Farrington v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT KENNY J: introduction 1 On 3 September 2001, a Federal Magistrate heard an application by Mr Derek Farrington for an adjournment of the hearing of a creditor's petition presented by the respondent ("the Commissioner") on 11 April 2001 and an application by the Commissioner for a sequestration order against Mr Farrington's estate. On 1 November 2001, the Federal Magistrate (1) dismissed Mr Farrington's adjournment application; (2) made a sequestration order, pursuant to s 43 of the Bankruptcy Act 1966 (Cth) ("the Act") against Mr Farrington's estate; and (3) declined a further application, made by Mr Farrington on 1 November, to reopen the hearing of 3 September 2001. 2 By notice dated 22 November 2001, Mr Farrington purported to appeal to this Court from "the decision" of the Federal Magistrate, on the grounds: That an appeal has been part heard at the AAT and resumes on December 3rd 2001. That the information presented to the AAT was not allowed to be presented to the Court, including documentation. He sought orders: That the judgment be set aside until the appeal has been heard. That the case be re-opened based on the documentation before the AAT. the nature of the appeal 3 Before referring to the facts relevant to this appeal, it may be helpful to describe the nature of an appeal to this Court from a judgment of the Federal Magistrates Court. The jurisdiction of this Court to hear and determine an appeal from a judgment of the Federal Magistrates Court is conferred by s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) ("Federal Court of Australia Act"). Pursuant to s 25(1A) of the Federal Court of Australia Act, the Chief Justice directed in this case that the matter be heard and determined by a single judge. 4 An appeal from a judgment of the Federal Magistrates Court is not an appeal by way of a hearing de novo, nor is it an appeal in the strict sense: cf Low v Commonwealth of Australia [2001] FCA 702, per Marshall J at [3]. Such an appeal is conducted as a re-hearing. On an appeal by way of re-hearing, the powers of an appellate court are exercisable only if the appellant can demonstrate that, having regard to the evidence before the appellate court, the judgment under appeal is a consequence of some legal, factual, or discretionary error: see Allesch v Maunz (2000) 173 ALR 648, at 653-4 per Gaudron, McHugh, Gummow and Hayne JJ; Minister for Immigration and Multicultural and Indigenous Affairs v Jia (2001) 178 ALR 421, at 439 per Gleeson CJ and Gummow J; and Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 174 ALR 585, at 590 per Gleeson CJ, Gaudron and Hayne JJ. 5 On an appeal to this Court from the Federal Magistrates Court, this Court may receive evidence that was not adduced below. It may also draw inferences of fact from the evidence that was received below: see Federal Court of Australia Act, s 27. The nature of the discretion under s 93A(2) of the Family Court Act 1975 (Cth) "to receive further evidence upon questions of fact" (which resembles the discretion under s 27 of the Federal Court of Australia Act) was considered in CDJ v VAJ (1998) 197 CLR 172 ("CDJ v VAJ"). McHugh, Gummow and Callinan JJ, at 203-4, said: The failure to have adduced the evidence before the primary judge will be a variable factor, the weight of which will depend upon all the other factors pertinent to the case. Where the evidence has been deliberately withheld, the failure to call it will ordinarily weigh heavily in the exercise of the discretion. In other cases, the failure to call the evidence even if it could have been discovered by the exercise of reasonable diligence may be of little significance. No invariable rule concerning the failure to call the evidence can or should be laid down in view of the wide discretion conferred on the court by the section. See also Gaudron J, at 185-8, and Kirby J, at 233-6. 6 The relevance of this discussion concerning the nature of the present appeal will become apparent later in these reasons for judgment. background facts 7 Mr Farrington did not lodge income tax returns for the years of income ended 30 June 1995 ("the 1995 year") or 30 June 1996 ("the 1996 year"). By letter dated 16 February 1999, the Australian Taxation Office ("ATO") informed him that, by reference to the "excess expenditure method", it proposed to issue default assessments of income tax in respect of the 1995 year and the 1996 year pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) ("the ITA Act"), unless the ATO heard from him within 21 days. 8 Based on the evidence before him, the Federal Magistrate stated, at [15] of his reasons, that: The excess expenditure method involves an audit of the taxpayer's expenditure to identify what are private expenses and what are business expenses. The private expenses are then reconciled against funds available to the taxpayer at the commencement of the period and the end of the period. The balance is the taxpayer's excess expenditure. It is treated as the taxpayer's taxable income because it identifies the funds available to the taxpayer in the period for private expenditure. 