Re Vaughan, Ben Vaughan, Ben v Official Trustee in Bankruptcy
[1996] FCA 416
•10 MAY 1996
` CATCHWORDS
BANKRUPTCY - property of bankrupt not divisible amongst creditors - wine collection, chainsaw and trailer - whether wine collection "ordinary tools of trade" of bankrupt's trade as wine course presenter - whether tools must have been in actual use at time of sequestration - whether consumable items tools of trade - whether chainsaw "necessary household property of bankrupt" - bankrupt living in home of 82 year old widowed pensioner mother - fireplaces only source of heating - use of chainsaw to cut free firewood on friends' rural properties - chainsaw seized by trustee - mother expending capital on purchase of cut firewood - whether trailer "used by the bankrupt primarily as a means of transport" - use for carting garden refuse, wine and firewood - bankrupt's small car not adequate for such purposes - whether trailer in effect extension of vehicle
Bankruptcy Act 1966 (Cth): s 116(2)(b), (c) and (ca)
Re Belcher (1932) 6 ABC 35
Nawaz Nominees Pty Ltd v Butera (County Court of Victoria, unreported, November 1987)
In Re Sherman (1915) 32 TLR 231
White v Quartermain (County Court of Victoria, unreported, 24 June 1985)
re: Ben Vaughan; Ben Vaughan v Official Trustee in Bankruptcy
(No. TB 317 of 1994)
Judge: Heerey J
Date: 10 May 1996
Place: Hobart
IN THE FEDERAL COURT OF AUSTRALIA )
)
TASMANIAN DISTRICT REGISTRY )
)
BANKRUPTCY DIVISION ) No. TB 317 of 1994
)
BANKRUPTCY DISTRICT OF THE )
)
STATE OF TASMANIA )
RE: BEN VAUGHAN Bankrupt
BEN VAUGHAN Applicant
OFFICIAL TRUSTEE IN BANKRUPTCY Respondent
JUDGE: Heerey J
DATE: 10 May 1996
PLACE: Hobart
MINUTES OF ORDER
The Court orders that:
Declare that (i) the Stihl Farm Boss Chainsaw seized by the Official Trustee on 17 November 1994 together with carrying case, gloves, goggles, file and funnel and (ii) the steel box trailer former registration number BT6097 are not property divisible amongst creditors of the bankrupt within the meaning of s 116(1) of the Bankruptcy Act 1966 (Cth).
The Official Trustee return to the bankrupt the chainsaw and associated items and the trailer.
The application is otherwise dismissed.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules
IN THE FEDERAL COURT OF AUSTRALIA )
)
TASMANIAN DISTRICT REGISTRY )
)
BANKRUPTCY DIVISION ) No. TB 317 of 1994
)
BANKRUPTCY DISTRICT OF THE )
)
STATE OF TASMANIA )
RE: BEN VAUGHAN Bankrupt
BEN VAUGHAN Applicant
OFFICIAL TRUSTEE IN BANKRUPTCY Respondent
JUDGE: Heerey J
DATE: 10 May 1996
PLACE: Hobart
REASONS FOR JUDGMENT
This application concerns three items of property of the bankrupt Mr Ben Vaughan and raises the question whether they are protected from division amongst his creditors by reason of s 116(2) of the Bankruptcy Act 1966 (Cth) (the Act). The property consists of first, a collection of wine consisting of 115 bottles, some half bottles, one magnum and some empty bottles; secondly, a chainsaw and associated accessories; and thirdly, a box trailer. It will be convenient to deal with the evidence relating to each item seriatim. Before doing so, I refer to s 116(2) which relevantly provides that divisible property as defined in s 116(1) does not extend to:
(a)...
(b)necessary wearing apparel, necessary household property of the bankrupt (including any sewing machine used for domestic purposes) ...
(c) ordinary tools of trade, plant and equipment, professional instruments, and reference books, of the bankrupt whose
aggregate value does not exceed the prescribed amount ...
(ca)property used by the bankrupt primarily as a means of transport, being property whose aggregate value does not exceed the prescribed amount ...
