Re Holliday, D. & Anor Ex parte Ring, E.M

[1991] FCA 95

JUDGMENT No ........ ........ ... ..,. - 9g 141

C A T C H W O R D S

EANKRUPTCY - applicat ion f o r payment t o t r u s t e e of

part o f the income of the bankrupt	- Bankru~tcv A c t
1966, S . 131.

Bankru~tcv	A c t	1966
Lvford v	(1984) 2 FCR 264
RE :	DOUGLAS HOLLIDAY and JULIE HOLLIDAY
EX PARTE:	EDWARD MCHAEL RING

No. W1845 of 1989.

DATE :  15 W C H 1991.

C O W :	GUMMOW J.
PLACE :	SYDNEY.

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	)	NO. W1845 of 1989
BANKRUPTCY DISTRICT OF THE	)
STATE OF NEW SOUTH WALES	1

DOUGLAS HOLLIDAY

JULIE HOLLIDAY

Bankrupts

EX PARTE:  EDWARD MICHAEL RING

Trustee

CORAM :	GUMMOW J.
PLACE :	SYDNEY.
DATE :	15 MARCH 1991.

MINUTES OF ORDERS

In the m~lication re Doualas Hollidav.

THE COURT:

(1) Orders that part of the income of the bankrupt, namely

the benefit of the creditors of the bankrupt, by monthly	the sum of $50 per week, shall be paid to the Trustee for
payments in arrears, the period for the first such payment to commence on 1 April 1991.

(2) Grants liberty to either party to apply before 1 April
1991 to vary order (1) in the light of any changed

financial circumstance of the bankrupt, his wife, or

- their children.

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	) No. W1845 of 1989
BANKRUPTCY DISTRICT OF THE	1
STATE OF NEW SOUTH WALES	)

RE:  DOUGLAS HOLLIDAY
JULIE HOLLIDAY

Bankrupts

EX PARTE:  EDWARD MICHAEL RING

Trustee

CORAM :	GUMMOW J.
PLACE :	SYDNEY.
DATE :	15 MARCH 1991.

REASONS FOR JUDGMENT

On 28 November 1989, a Judge of this Court made a

sequestration order against the estates of Mr and Mrs

Holliday. The acts of bankruptcy relied upon (failure to	comply with bankruptcy notices) were committed on 20 September
1989. The bankruptcy notices were based upon a judgment in the sum of $82,005.05, recovered in the Supreme Court of New South Wales on 26 June 1989 in respect of moneys due pursuant to the taking of partnership accounts between Mr and Mrs Holliday and Mr G.N. Mascord and Mrs Jan Mascord.
In the A~~lication re Julie Hollidav.
THE COURT:

Orders that the application filed 17 October 1990 be dismissed.

Note:  Settlement and entry of orders is dealt with in
Rule 124 of the Bankruptcy Rules.

By applications filed 17 October 1990, the Trustee seeks orders against each bankrupt pursuant to S. 131 of the Bankru~tcv Act 1966 ("the Act"). Sub-sections (l), (2), (5), (6) and (7) of S. 131 are in the following terms:

"(1) Subject to this section, a bankrupt who is in receipt of income is entitled to retain it for his own benefit.

(2) The Court may, upon the application of the trustee, order that all, or such part as the Court thinks fit, of the income of the bankrupt shall be paid to the trustee for the benefit of the bankrupt's creditors.

(5) Without limiting the power of the Court to vary an order made under subsection (2), the Court may, upon such terms and conditions as it thinks fit, vary such an order so as to relieve a person from liability to pay to the trustee amounta that have become payable under the order.

(6) An order under subsection (2) ceases to have effect upon the discharge of the bankrupt in relation to whom the order was made unless at the time the bankrupt is undischarged from a later bankruptcy.

(7) Where the Court orders, under subsection ( 2 ) , a person other than the bankrupt to pay income of the bankrupt to the trustee for the benefit of the bankrupt's creditors, a payment made by that person

bankrupt." amount paid, a valid discharge to him as against the in pursuance of the order is, to the extent of the

The bankrupts are husband and wife who live together with their two children, a 13 year old son and a 17 year old daughter. The daughter will leave school at the end of 1991. Since about December 1989, that is to say shortly after the making of the sequestration orders in respect of their estates, Mr and Mrs Holliday and their family have been living in premises at Maryland, a suburb of Newcastle, which are owned by Mrs Holliday's brother.

