question would arise as to the effect it would have upon these titles. They are all titles to property which, on the literal wording of s. 91, would vest in the official receiver appointed by the second order as from 21st August 1942, or on any subsequent date upon which the bankrupt acquired any further property, and, therefore, at a date antecedent to that upon which these persons acquired title from the first official receiver or under s. 98. In order to preserve these titles it would be necessary to imply a limitation upon s. 91 so as to exclude the property in question from the property vested in the second official receiver by that section. This would be straining the literal construction of the section in the interests of justice. But such cases as In re Clark; Ex parte Beardmore[110] and In re Wigzell; Ex parte Hart[111] show the difficulty of so doing. Further, the protection afforded by s. 98 is only expressed to be against the official receiver appointed by the first order; and, even if these sections can be segregated as my brother Rich suggests by the use of the maxim generalia specialibus non derogant, there remains the further difficulty that if two sequestration orders can be made on the same petition two sets of preferential creditors can be created under s. 84, a result which would appear to be obviously opposed to the intention of the Act. Some of these difficulties which arise when a second sequestration order is made upon a second petition, whilst the debtor is still an undischarged bankrupt, have been recognized and provided for by s. 61 of the Act. But the section would hardly embrace a case where there was a voidable sequestration order made on a prior petition followed by a second sequestration order made on a subsequent petition followed by an annulment of the first sequestration order and the making of a second sequestration order on the prior petition. The express provisions of this section are a further indication to my mind that the only occasion contemplated by the Act in which a second sequestration order could be made to operate with respect to the same period or part of the same period as that covered by the first sequestration order is where the second order is made upon a subsequent petition.

Further, the sections which relate to the position of persons dealing with a bankrupt in the period between six months before the date of the presentation of the petition on which the sequestration order is made and the date of the order are ss. 92 to 97. Of these sections I need only refer to s. 96, but this section could not have any operation in respect of any dealings with the bankrupt between 22nd December 1942 and 9th August 1943, because the effect of the sequestration order of 22nd December 1942 was to vest in the official receiver any property that the bankrupt owned on 21st August 1942 or acquired between that date and 9th August 1943, so that, after 22nd December 1942 and until 9th August 1943, the bankrupt did not own any property with respect to which s. 96 could operate.

It was contended that the order for the further hearing could be made under s. 26 (1) of the Act, which provides that the Court may review, rescind or vary any order made by it in its bankruptcy jurisdiction. I agree with the Chief Justice that a sequestration order cannot be annulled under this section. In addition to the reasons which he has given, this result follows, in my opinion, from the provisions of s. 54 (2), because under that section the rescission of a sequestration order would not discharge the bankruptcy. Further, the second sequestration order of 13th August 1943 was not a review, rescission or variation of any previous order, but an independent order causing a person who had ceased to be a bankrupt to revert to that status, but from a different date, in respect of the same act of bankruptcy upon which he had already been made bankrupt.

An order of annulment made under s. 124 is an order made by the Court in its bankruptcy jurisdiction, so that it may well be that it is an order which can be rescinded under s. 26. But the Court would no doubt be slow to make such an order except on the ground of fraud, in view of the finality contemplated by s. 124. The effect of the order would be to revive the previous bankruptcy. But I have been unable to find any case where it has been decided or suggested that there can be a readjudication under s. 124. In Ex parte Jarvis; In re Spanton[112] the order before the Court of Appeal was an order discharging an annulment order similar to an annulment order which could be made under s. 71 (18). The order was that the bankruptcy should proceed in the same manner as if the order of annulment had not been made. The effect of the order was, therefore, to revive the original adjudication. It was not an order for a fresh adjudication. This order was in accordance with what appears to be the recognized and established procedure in bankruptcy: See In re Lavender[113]; Ex parte Lawrence; Re Bowring[114]; In re A Debtor; Ex parte Debtor[115]; Harman v. Layton-Bennett[116]; Harman (Martin Coles) v. Official Receiver, Petitioning Creditors and Trustee[117].

In the present case it could be contended that the order made by his Honour on 9th August 1943 was a conditional order because a rehearing of the petition was ordered at the same time as the annulment, and that, when his Honour rejected Cameron's grounds of opposition, he could have rescinded the annulment order under s. 26 and thereby revived the original order of sequestration. This procedure would have been in line with that adopted in In re Lavender[118] and Ex parte Lawrence[119], and in accordance with the general structure of the Bankruptcy Act, and would therefore have been free from the difficulties and anomalies created by the second sequestration order.

But, for the reasons already stated, I am of opinion that his Honour had no jurisdiction to make the order of 13th August 1943.

Under the Judiciary Act 1903-1940, s. 37, this Court has power in the exercise of its appellate jurisdiction to give such judgment as ought to have been given in the first instance. So that, if I was of opinion that the appeal failed on the merits but that his Honour had made an order in the wrong form, although the respondent has not appealed against the order of annulment, I would be prepared seriously to consider whether it would not be proper to rescind the sequestration order of 13th August 1943 and the order of annulment of 9th August 1943 and thereby revive the original sequestration order of 22nd December 1942. But I am unable to adopt this course for the following reasons.