The prescribed amount in the case of sub-s (2)(c) is $2000 (reg 40B) and in the case of sub-s (2)(ca) $2,500 (s 116(2A)).
The Wine
Mr Vaughan has had a long connection with wine both as a wine and spirits retailer and as a wine judge. He has also conducted wine appreciation courses. His qualifications are best described in an affidavit sworn on his behalf by the celebrated vigneron Dr Max Lake who deposes:
I have known Ben Vaughan as a Committeeman, Steward, Associate Judge and finally a full Judge, among the very few Tasmanians, at the Hobart Show over a period of 15 years. I consider his knowledge of wines from all major producing countries of the world to be excellent, based as it is on a wide experience of them. The same may be said of Australian wines in general and Tasmanian wines in particular. His has a highly trained palate which commands wide respect.
The wines in question form what Mr Vaughan describes as his "wine library". He says, and I accept, that in the conduct of wine appreciation courses it is essential to have wines available for the purpose of tasting and discussion. To quote again from Dr Lake's affidavit:
It is obviously not possible to conduct any wine tasting that forms of an educational wine appreciation course without wines for attendees to actually taste along with the discussion of their origins and organoleptic qualities. Wine is a living thing, characteristically changing as it ages, so that the use of older vintages is a crucial component of any properly devised tasting course. This also applies to the use of wines from different areas, be they countries, States or regions within a State. It is simply not possible to conduct a complete in-depth wine appreciation course that is limited to "off the
shelf", current vintages. There has to be a library available of older vintages, gathered over the years, and carefully maintained, to give any credibility to such a program.
Mr Vaughan who, although not a lawyer, presented a capable and courteous argument, contended that the wine constituted ordinary tools of his trade within the meaning of s 116(2)(c).
One of the arguments advanced by counsel on behalf of the trustee against Mr Vaughan's claim was that he had only conducted wine appreciation courses in a very small way and as a hobby. Counsel relied on Re Belcher (1932) 6 ABC 35 at 39 where Paine J said, after referring to the Imperial Dictionary, that "trade" within the meaning of a provision comparable to s 116(2)(c) is the
business which a person has learnt, ie, in which he has acquired a technical ability and which he carries on for procuring subsistence or for profit: his occupation, particularly with mechanical implements, in contradistinction to either professional or agricultural industries.
Counsel pointed to Mr Vaughan's statement of affairs in which he disclosed that for the year 1994-95 his only income as a wine seminar presenter related to one function for which he received a gross fee of $600 and incurred expenses of $410.30.
There is the practical answer that Mr Vaughan puts, namely that the trustee has seized his wine library and he is unable to conduct any courses. He moreover relies on an affidavit of Mr Brian Shelley, a Launceston hotelier, who deposes as to a programme of possible future courses which Mr Vaughan could conduct and which would generate gross income of the order of $20,000 in a year.
But in any case it is not permissible in my opinion to read into the plain words of s 116(2)(c) a qualification that the tools of trade must have in fact been used by the bankrupt at the date of sequestration or at any other particular time and must have been used to generate some particular level of income. Section 116(2)(c) looks at the nature of the items themselves and whether they can be characterised as "ordinary tools of trade ... of the bankrupt". Doubtless this connotes some connection between the tools and a trade, actual or prospective, of the particular bankrupt. But one of the underlying purposes of the Act is to give bankrupts the opportunity of a fresh start after surrendering virtually all their property for the benefit of their creditors. To allow a bankrupt to retain tools of modest value for the purposes of a trade that he or she can carry on, even one that had only been conducted in a minor way prior to bankruptcy, or perhaps not at all, is consistent with that purpose: see In re Sherman (1915) 32 TLR 231.
It is true that in Belcher (at 39) Paine J concluded that "tools, implements and instruments of trade" (the then applicable statutory expression) referred to "such things as are personally used by (the bankrupt) in his trade". But that case was concerned with plant and machinery used in a paintworks business which the bankrupt operated with two other men who were the only ones "who had any technical knowledge of the trade whatever" (at 37). The bankrupt was only concerned with the commercial side of the business. Although the business had ceased by the date of sequestration, the gist of Paine J's decision is that there
was no connection between the plant in question and any trade of the bankrupt. His Honour concluded (at 40) that the bankrupt
... had no technical knowledge whatever which would enable him to carry on the trade of a manufacturer or mixer of paints. In that case I do not think it was his "trade" within the meaning of the section. (Emphasis added)
Belcher is not in my opinion authority for the proposition that the tools must have been actually used by a bankrupt in a trade carried on by him or her at the date of sequestration.
