Ahh- 40612,
The incident you are referring to happened in TC airspace. The way you have explained it or had it explained to you is confusing.
First if mode "S" indicated 40 and 50 then there was 1000ft between them. However, if you are referring to the Selected Flight Level parameters that are downlinked from the transponder, this is different information and relates to the FL set by the pilots on the autopilot. This does not take into account the pressure setting on the altimeter of the aircraft.
What happens in the situation you describe is that the higher one is flying the Standard Pressure Setting and the lower aircraft is flying on the QNH.
The STCA works off the information transmitted from the alitmeter and notices the reduction in separation and activates, In the situation you describe this is what occurred.
Hold breath and wait for the discussion