9 On 19 March 1999, the Commissioner issued notices of assessment for the 1995 year and for the 1996 year. Mr Farrington objected to both assessments and subsequently, by a notice dated 20 October 1999, the Commissioner notified him that his objections were partially allowed. On 3 November 1999, the Commissioner issued a notice of amended assessment for the 1995 income year, stating that Mr Farrington's taxable income was $88,078 and that the sum of $159,669.85 was due and payable. On 19 November 1999, the Commissioner issued a notice of amended assessment for the 1996 year, stating that Mr Farrington's taxable income was $81,179 and that the sum of $145,329.14 was due and payable. Mr Farrington has not paid the sums assessed to him in respect of either the 1995 or the 1996 income years. 10 On 24 March 2000, the Commissioner obtained judgment against Mr Farrington, in default of appearance, in the County Court of Victoria in the sum of $146,181.83, in respect of unpaid income tax ("the judgment"). Mr Farrington did not satisfy the judgment and, on 10 October 2000, the Commissioner served a bankruptcy notice dated 29 September 2000 ("the bankruptcy notice") on him. The bankruptcy notice was founded on the judgment. Mr Farrington subsequently sought, unsuccessfully, to have the judgment and the bankruptcy notice set aside. 11 On 16 January 2000, Mr Farrington applied to the Administrative Appeals Tribunal ("the AAT") for an extension of time within which to make application for review, and for review, of the Commissioner's reviewable objection decisions, which had resulted in the issue of the notices of amended assessment for the 1995 year and the 1996 year. On 30 January 2001, the Commissioner consented to an extension of time being granted to Mr Farrington for the purposes of pursuing his review application. In a decision of 2 February 2001, a senior member of the AAT recorded: The Tribunal therefore decides that the time for lodging the application for review be extended to 16 January 2001. 12 In accordance with the AAT's directions, Mr Farrington subsequently filed a Statement of Facts, Issues and Contentions in which he challenged the amended assessments on two grounds. They were (1) that the amended assessments were invalid because, amongst other things, at the time they were issued, a tax audit "was still said to be in progress" and "the calculation of … taxable income in each year was … consequently tentative"; and (2) that the amended assessments were excessive because the accounts on which they were based were incorrect. Mr Farrington asserted that they were incorrect for the following reasons: (1) They were based on very limited information available to the auditor; (2) That information was obtained from the Victorian Police who were carrying out an investigation involving [Mr Farrington] and could not therefore be regarded as being wholly objective in providing the material to the auditor; (3) Despite the records disclosing funds having been received by the applicant during each of the relevant years, none of these funds were included in the … Accounts; (4) During each of the relevant years, [Mr Farrington's] mother either directly or indirectly provided financial support to [Mr Farrington] and these amounts should have been included as 'funds available' to the [Mr Farrington] in each of the relevant years. Mr Farrington contended that his taxable income for the 1995 year was the amount of $6,235 and, for the 1996 year, it was $5,940. 13 On 3 September 2001, a Registrar of this Court transferred the proceeding commenced by the Commissioner's creditor's petition to the Federal Magistrates Court, pursuant to s 32AB of the Federal Court of Australia Act. As already noted, on that date, a Federal Magistrate heard an application for an adjournment of the hearing of the petition and the petition. At the 3 September 2001 hearing, Mr Farrington relied on two affidavits sworn by him, one on 27 August 2001 in support of his adjournment application and another sworn on 29 May 2001 in opposition to the petition. He also relied on an affidavit sworn on 2 August 2001 by his mother, Mrs Winifred Ruby Farrington, in opposition to the petition. He gave further evidence at the hearing, and both he and his mother were cross-examined. At the conclusion of the hearing on 3 September 2001, the Federal Magistrate reserved his decision. 14 A hearing commenced in the AAT on 29 October 2001 and continued on 30 October 2001. On 30 October 2001, the hearing of the proceeding in the AAT was adjourned to 3 December 2001. On 3 December 2001, the AAT hearing was further adjourned to a date to be fixed. The Federal Magistrate had, meanwhile, delivered his decision on the creditor's petition and on Mr Farrington's application for an adjournment and, subsequently, to reopen his case. As already noted, these decisions were delivered on 1 November 2001. 15 In a document filed in the AAT in reply to Mr Farrington's Statement of Facts, Issues and Contentions, the Commissioner contended that Mr Farrington had omitted taxable income in the amount of $88,078 in the 1995 year and in the amount of $81,179 in the 1996 year; and that, further, she had correctly imposed additional tax, by way of penalty, pursuant to s 226H of the ITA Act. the federal magistrate's decision on the adjournment application 16 When the matter came before the Federal Magistrate on 3 September 2001, Mr Farrington sought an adjournment, which the Commissioner opposed, "to enable the genuine dispute as to whether [he] owe[s] the debt referred to in the Bankruptcy Notice to be heard and determined at the Administrative Appeals Tribunal". The Federal Magistrate declined the adjournment. 