I agree with the Chief Justice that when his Honour's attention was called to reg. 22 of the National Security (War Service Moratorium) Regulations, which make it illegal to present a bankruptcy petition without the leave of the Court against a member of the forces, he was bound to dismiss the petition if he was satisfied that, when the petition was presented to the Court, Cameron was a member of the forces. At the rehearing of the petition it was common ground that Cameron became a member of the forces on the same day that the petition was presented. Cameron gave evidence which, if believed, proved that he became a soldier early on the morning of 8th September, while it seems probable that the petition was not presented until later in the day. In his judgment, his Honour assumed that Cameron was a member of the forces when the petition was presented, but held that nevertheless the regulation would not invalidate the petition. As this Court did not agree with his Honour, it became necessary to remit the matter to him with a request that he should find as a fact whether Cameron was a member of the forces at the time of the presentation. I believe that this Court intended his Honour to find the fact in the light of all the available evidence, but his Honour confined himself to the evidence which had already been given, and, on that evidence, held that he was not affirmatively satisfied that Cameron was a member of the forces at the material time. We were informed by counsel for the appellant that the fresh evidence which his Honour rejected was reliable evidence which would have proved that Cameron was then a member of the forces. This Court should be slow, in my opinion, to prevent the appellant from having an opportunity to tender this evidence.

The appeal should, in my opinion, be allowed and the sequestration order of 13th August 1943 set aside. It will then be open to the respondent to apply to the learned Judge in Bankruptcy for a rehearing of the annulment order of 9th August 1943 with a view to its rescission, and on such a rehearing Cameron will be able to tender the fresh evidence.

In these circumstances I find it unnecessary to express any opinion upon the other grounds of appeal.

Solicitors for the appellant, J. A. Meagher & De Coek.

[4] (1888) 58 L.J. Q.B. 8; 5 Morr. 272.

[5] (1894) 63 L.J. Q.B. 423; 1 Manson 89.

[10] (1914) 2 K.B. 421, at p. 428.

[13] (1921) 2 A.C. 299, at p. 332.

[14] [1914] HCA 41; (1914) 18 C.L.R. 339, at pp. 348, 349.

[17] (1943) 1 K.B., at pp. 262, 263.

[22] [1845] EngR 175; (1667) 1 Wms. Saund. 69 [85 E.R. 81].

[23] (1873) L.R. 8 C.P. 533: see pp. 544, 545.

[25] [1918] VicLawRp 49; (1918) V.L.R. 285: see pp. 315, 341.

[27] (1888) 22 Q.B.D. 83, at p. 85.

[31] (1921) 2 A.C., at pp. 332, 333.

[32] (1922) 1 Ch. 440, at p. 465.

[37] (1871) L.R. 5 H.L. 234, at p. 245.

[38] (1873) L.R. 8 C.P. 533, at p. 544.

[43] (1920) 3 K.B. 598, at p. 606.

[46] (1917) 17 S.R. (N.S.W.) 152; 34 W.N. 49.

[48] (1874) L.R. 18 Eq. 705, at p. 713.

[53] (1888) 58 L.J. Q.B. 8; 5 Morr. 272.

[54] (1874) 9 Ch. App. 667: See p. 669.

[64] (1883) 22 Ch. D., at p. 534.

[66] (1909) 1 K.B. 430, at p. 438.

[67] (1883) 22 Ch. D., at p. 534.

[70] [1934] HCA 48; (1934) 51 C.L.R. 545, at p. 550.

[71] [1861] EngR 556; (1861) 10 C.B. N.S. 3 [142 E.R. 349].

[72] (1819) 3 B. & Ald. 123 [106 E.R. 608].

[73] (1819) 3 B. & Ald., at p. 130 [106 E.R., at p. 610].

[74] (1871) 10 S.C.R. (N.S.W.) 187.

[75] (1875) 14 S.C.R. (N.S.W.) 164.

[76] (1872) L.R. 7 Ex. 287, at p. 290.

[77] [1941] HCA 27; (1941) 64 C.L.R. 642, at pp. 648, 652, 655.

[85] [1941] HCA 41; (1941) 65 C.L.R. 307.

[88] (1819) 3 B. & Ald. 123 [106 E.R 608]..

[89] (1881) 6 App. Cas. 424, at pp. 447, 448.

[90] (1873) L.R. 8 C.P., at pp. 544, 545.

[91] (1898) 1 Q.B. 669, at p. 672.

[92] (1898) 2 Q.B., at p. 686; (1899) A.C. 439.

[93] (1873) L.R. 8 C.P., at pp. 544, 545.

[94] [1918] VicLawRp 49; (1918) V.L.R. 285.

[95] [1861] EngR 556; (1861) 10 C.B. N.S. 3 [142 E.R. 349].

[96] (1866) L.R. 2 H.L. 239, at p. 258.

[100] (1844) 13 M. & W. 77 [153 E.R. 32].

[101] (1910) 2 K.B. 229, at p. 232.

[104] (1888) 58 L.J. Q.B., at p. 10; 5 Morr., at p. 274.

[105] (1889) 22 Q.B.D., at p. 633.

[107] (1894) 63 L.J. Q.B. 423, at p. 424; 1 Manson 89, at p. 90.

[108] (1892) 3 B.C. (N.S.W.) 6, at p. 9.

[109] (1873) L.R. 8 C.P., at p. 539.