Holliday now has difficulty with his hearing. In earlier years, he had some fame as a surfer. He is employed as Factory Manager by a company trading as "New Breed Surf & Leisure" which appears to manufacture and sell surf skie. Mr Holliday receives a weekly wage, after tax, of $450.00. The Supreme Court proceedings, which I have mentioned, arose out of a falling out between Mr and Mrs Holliday and their partners, Mr and Mrs Mascord, in relation to the conduct of the partnership business which again involved the manufacture and distribution of surf boards. Mrs Holliday commenced to work full-time in about 1987 and up to 27 December 1990 was receiving a wage, after tax, of $350 per week from New Breed Surf & Leisure. She acted as Office Manager. She now proposes to embark upon a three year full-time course at the University of Newcastle, leading to a Diploma in Health Science.

The evidence plainly indicates that Mrs Holliday handles the family finances, and indeed it is she who collects her husband's wages. In the circumstances, the applications by the trustee were heard together and evidence in each was treated as evidence in the other.

By each application, the trustee seeks an order that the bankrupt pay to him for the benefit of the creditors $100 per week from the income of the bankrupt. It appears from the evidence that since the bankruptcy, no payments have been made for the benefit of creditors. The present applications were instituted after the conduct on 12 July 1990 of examinations of Mr and Mrs Holliday under S. 69 of the Act.

The principles applicable in dealing with an application for an order under sub-S. 131 (2) of the Act are outlined in the Full Court decision in Lvford v Levit (1984) 2 FCR 264. As their Honours pointed out, the question is one of ascertaining what is reasonably necessary for the maintenance of the bankrupt and the bankrupt's family having regard to the occupation and station in life of the bankrupt. Further, the eventual burden of establishing that an order should be made and the quantum of that order lies on the trustee.

In the present case, the bankrupts each swore affidavits
on 5 February 1991, a week before the hearing on 12 February

1991. Annexed to each affidavit was what was said to be a

respect of herself and her husband "as at November, 1990".	schedule of weekly expenditure prepared by Mrs Holliday in
Both deponents were cross-examined by counsel for the trustee. The principal burden of the cross-examination fell upon Mrs Holliday, given her position as one in control of the family finances. No application was made by the solicitor appearing for Mrs Holliday to supplement her affidavit by oral evidence in chief to deal with any changes in circumstances between November 1990 and February 1991. It was only in cross-
week from the income of the bankrupt. It appears from the evidence that since the bankruptcy, no payments have been made for the benefit of creditors. The present applications were instituted after the conduct on 12 July 1990 of examinations of Mr and Mrs Holliday under S. 69 of the Act.
The principles applicable in dealing with an application for an order under sub-S. 131 (2) of the Act are outlined in the Full Court decision in Lvford v Levit (1984) 2 FCR 264. As their Honours pointed out, the question is one of ascertaining what is reasonably necessary for the maintenance of the bankrupt and the bankrupt's family having regard to the occupation and station in life of the bankrupt. Further, the eventual burden of establishing that an order should be made and the quantum of that order lies on the trustee.
In the present case, the bankrupts each swore affidavits on 5 February 1991, a week before the hearing on 12 February
1991. Annexed to each affidavit was what was said to be a
respect of herself and her husband "as at November, 1990". schedule of weekly expenditure prepared by Mrs Holliday in
Both deponents were cross-examined by counsel for the trustee. The principal burden of the cross-examination fell upon Mrs Holliday, given her position as one in control of the family finances. No application was made by the solicitor appearing for Mrs Holliday to supplement her affidavit by oral evidence in chief to deal with any changes in circumstances between November 1990 and February 1991. It was only in cross-
examination that it transpired that there had been a number of relevant changes in circumstances which had the effect of undermining the utility on the present application of the schedule prepared by Mrs Holliday, and of leaving Court with a picture of the present financial circumstances of the family gathered primarily from what elicited in cross-examination. Some aspects of the matter were left in an unsatisfactory state. For example, no receipts were produced of moneys paid to or at the direction of Mrs Holliday's brother in respect of the occupancy of his house.
As the cross-examination proceeded, it became apparent that the enrolment date for Mrs Holliday's course at the University of Newcastle was 20 February 1991, and that she would expect, when she became a student, to receive the Austudy allowance of up to $100 per week whilst she was a student. It also appears that Mr and Mrs Holliday's 17 year old daughter has purchased a car which is available for some use by her mother. Also, it appears that the daughter may be
be relieved of their past need to support their daughter by
available for receipt of an Austudy benefit for this, her last, year at school. This would mean that the parents would
the payment of school fees and piano fees.
Sub-section 131 (3) of the Act provides that for the purposes of sub-S. 131 ( 2 ) , the term "income" does not include a pension or payments in the nature of a pension that by a law of the Commonwealth is exempted from attachment or made