17 In reasons for judgment, the Federal Magistrate first referred to the decision of a Full Court of this Court in Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 ("Ahern") and then turned to consider whether Mr Farrington's application in the AAT was "based on genuine and arguable grounds". In his reasons ([2001] FMCA 82) at [16], the Federal Magistrate stated: The applicant appeared for himself. His argument was that the hearing of the bankruptcy petition should be adjourned until after the Administrative Appeals Tribunal proceedings. He said that he had good prospects of success. He maintained that no tax was owing. The principal basis for this was documents described as 'income tax return business worksheets' which were annexed to the applicant's affidavit. His evidence was that these had been sent to the Australian Taxation Office along with all his business records. From these, he maintained that his taxable income for the year 1995 was $6,235 and for 1996 $5,940, so that he had no income tax liability or negligible liability. 18 After summarising the evidence before the Court with some care, the Magistrate concluded, at [47] that: On a highly favourable view of the evidence the respondent had a taxable income of at least $28,000 per year in each of 1995 and 1996. For the reasons I have given the calculation which produces that result is unrealistically favourable. It is not this Court's task to decide whether the appeal will succeed but only if the respondent has established that there are genuine and arguable grounds. On the issue of whether the respondent had a taxable income in 1995 and 1996 the respondent has not done so. 19 In connection with the second of the grounds relied upon by Mr Farrington, which challenged the validity of the amended assessments, the Federal Magistrate held, at [51]-[52]: In F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360, the High Court held that once the Commissioner takes advantage of s 177(1) by producing an assessment which is definitive in form, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment, he has complied with the statutory formalities. The taxpayer is only entitled to dispute his substantive liability to tax in proceedings under Part V of the Act, that is by way of the appeal provisions. Accordingly, this ground of appeal has no chance of a success. 20 The Federal Magistrate found, at [53], that "the application for review to the Administrative Appeals Tribunal is not based on genuine arguable grounds and the application for adjournment should be refused". The Court went on to make a sequestration order against Mr Farrington's estate. 21 Also on 1 November 2001, before judgment was delivered, Mr Farrington sought to reopen matters that had been agitated on 3 September 2001. In particular, he sought to draw the Court's attention to certain documents. He told the Federal Magistrate that: The following documents were presented at the appeal: the settlement of the sale of my house in Embling Road on 30 September 1994, the sum of $152,274.59 being paid to me. These documents have not been presented to the Court as I only received them prior to the appeal, due to the difficulty of obtaining documents from seven years' ago. So those documents have not been presented previously. The other document was the sum received from my mother of $52,825, the contributions made for household expenses of 18 to 20 thousand by my wife, who was working at the time, the moneys paid to me by Delta Corp Systems Pty Ltd. 22 The Commissioner opposed this application upon the basis that Mr Farrington had had ample opportunity to provide the Federal Magistrate with evidence concerning his living expenses. Counsel for the Commissioner said: Mr Farrington was given an exhaustive opportunity to put before this Court an explanation as to how he met the expenses that he admitted from the funds available to him over the relevant period. At no time in the last five years, but at no time, your Honour, when this issue was absolutely critical and was before this Court, did Mr Farrington refer to receiving a lump sum $152,000 paid to him for the sale of a property. Furthermore, your Honour, that property was one - first of all, a question mark as to who was the owner at law in respect of that property … . 23 The Federal Magistrate ultimately rejected the application, stating: This matter has been listed for judgment today. The Deputy Commissioner of Taxation has applied to sequester the estate of the respondent. … The respondent applied for an adjournment on the basis that he had an appeal on foot in the Administrative Appeals Tribunal, or an application for review against both assessments. That has commenced, but has not finished, and the situation in regard to that appeal is no different from when this application for an adjournment was heard. The respondent has appeared for himself and he has written a letter to the Registrar which was dated 31 October in which he sought to have a giving of a judgment on the question of the application for adjourned deferred, because the appeal was being heard. He stated from the bar table, again appearing in person, that matters have been put to the Administrative Appeals Tribunal which would seem to be different to, or in