Re Gilland, K.A. v Ex Parte Pipkin, K.M. (Trustee)

[1989] FCA 750

;JUDGMENT No. ........ ........ .... 750 y C L 1

IN THE FEDERAL COURT OF AUSTRALIA )

)

SOUTH AUSTRALIA DISTRICT REGISTRY )

)

GENERAL DIVISION	)	No. 1206 of 1987
)
BANKRUPTCY DISTRICT OF THE STATE	) )
OF SOUTH AUSTRALIA	)

Re: KENNETH ANTHONY GILLAND

a bankrupt

Ex Parte:

KEVIN MICHAEL PIPKIN the
trustee of the property of
KENNETH ANTHONY GILLAND a

bankrupt

Applicant

KENNETH ANTHONY GILLAND

Respondent

REASONS FOR JUDGMENT

VON DOUSSA J. :
28 AUGUST 1989

This is an application by the trustee of the estate of Kenneth Anthony Gilland for directions pursuant to s.134(4) of the Bankruptcy Act 1966 ("the Act"). The background facts which have led to the application are as follows:

notice claimed $4,352.56 being a judgment of the Local Court of

A sequestration order was made against the bankrupt on
9th November 1987 on a creditor's petition presented on 15th

April 1987. The act of bankruptcy alleged was the debtor's

failure to comply with a bankruptcy notlce. .The bankruptcy

Adelaide for $2,928.09 together wlth lnterest and costs

The judgment apparently followed a trial in the Local Court wherein the bankrupt denied that he was personally liable for the debt which he said was the responsibility of a company which was also sued as a defendant in the proceedings. Judgment however was given against the bankrupt. The judgment creditor is the only creditor who has proved in the bankruptcy and his claim has now grown to approximately $5,800 after allowance is made for the costs in connection with the presentation of the petition and sequestration order.

The only assets disclosed by the bankrupt in his statement of affairs sworn 5 May 1988 (and apparently the only assets discovered by his trustee) are a 1982 Holden shuttle van and an electric wheelchair. The former asset had in May 1988 a net value of about $5,200 after allowing for a secured debt of $800 to a finance company, and the latter asset a value of about $4,500.

The bankrupt is an lnvalid pensioner. He suffers a

multitude of medical conditions including hypertension, chronic	nervousness, reflux problems with his stomach and, perhaps most
importantly for present purposes, limb girdle muscular dystrophy. He is therefore dependent on his wheelchair and the Holden shuttle van for his means of mobility and transportation.
By notice dated 11th August 1988 the trustee called a meeting of creditors to consider, and if thought fit to pass, the following resolution :

"That pursuant to paragraph 116(2)(b) of the Bankruptcy Act 1966 it is hereby resolved that the bankrupt's 1982 Holden Shuttle motor vehicle ... is household property of the bankrupt which is not divisible amongst the creditors of the bankrupt".

At the meeting the only creditor who attended was the petitioning creditor who voted through a proxy. The petitioning creditor voted against the resolution proposed by the trustee. The petitioning creditor then proposed -

"That the trustee be directed forthwith to take
possession of and reallze the bankrupt's 1982 Holden
shuttle motor vehicle ..."

That resolution was passed on the sole vote of the petitioning creditor. For some reason, which is not disclosed on the papers, the meeting of creditors was not asked to consider the status of the electric wheelchair.

The trustee is in doubt whether he should implement the
resolution of the meeting of creditors. In particular he seeks

directions as to what action, if any, should be taken by him to

take possession of and realise the motor vehicle. He has taken

the opportunity to seek a similar direction in relation to the
possible sale of the electric wheelchair.

When this application flrst came on for hearlng the trustee argued in favour of directions that the motor vehicle and the wheelchair were "necessary household property" of the bankrupt pursuant to para.l16(2)(b) and therefore not property

divisible amongst the creditors. The petitioning creditor appeared by counsel to acknowledge service of the application, and to urge that the Court direct the sale of the motor vehicle In accordance with the resolution passed at the creditors' meeting. No submission was made in relation to the electric wheelchair. The bankrupt did not appear. After reserving my decision I discovered in the flle lnformatlon which suggested that the bankrupt may have been in hospital at the time of the hearing. I arranged for the matter to be relisted to give him the opportunity to make submlsslons. He has now done so, and he has also placed evidence before the Court which places an entirely different light on the character of the two items of property under consideration.

It is convenient first to deal with the electric wheelchair. Oral evidence given by the bankrupt, and which I

accept, and a letter produced by him from Western Domiciliary

Care and Rehabilitation Service establish that the wheelchair is

not the bankrupt's property. It belongs to the South Australian

Government, and is made available to the bankrupt by Western

Domiciliary Care and Rehabilitation Service, a branch of the

Health Commission of South Australia. The wheelchair is not

property divisible amongst the creditors of the bankrupt. It was erroneously included by the bankrupt in his statement of affairs.

I turn to the Holden shuttle motor vehlcle. An

affidavit, filed 23 June 1989, from Henry John Myszka, a solicitor who formally acted for the bankrupt, and the oral evidence of the bankrupt now establish the following facts :

On 16 June 1983 the bankrupt suffered a fall at a shopping centre at West Lakes. Through Mr Nyszka he made a claim for damages for bodily injuries sustained in the fall against Coles KMA Ltd trading as "K-Mart". The claim was settled on 21 May 1986 for a total figure of about $25,000. After payment of all medical expenses, legal costs and other outgoings the bankrupt received $10,841.08. The subject vehlcle was bought from Stillwell Ford immediately following payment of the damages. The cost price of the vehicle was $9,995. This was paid for from the proceeds of the damages claim. However, ~t was necessary for the bankrupt to borrow additional moneys to pay the "on road costs" such as stamp duty, registration and comprehensive insurance - this accounts for the small secured debt shown in the statement of affalrs.

At the date of the sequestration order, sub.s.116(3) of

the Act (as it had been amended by Act No. 12 of 1980) so far as

relevant read :

"Where the whole, or substantially the whole, of

the moneys paid for the purchase, or used in the acquisition, of property were moneys of all or any of the following kinds, namely:

(i)    ... ;

(ii) damages or compensation referred to in paragraph 2(g); ...

(lii) ...,

that property is, by virtue of this sub-sectlon,

property to which paragraph (2)(n) applies."

Property to which para.l16(2)(n) applles is property which is not

included in the definition of property divisible amongst

creditors contained in sub.s.l16(1).

Paragraph 116(2)(g), sp far as relevant read :

"(g) any right of the bankrupt to recover damages
or compensation -

(i)for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or

and any damages or compensation recovered by the bankrupt (whether before or after he became a bankrupt) in respect of such an injury ..."

I am satisfied that the Holden shuttle motor vehicle was purchased wholly from moneys which were damages for personal injury done to the bankrupt, and as such, by virtue of the above provisions of the Act, is not property divisible amongst the creditors.

For these reasons I give the following directions :

1.   That the electric wheelchair referred to and

bankrupt as "other property" is not property of the included in the statement of affairs filed by the

bankrupt divisible amongst his creditors.

2.    That the Holden shuttle motor vehicle referred to and included in the statement of affairs filed by the bankrupt is not property divisible amongst hls

creditors as it is exempt property by virtue of

paras.l16(2)(g) and (n) and sub.s.116(3) of the
Act.

I certify that this and

the 6 preceding pages are
a true copy of the Reasons
for Judgment of Mr Justice

von Doussa.

Associate: + / i . ? y J 5 1 d