However, what defeats Mr Vaughan's claim is that although his wine is, I accept, an essential concomitant of what I also accept is a trade, the trade of a wine course presenter, it is not a "tool" because it is a consumable. The relevant definitions of "tool" in the Macquarie Dictionary are:
an instrument, especially one held in the hand, for performing or facilitating mechanical operations, as a hammer, saw, file, etc
any instrument of manual operation.
While those definitions do not explicitly advert to the feature I have mentioned, it seems to me inherent in the ordinary notion of a tool of trade that it is something retained permanently by the tradesman, albeit that it may wear out or have parts which need replacement from time to time, such as drill bits for a drill. Many trades require the use of consumables which partake of the nature of stock in trade. For example, a tailor has tools of trade such as scissors or a sewing machine, but also uses cloth and thread. It would not be an ordinary use of language to describe the cloth and thread as part of the tailor's tools of trade. Similarly, a portrait painter would have brushes and an easel, which would be tools of trade, but that expression would not cover paint and canvas.
I appreciate Mr Vaughan's argument that his wines are not stock because in some instances he may use them to illustrate a particular defect and so they are really used for the purpose of education and illustration rather than consumption as such by the participants. (Although I note that a pamphlet advertising one of his courses offered "a unique opportunity to taste some of the World's great wines", including a 1970 Bollinger Annee Rare, a 1982 Chateau Margaux and a 1979 Chateau d'Yquem. As far as the evidence discloses, the prospect of tasting defective wines was not held out as a selling point.) However, the fact remains that his wines are to be consumed and of necessity replaced in the course of his trade. Whether or not they are stock in trade, they are not in my opinion ordinary tools of trade.
The Chainsaw
The chainsaw in question is a Stihl "Farm Boss" saw with a 2-stroke motor and various accessories; a carrying case, gloves, goggles, a file and a funnel. It is claimed by Mr Vaughan as "necessary household property" under s 116(2)(b).
Prior to its seizure by the trustee the chainsaw was kept at the house where Mr Vaughan and his wife live at 1 Rosehill Crescent, Lenah Valley, a suburb of Hobart. This house is owned by Mr Vaughan's mother, a widowed lady aged 82 years. The house is of brick construction built on a split level with living area on the lower level and bedrooms upstairs. In an affidavit filed in these proceedings Mrs Vaughan deposes:
It is a fairly cold house and the living area is heated by two open fireplaces. I have a fire in one of the fireplaces every day during the colder months and quite often at other times. The second fire is lit on average about twice a week. I do not own any other form of heater.
When he had possession of the chainsaw Mr Vaughan would go to properties owned by friends and relations in the Midlands and up the East Coast where he had permission to gather wood. He would cut the wood into lengths suitable for cartage in his trailer, and back at the house cut it again into size suitable for use in the fireplaces. The only expense in this exercise was the cost of fuel for his car and the chainsaw. He estimates that cost as approximately $10 per tonne. He would make in a year at least a dozen of such wood gathering trips.
The cost of cut firewood delivered to a house in Hobart is about $105 per tonne. In the house at Lenah Valley usage over a year would range from five to ten tonnes. Mrs Vaughan deposes that since the chainsaw was taken:
... I have run down my wood pile and late last year I had to buy three tons [sic] of wood. As I am a pensioner with no other source of income I had to use some of my capital to pay for that wood. This has been a constant worry to me as I have been advised not to use capital for normal living expenses if I can avoid doing so. As a result of this situation I now use my wood more sparingly and do not burn a fire as often as I would like to. The lack of my son Ben's chainsaw has created a situation where I can no longer live with the basic comfort I enjoyed before.