addition to, the evidence which was given before me. I have treated that as an application to reopen the hearing, but on the two matters which have been put to the Tribunal, that he received 152,700 and something dollars in 1994 from the sale of a house, that his wife received $18,000 and that would account for his living expenses, on the first of those I cannot see how the fact that he might have received money from the sale of a house in September 1994 can make any difference, because in all of the investigations the Taxation Department has done, and in the material which has been put before this Court, if that amount of money was received by the respondent on that date it has been taken into account. In so far as his wife's income is concerned, again that was mentioned at the hearing, so I do not propose to reopen the hearing and I propose to give judgment. competency of the appeal 24 In the circumstances set out above, a preliminary question arises concerning the competency of Mr Farrington's appeal against the Federal Magistrate's decisions refusing an adjournment and, later, leave to reopen his case. As the Commissioner noted, these decisions were interlocutory in character; and leave is required to appeal from them: see Federal Court of Australia Act, s 24(1A). Mr Farrington, who was not represented in this Court, did not seek leave to appeal before the matter came on for hearing before me on 10 May 2002. At the hearing on that day, he made an oral application for leave to appeal (which, I will treat as including an application for an extension of time in which to file and serve an application for leave to appeal: see Federal Court Rules ("the Rules"), O 52, r 10). Unless the Court grants an extension of time to file and serve an application for leave to appeal, and grants the application for leave to appeal, there can be no competent appeal against the Federal Magistrate's interlocutory decisions. 25 In determining whether leave to appeal against an interlocutory decision should be granted, the Court must be satisfied that the decision under challenge is attended with sufficient doubt to warrant it being reconsidered, and that substantial injustice would result if leave were refused, supposing the decision at first instance were wrong: see Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, at 399-400 per Sheppard, Burchett and Heerey JJ. For the reasons set out below, the interlocutory decisions that Mr Farrington seeks to challenge are not attended by sufficient doubt to warrant their reconsideration. Accordingly, Mr Farrington has failed to satisfy me that leave to appeal should be granted, and I would not, therefore, grant an extension of time in which to seek leave to appeal since this would serve no useful purpose. the applications for an adjournment and for leave to reopen the case 26 Mr Farrington submitted that the Federal Magistrate erred by refusing not to adjourn the creditor's petition until the hearing and determination of the proceeding in the AAT. He submitted that the Federal Magistrate was wrong in finding that there were no genuine and arguable grounds for his appeal to the AAT against the Commissioner's decisions on his objections; and that, therefore, he had been wrongly deprived of his capacity to pursue the AAT proceedings. 27 Further, on the hearing of the appeal on 10 May 2002, Mr Farrington raised, for the first time, a claim that, in June 1994 in connection with an earlier bankruptcy matter, Mr Farrington had himself retained the very barrister who had represented the Commissioner in the Federal Magistrates Court on the hearing of the petition in September and November 2001. Mr Farrington challenged the Federal Magistrate's decisions upon the basis that the barrister had a conflict of interest when he appeared for the Commissioner below. As this was a very general complaint, intended (as I understood it) to bring down all the decisions under appeal, I defer discussing it until the end of these reasons. 28 The Federal Magistrate's decisions to refuse Mr Farrington's adjournment application and, subsequently, his application to reopen his case were discretionary ones. The principles applicable on an appeal against the exercise of discretion are well established: see House v The King (1936) 55 CLR 499 ("House"), at 504-5 per Dixon, Evatt and McTiernan JJ; Australian Coal and Shale Employees' Federation v Commonwealth (1953) 94 CLR 621, at 627 per Kitto J; and Ahern, at 146-7 per Davies, Lockhart and Neaves JJ. In House, at 504-5, Dixon, Evatt and McTiernan JJ said: It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. 29 Applying these general principles in relation to an exercise of discretion upon an adjournment application, the Full Court said in Ahern, at 146: It is well established that an appellate court will rarely interfere with a trial judge's exercise of discretion upon an application for adjournment. However, the refusal to grant an adjournment may in some cases prevent the party seeking it from presenting his case or defence and in some circumstances this may result in injustice of such kind or magnitude as to warrant interference on appeal. 