incapable of being assigned or charged. There are no submissions as to whether Mrs Holliday's contemplated Austudy benefit would answer the description of "income" for the purposes of the making of an order under sub-S. 131 (2). I proceed on the footing that the trustee has not shown that any such payments would be income of Mrs Holliday for that purpose.

On the other hand, the receipt of such benefits both by Mrs Holliday and her daughter would, subject to any qualification arising from the present futurity of the receipt of such benefits, be matters to be taken into account in the course of ascertaining what was reasonably necessary for the maintenance of Mr and Mrs Holliday and their family, as a step in deciding whether an order should be made under sub-S. 131

(2)	, and the amount of any such order. This I think follows
from the reasoning in Lvford v Levit (U	at 270-272).
The solicitor for the bankrupts submitted that an order would be futile, given the size of the judgment debt recovered	in the Supreme Court, the remaining period of the currency of
the bankruptcies, and the limited means of the bankrupts. Counsel for the Trustee responded that this submission misconceived the scope and purpose of S. 131 as propounded in Lvford v Levit (suvra). I agree.
The sum of $200 per week is paid by Mr and Mrs Holliday in respect of the occupation of the house at Maryland. To

their last landlord they paid rent of $185 per week. The payments of $200 are made to Mrs Holliday's mother (after deduction of rates and taxes and of payments on a mortgage held by the A.N.Z. Banking Group Ltd in Newcastle) although, as I have indicated, the house is owned by her brother. Counsel for the Trustee challenged the lack of formality in what appears to be a family arrangement, and the absence of receipts. But I should proceed on the footing that the payments in question are in fact made by the Hollidays and do represent a real consideration for occupation of the premises.

Mrs Holliday had been paying a tithe to her Church of $160 per month until she ceased work. She proposes to resume payments when she receives her Austudy grant. She puts this obligation ahead of any obligations to her creditors. But whilst she is firmly of this view, it cannot bind the Court in the present proceedings. The schedules of weekly expenditure included other items which are no longer current. These include school fees for the elder child, piano tuition fees, superannuation payments and private medical insurance and Mrs

weekly expenditure given in the November 1990 schedule was Holliday's expenses of travel to work. The total combined $705.00. The removal of these non-current expenses would
reduce that expenditure to approximately $500.

In the circumstances of this case, and although the Hollidays pool their resources, the income out of which an order might be made is that of Mr Holliday. However, I take into account the prospective receipt of Austudy benefits. I am anxious to avoid further delay and expense by bringing the parties back further to debate a fluid factual situation.

In my view, the Trustee has shown that an order should be made as regards Mr Holliday, having regard to what is reasonably necessary for the maintenance of Mr Holliday and his family, in the light of his station in life and that of his wife. The quantum of the order should be $50 per week, payable monthly in arrears.

I will suspend the operation of the order so that the first four week period will commence to run on 1 April 1991. I grant liberty to either party to apply before 1 April 1991 to vary that order in the light of any charged financial circumstances of the bankrupts or their children.

I will hear the parties on costs.

seven (7) pages are a true copy of the	I certify that this and the preceding
reasons for judgment of the Honourable Mr Justice Gummow.
Associate:
Date:  15 "py- arch 1991.

Counsel and solicitors	Mr J.R. Dupree
for the applicant/trustee:	(12 February 1991) Mr D.W. Elliott (26 February 1991) instructed by Messrs. Blessington Judd.
Solicitor for the	Mr J. Johnson
respondents/bankrupts:
Dates of hearing:	12, 26 February 1991.
Date of judgment:	15 March 1991.