The question of what is "necessary household property" has been considered in two judgments of the County Court of Victoria. In
White v Quartermain (unreported, 24 June 1985) Judge Duggan said:
I take the view that it is intended that a household will not be deprived of that property that is reasonably necessary for its continuation as a viable household providing its normal occupants with such facilities as will prevent impoverishment or humiliation and will enable them to live in basic comfort.
Later in Nawaz Nominees Pty Ltd v Butera (unreported, November 1987) Chief Judge Waldron said:
"Necessary household property" does not include those things which all of us would prefer to own and enjoy. It extends only to those items of the household without which life could not be properly serviced in a modern society. Such a definition in my opinion appropriately puts the emphasis on what is required rather than what may be preferred in order to maintain a household, but nevertheless applies or relates that emphasis to the modern day standard of living. Thus a refrigerator and a washing machine are and, no doubt for many years have been, "necessary household property" whereas in the earlier days of the ice-box and the laundry "copper" they would have been seen as preferred rather than necessary items.
I agree generally with those statements although I would, with respect, prefer not to include Judge Duggan's criterion of "preventing impoverishment or humiliation" which perhaps carries Dickensian overtones. As Chief Judge Waldron points out, this question has to be considered in the light of contemporary living conditions. However, it would have to be accepted that in Hobart, either now or at any time since European settlement, the provision of heating in a house is a necessity.
I am satisfied that in the particular circumstances of this case and this household the chainsaw was necessary household property, being a means of providing essential heating in a reasonable and economical way. It is not to the point, as counsel for the trustee argued, that this was a matter of choice for Mr Vaughan
and that he could have bought cut firewood from suppliers in Hobart. One might as well say that a washing machine is not necessary household property because one can go to a laundromat or a stove is not necessary household property because one can live on take-away pizza.
The Trailer
Mr Vaughan has a Ford Escort car, which is a fairly small vehicle. The trailer is currently unregistered and in Mr Vaughan's possession. He claims it under s 116(2)(ca). He does not wish to spend money on registration at the moment because of the uncertainty involved in these proceedings. He has three main uses for the trailer.
First, the house at Lenah Valley is on two large blocks of land with vegetable gardens, flower gardens, shrubs, lawns and nature strip. There are five fruit trees, 10 deciduous and four evergreen trees over four metres in height, and over 20 shrubs or bushes between one and three metres. There is a continuous accumulation of garden rubbish, trimmings, off-cuts, leaves, etc which require transportation to the Council tip on a regular basis. Secondly, Mr Vaughan works as a commission agent for the Victorian winery Passing Clouds. That firm sends shipments of wine to Mr Vaughan who warehouses it and distributes it to customers. Freighting arrangements make it desirable to send shipments of 15 or more cases at a minimum. Such a shipment would weigh around 250 kilograms and occupy ×45 cubic metres. It is not feasible to transport such an amount in a small
passenger car. Thirdly, there is the collection of firewood already described.
In my opinion, the trailer can be said to be used "primarily as a means of transport". "Transport" in this context is not confined to the transport of the bankrupt himself. It would obviously extend to members of his family or other people travelling as passengers in his vehicle, and also to goods such as groceries or luggage. Had he a larger vehicle such as a station wagon, he may have been able to carry the garden refuse, wine and firewood in the one vehicle. The trailer can sensibly be seen as merely an extension of his small vehicle and something that is used primarily as a means of transport.
I will declare that (i) the Stihl Farm Boss Chainsaw seized by the Official Trustee on 17 November 1994 together with carrying case, gloves, goggles, file and funnel and (ii) the steel box trailer former registration number BT6097 are not property divisible amongst creditors of the bankrupt within the meaning of s 116(1) of the Act. The application is otherwise dismissed.
I order that the Official Trustee return to the bankrupt the chainsaw and associated items and trailer.
I certify that this and the preceding ten (10) pages are a true copy of the reasons for judgment of his Honour Justice Heerey.
Dated:
Associate
Appearances
Counsel for the applicant: In Person
Solicitor for the applicant: In Person
Counsel for the respondent: Mr P Wood
Solicitor for the respondent: Piggott, Wood & Baker
Date of hearing: 10 May 1996
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