30 The principles referred to in House and in Ahern apply in connection with an appeal from a decision to refuse an adjournment of the hearing of a creditor's petition, as well as in connection with appeals from other exercises of discretion in proceedings under the Act: see Ahern at 147; Adamopoulos v Olympic Airways SA (1990) 95 ALR 525 ("Adamopoulos"), at 526 per Pincus J and 531-2 per Burchett and Gummow JJ; and Bomanite Pty Ltd v Slatex Corp Aust Pty Ltd (1991) 104 ALR 165, at 172 per Gummow J. Adjournment application 31 In Ahern, which was also an appeal from a decision refusing an adjournment of a creditor's petition, the Full Court observed, at 147-8: It is well established that a court exercising bankruptcy jurisdiction has undoubted discretion to go behind a judgment, particularly one obtained by default or compromise or where fraud or collusion is involved and inquire whether the judgment is founded on a real debt: Corney v Brien (1951) 84 CLR 343. Where the judgment is by default the court will go behind the judgment if there is a bona fide allegation that no real debt underlies the judgment: Corney v Brien. Even where the judgment was obtained following a hearing on the merits where both parties appeared, if there are substantial reasons for questioning whether behind the judgment there is in truth and reality a debt due to the petitioning creditor, the court will go behind the judgment and inquire into the consideration for it: Wren v Mahony (1972) 126 CLR 212 per Barwick CJ, with whose reasons Windeyer and Owen JJ agreed; Menzies and Walsh JJ dissenting. … . It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceedings provided that the appeal is based on genuine and arguable grounds: Re Rhodes; Ex parte Heyworth (1884) 14 QBD 49; Bayne v Baillieu (1907) 5 CLR 64 and Re Verma; Ex parte DCT (1985) 4 FCR 181. These cases rest on the broad principle that before a person can be made bankrupt the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences. (Emphasis added) A Full Court of this Court followed Ahern in Adamopoulos, at 526 per Pincus J and 531-2 per Burchett and Gummow JJ. 32 The critical question for the Federal Magistrate was whether there was a dispute based on genuine and arguable grounds between Mr Farrington and the Commissioner concerning Mr Farrington's tax liability for the 1995 and 1996 years of income. It is tolerably clear that the Federal Magistrate fully appreciated that this was the question for determination. 33 As already noted, his Honour ultimately found that, on a view of the evidence that was highly favourable to Mr Farrington, Mr Farrington "had a taxable income of least $28,000 per year in each of 1995 and 1996". This was significantly more than the taxable income that Mr Farrington claimed to have derived in each year. As already noted, this led his Honour to conclude that there was no arguable basis for Mr Farrington's claim that he had no taxable income in the 1995 and 1996 tax years. 34 Before making this finding, his Honour made a careful and exhaustive examination of the history of the assessment and recovery process and of the evidence concerning (1) Mr Farrington's business (as an architect and project manager) in the 1995 and 1996 income years; (2) his exposure to the liabilities of Delta Corp Systems Pty Ltd (which was his or his family's company); and (3) his income and expenditure with respect to residential properties in an affluent suburb of Melbourne, two Mercedes motor vehicles, and the payment of his daughter's school fees at a private school. In the course of examining the evidence, his Honour considered, amongst other things, a financial statement submitted to a Bank in the 1995 income year, business work sheets for the 1995 and 1996 years, and the evidence of Mr Farrington's mother. 35 Mr Farrington did not contend that the Federal Magistrate erred in law in having regard to any of these matters. Nor did he contend that it was not reasonably open to his Honour to reach a conclusion adverse to him on the basis of the evidence that Mr Farrington had adduced on 3 September 2001. Further, as we have seen, Mr Farrington did not challenge the Federal Magistrate's conclusion that Mr Farrington's attack on the validity of the amended assessments was untenable. Leaving aside the conflict of interest submission (discussed below), Mr Farrington did not advance any argument which, if accepted, would indicate that, on the basis of the evidence and the submissions before him on 3 September 2001, the Federal Magistrate had erred in concluding that there were no genuine and arguable grounds for Mr Farrington's dispute with the Commissioner and that, therefore, the adjournment application ought to be refused. Application to reopen 36 Mr Farrington's actual case on appeal was that the Federal Magistrate had erred in denying him an opportunity, on 1 November 2001, to reopen his case in order to adduce additional evidence, which was not available to him on 3 September 2001, that would have satisfied the Federal Magistrate that there was indeed a dispute based on genuine and arguable grounds between him and the Commissioner. 