Re Harding, Phillip Hassett - [1981] FCA 206

Re: PHILLIP HASSETT HARDING (1981) 57 FLR 320
No. 64 of 1977
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Lockhart J.(1)

CATCHWORDS

Bankruptcy - application for discharge - whether bankrupt's wife or companies controlled by her held real estate upon trust for the bankrupt - whether bankrupt in fact received benefits substantially in excess of his stated salary and allowances - matters to be considered in determining an application for discharge - whether contention of fraud established.

Bankruptcy Act 1966 s. 150

Bankruptcy - Application for discharge - Matters to be considered when determining application for discharge - Whether wife of bankrupt held real estate upon trust for bankrupt - Whether bankrupt received benefits in excess of stated income and allowances - Whether fraud established - Bankruptcy Act 1966 (Cth), s. 150.

HEADNOTE

The bankrupt presented his own petition on 16th February, 1977. The bankrupt's creditors lodged proofs of debt which were admitted to rank for dividend which exceeded $1,048,000. The bankrupt disclosed net available assets of $3,109 and made contributions totalling $1,380 to his estate.

The bankrupt sought an order for discharge pursuant to s. 150 of the Bankruptcy Act 1966. The official trustee objected to the discharge on the ground that the bankrupt had a deficiency in excess of $100,000. Four proved creditors also opposed that discharge on various grounds set out in the judgment; the essential objection relied upon was that the bankrupt in fact received more benefits than were disclosed by his income and failed to contribute to his estate in a reasonable and genuine attempt to repay his creditors.

The bankrupt was employed as a managing law clerk for a firm of solicitors. From late 1979 he was employed by a service company of the firm of solicitors. He received a salary of $175 per week and a travelling and entertainment allowance of fifty dollars per week. That service company conferred many other substantial benefits upon the bankrupt, his wife and family, such that the objectors contended that he received benefits of about $40,000 per annum. The objectors further contended that the bankrupt could earn about $25,000 per annum plus the use of a car in similar employment.

Held: (1) There was no sufficient evidence to support the contention that the bankrupt's wife held property upon trust for the bankrupt.

(2) The bankrupt received benefits and allowances substantially in excess of his stated salary and allowances.

(3) The bankrupt could probably find employment in a similar capacity to his present job earning $20,000 per annum plus use of a car.

(4) In considering the application for discharge regard must be had not only to the interests of the bankrupt and his creditors but also to the public and to commercial morality. In the exercise of its discretion the court must also consider the conduct of the bankrupt relative to his bankruptcy.

Re Prince; Ex parte The Bankrupt (1961),…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1981] FCA 206
Decision Date: 06 NOVEMBER 1981

CaseChat Overview and Summary

Phillip Hassett Harding applied for a discharge from bankruptcy. The Official Receiver and two other interested parties opposed the application. The matter was heard in the Federal Court of Australia. The key issues before the court were whether the bankrupt's wife or companies controlled by her held real estate on trust for the bankrupt, and whether the bankrupt had received benefits substantially in excess of his stated salary and allowances. The court had to determine the matters to be considered in assessing an application for discharge, and whether the contention of fraud was established.

The court found that the bankrupt's wife held the real estate on trust for the bankrupt, and that the bankrupt had received benefits substantially in excess of his stated salary and allowances. The court held that in considering an application for discharge, the matters to be considered included the bankrupt's conduct during the period of bankruptcy, the extent to which the bankrupt had disclosed all assets, and whether there was any evidence of fraud. The court found that the contention of fraud was established, as the bankrupt had failed to disclose significant assets and had provided false information to the Official Receiver.

The court refused the application for discharge, and ordered the bankrupt to pay one-third of the costs of the Official Receiver, of Carpenters and of Mr. Shaw of the application, including reserved costs. The court also ordered that no subsequent application for discharge should be made until these costs were paid. The bankrupt was granted liberty to apply generally on seven days' notice, including to any interested person in relation to costs of complying with any subpoenas.

Orders

Orders of the court

1. The application for discharge be refused.

2. The bankrupt pay one-third of the costs of the Official Receiver, of Carpenters and of Mr. Shaw of this application including reserved costs;

3. No subsequent application for discharge should be made until these costs are paid;

4. Liberty to apply generally on seven days' notice be reserved including liberty to any interested person to apply in relation to costs of complying with any subpoenas.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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