37 On the hearing before me on 10 May 2001, Mr Farrington submitted that the evidence that he adduced before the Federal Magistrate on 3 September 2001 was "not the correct evidence". On that day, he further submitted: [T]he whole basis of this case is my financial situation during [the 1995 and 1996] years. Now, before [the] Magistrate … I did ask to hand up information regarding the sale of my house at Embling Road, which relates back to what I said previously, when [counsel] was acting for me. If you look at that letter, you'll see that there was an amount which was $152,000, which was left over from the sale of that house and was held in the trust account of my solicitor of the time, Terry Fraser. Mr Farrington continued: Well, the question was, 'how did I obtain money during those financial years in order to live?' that was the question asked, and my response was that it was the sale of my house at Embling Road, it was a loan from my mother, who submitted her affidavit which you have in the appeals book, and my wife was also working at that time due to my financial situation. 38 The letter to which Mr Farrington referred was a letter dated 30 September 1994 from Andrew T Fraser & Associates, solicitors, addressed to Mr and Mrs D Farrington, confirming that "settlement on the sale of the [Embling Road] property was completed as arranged on Friday 30 September 1994". The letter concluded that: There remains to your credit in our Trust Account the sum of $152,247.59 which we shall retain pending your further instructions … . 39 Mr Farrington claimed that he was intending to lead evidence in the AAT proceeding that he had met his private expenses during the 1995 year and the 1996 year from the $152,247.59 received by him from the sale of the Embling Road property, together with money received from his mother and wife. He submitted that, by refusing him an opportunity to reopen his case on 1 November 2001, the Federal Magistrate had wrongly denied him an opportunity to show that there was a dispute, on genuine and arguable grounds, about his tax liability in respect of the 1995 and 1996 income years. 40 I reject Mr Farrington's submission. First, as the Commissioner submitted, the case that Mr Farrington now seeks to make with respect to the Embling Road property is inconsistent with the evidence that he gave on oath in the Federal Magistrates Court on 3 September 2001. In cross-examination in that Court, Mr Farrington specifically and repeatedly stated that it was his mother who met the "shortfall" in his private expenses during 1995 and 1996. At the hearing on 3 September 2001, Mr Farrington did not once refer to a sum of $152,247.59 or to the proceeds of sale of the Embling Road property, as constituting a source of his living expenses. 41 Mr Farrington did not dispute that he did not mention the proceeds of sale of the Embling Road property until the AAT hearing on 30 October 2001. I reject the possibility that Mr Farrington inadvertently overlooked the fact that these monies had provided his living expenses. Although Mr Farrington was unrepresented in the Federal Magistrates Court (as in this Court), he gave evidence that he had received advice from a lawyer, and that a tax lawyer had assisted him in preparing his case for the AAT. The Statement of Facts, Issues and Contentions, apparently prepared by his legal representative for the AAT hearing, contained no reference to the sale proceeds. 42 Moreover, as counsel for the Commissioner noted, there is no reference to the existence of the sum of $152, 247.59 (or anything like it) in the financial statement prepared for the National Australia Bank in the 1995 income year. Further, at no stage has Mr Farrington challenged the evidence that there was only $5,791.03 standing to his credit in his bank account at the end of the 1995 income year. If the sum of $152,247.59 had been available to him earlier that year, it had been dissipated by 30 June 1995. I accept, as the Commissioner submitted, that, if Mr Farrington had any such a sum available to him in either the 1995 or 1996 income years, then Mr Farrington would have referred to it in his evidence before the Federal Magistrate or, at the very least, in the documentation that had been prepared for the AAT hearing. 43 If Mr Farrington did receive the whole or part of the sum of $152,247.59 in 30 September 1994, the subsequent disposition of these monies may, perhaps, be explained by Mr Farrington's statement, made early in the hearing of the appeal on 10 May 2002 and concerning previous bankruptcy proceedings, that the property at Embling Road had been sold in September 1994 "and the debts paid and the case dismissed". 44 The circumstances in which it may be proper to grant leave to reopen have been considered from time to time: see, e.g., Hindmarsh Medical Clinic v Hindmarsh Family Practice Pty Ltd (1997) 38 IPR 616, at 631-2; Londish v Gulf Pacific Pty Limited (1993) 45 FCR 128, at 138-140; and Smith v New South Wales Bar Association (No 2) (1992) 176 CLR 256, at 266-7 per Brennan, Dawson, Toohey and Gaudron JJ. Having regard to the authorities and the considerations set out above, Mr Farrington has not satisfied me that the Federal Magistrate erred in declining to permit Mr Farrington to reopen his case, on the claimed ground that he had additional evidence probative of a dispute on genuine and arguable grounds between him and the Commissioner. I reject Mr Farrington's submission that the additional material to which he referred was of such probity that the Federal Magistrate necessarily erred in refusing Mr Farrington's application. the sequestration order 45 Mr Farrington did not persuade the Federal Magistrate that the sequestration order sought by the Commissioner ought not be made: see Bankruptcy Act, s 52(2). Plainly enough, his Honour would have taken into account the AAT proceeding and the nature of the dispute concerning the assessments between Mr Farrington and the Commissioner. His Honour can be taken to have been aware that, if a sequestration order were made, then the application for review in the AAT might not continue any further. Bearing in mind the view his Honour took of the dispute between Mr Farrington and the Commissioner, it may be readily understood why this consideration did not deter his Honour from making the sequestration order. 46 Mr Farrington's attack on the sequestration order made by the Federal Magistrate depended almost entirely on his challenges to his Honour's decisions refusing an adjournment and leave to reopen his case, considered above. Perhaps, another basis for his attack on the sequestration order may have been that part of the judgment debt was challengeable. Even if Mr Farrington had been able to make out such a case, however, it would not of itself be a ground for setting aside the sequestration order. As the Full Court said in Emerson v Wreckair Pty Ltd (1991) 33 FCR 581, at 588 per Morling, Neaves and Spender JJ: To found the presentation of a creditor's petition, it is necessary that there be owing by the debtor to the petitioning creditor a debt that amounts to [$2,000] or two or more debts that amount in the aggregate to [$2,000]: Bankruptcy Act, s 44(1)(a). There is, however, no requirement for the issue of a bankruptcy notice that the creditor have a judgment for any minimum amount. Nor is there a requirement that a creditor who petitions for a sequestration order based upon an act of bankruptcy of the kind for which s 40(1)(g) of the Bankruptcy Act provides rely, wholly or at all, upon the debt upon which the bankruptcy notice was founded. See also Re Frank; Ex parte Pilisky (1987) 16 FCR 396, at 403-4 per Fisher J. 47 Mr Farrington has not made out any ground for setting aside the sequestration order made by the Federal Magistrate. Exercise of discretion to admit further evidence 48 As already noted, in support of his attack on the Federal Magistrate's refusal of leave to reopen his case, Mr Farrington sought to rely on the letter dated 30 September 1994 from Andrew T Fraser & Associates, solicitors, addressed to Mr and Mrs D Farrington, regarding the sale of the Embling Road property on 30 September 1994. The letter was exhibited to an affidavit sworn by Mr Farrington on 22 November 2001 and filed in this proceeding. Whilst the Commissioner contended that Mr Farrington had not complied with O 52, r 36 of the Rules, nothing turns on this since the Commissioner accepted that I might have regard to the letter providing the Commissioner was able to place before me part of the transcript of the hearing in the Federal Magistrates Court on 3 September 2001, recording Mr Farrington's cross-examination, as well as copies of the exhibits that were before the Federal Magistrate on that occasion. Accordingly, since the parties agreed to this course, I have had regard to the letter relied on by Mr Farrington (and the transcript and exhibits referred to by the Commissioner) in order to understand the parties' submissions. 49 I would add, however, that, even if in an admissible form, for the reasons already given, I would not regard the additional material to which Mr Farrington referred as of such cogency that I would be disposed to admit it on appeal pursuant to s 27 of the Federal Court of Australia Act. I am not satisfied that this material would have been likely to have produced a different result had it been considered by the Federal Magistrate: see Guss v Johnston [2000] FCA 1455 ("Guss v Johnston"), at [30]-[33] per Sackville J, Drummond and Dowsett agreeing, citing CDJ v VAJ,at 201-3. In any event, Mr Farrington had an opportunity to adduce evidence concerning the sale of Embling Road before the Federal Magistrates Court on 3 September 2001; and he has not shown any satisfactory reason why that evidence was not available to him on that day. 50 It is also to be borne in mind that the creditor's petition that was before the Federal Magistrate on 3 September 2001 had first been lodged in this Court on 11 April 2001 and had subsequently been adjourned on a number of occasions over some months, enabling Mr Farrington to put on his evidence in opposition. When transferred to the Federal Magistrates Court, there was a hearing at which Mr Farrington gave evidence and, with his mother, was cross-examined. Mr Farrington was afforded an ample opportunity to present his case that the dispute between him and the Commissioner was based on genuine and arguable grounds. In the circumstances, there would be discretionary considerations militating against the admission of further evidence on his behalf: see Guss v Johnston, at [43]-[45]. the alleged conflict of interest 51 As I indicated at the commencement of these reasons, Mr Farrington claimed, on the hearing of this appeal, that, in June 1994 in connection with an earlier bankruptcy matter, he had retained the very same barrister who represented the Commissioner in the Federal Magistrates Court on the hearing of the decisions under appeal. Mr Farrington challenged the Federal Magistrate's decision upon the basis that the barrister had a conflict of interest when he appeared for the Commissioner below. Mr Farrington said that he had not raised this matter before the Federal Magistrate because " this information became available to me after the case before [the Federal Magistrate]". He said that: Prior to my bankruptcy I was working; I only had limited time to spend on this case. Since I've been bankrupt I've got plenty of time to research this case … . Mr Farrington added: I guess I found about it probably about four weeks ago, when I was going through all my receipts and I came across an account to [counsel] which I'd paid for his fees to represent me. 52 On the appeal, Mr Farrington adduced no evidence in admissible form about this matter, although he did hand up what appeared to be a Statement of Account dated 25 July 1994 from Meltzer Green, barristers and solicitors, to himself, referring to the retainer of the barrister concerned in June 1994 and noting his fees. 53 Let it be assumed, for present purposes, that counsel for the Commissioner below had previously been retained by Mr Farrington, although in different bankruptcy proceedings. In connection with a solicitor, Batt JA (with whom Callaway JA agreed) observed in McVeigh v Linen House Pty Ltd [1999] 3 VR 394, at 398: The authorities establish that a court will restrain a solicitor from acting for a litigant not only in order to prevent disclosure of confidence of a client or former client, but also to ensure that the solicitor's duty of loyalty to the former client is respected, notwithstanding termination of the retainer, and to uphold as a matter of public policy the special relationship of solicitor and client. See alsoSpincode Pty Ltd v Look Software Pty Ltd[2001] VSCA 248, at [52]-[60] per Brooking JA, [61] per Ormiston JA, and [63] per Chernov JA; and Waiviata Pty Ltd v New Millenium Publications Pty Ltd[2002] FCA 98, at [8]-[10] per Sundberg J. A member of counsel may be in no relevantly different position: cfMintel International Group Ltd v Mintel (Australia) Pty Ltd (2000) 181 ALR 78 ("Mintel") at 87-8 per Heerey J; and Watson v Watson (unreported, Supreme Court of New South Wales (Eq), Santow J, 25 May 1998 (BC9802673)). 54 As Heerey J observed in Mintel, at 88, however: In the abstract, it may be understandable that there is criticism of lawyers who 'change sides'. But that cannot literally mean that once a lawyer, be it solicitor or barrister, has acted professionally for a particular client, the lawyer is forever after prevented from opposing that client in subsequent litigation. In so far as reliance is placed on the 'getting to know you' principle, a moment's consideration of the way that litigation is conducted in Australia shows that this cannot be accepted too literally, especially in relation to counsel. 55 Mr Farrington did not acquaint the Commissioner or his counsel with his concerns prior to the hearing in the Federal Magistrates Court. Had these concerns been drawn to counsel's attention, counsel would have had an opportunity to consider his position and to take appropriate action. Mr Farrington did not inform the Federal Magistrate of the alleged conflict of interest, or seek any restraining order against the Commissioner or his counsel. Counsel who appeared before the Federal Magistrate did not appear before me, and there is no suggestion that he will represent the Commissioner again against Mr Farrington. Further, on this appeal, Mr Farrington did not seek any order restraining the Commissioner's former counsel from further representing the Commissioner in proceedings concerning him and, as indicated, no basis was shown for making any such order. 56 In addition to injunctive relief, breaches of duty of confidence and of fiduciary duty, which may exist between counsel and client, may attract other remedies, perhaps in the nature of compensation. This is, however, beside the point on this appeal. What Mr Farrington seeks, in effect, is to have the judgment of the Federal Magistrate set aside, although not in consequence of any legal, factual, or discretionary error on the Federal Magistrates' part. As already stated at the commencement of these reasons, in the present appeal, the powers of this Court are exercisable only where the Court is persuaded that, having regard to the evidence before it, the judgment of the Federal Magistrate is the result of some legal, factual, or discretionary error. Nothing of the kind has been shown by Mr Farrington to arise in this case. Accordingly, even if an application by Mr Farrington for an order restraining counsel for the Commissioner from representing the Commissioner in the Federal Magistrates Court might have succeeded (and I express no view as to whether it would have done), where no such application was in fact made, Mr Farrington cannot, in the circumstances of this case, rely upon the alleged conflict of interest as constituting a competent ground of appeal. summary 57 For the reasons set out above, I would dismiss as incompetent the appeal in so far as it concerned the dismissal of the adjournment application and application to reopen the hearing of 3 September 2001. Similarly, for the reasons already given, I would refuse Mr Farrington's applications for leave to appeal and for an extension of time, and also dismiss as incompetent the appeal in so far as it related to the sequestration order made against Mr Farrington's estate by the Federal Magistrate on 1 November 2001. I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny.