Townsend, Re R.G. & C.M.

[1986] FCA 504

RESTRICTED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA 1

DIVISION GENERAL 1

BANKRUPTCY DISTRICT OF NEW SOUTH WALES ) NO. W.190 Of 1984

AND THE AUSTRALIAN CAPITAL TERRITORY

- RE :

ROBERT G. TOWNSEND and

CHRISTINE M. TOWNSEND

Bankrupts

EX-TEMPORE REASONS FOR JUDGMENT

I

I

BURCNETT J.

Thls is an application by a trustee in bankruptcy under

s.131 of the Bankruptcy Act 1966, sub-secs.(l) and	(2) of which
read as follows:

" (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."

The section has been construed in a number of decisions.

It is clear that it confers a discretion on the Court. In Re -

McLachlan (1975) 8 A.L.R. 162, at 165, Riley J. said:

"No order should	be
would contravene	the
that a bankrupt	is

income reasonably necessary the for

maintenance of 1iiIllself and his family.. . . : '

But the cases consistently speak of what the

bankrupt is entitled to retain as being what

is required or reasonably necessary for the

support of hlmself and his family." ', .

Riley J. also in that case said:

"The burden of proof of what is required or

reasonably necessary is borne	by the bankrupt
...

and he cited authority for that proposition. But in the decision

of the Full Court of this Court in Lyford v. Levit (1984) 2

..

F.C.R. 264, at 269, the joint judgment of Bowen C.J., Toohey and ,

Fisher 33. refers to that statement of Riley J., and then adds:

"In the matter now before this Court the

learned primary judge described that onus as

evidentiary, saying that 'in the long run the

burden of establishing that an order should

be made and the quantum of that order lies on

the trustee'. With respect, we agree with

his Honour's view. Section 131(1) begins i:

with the assertlon that a bankrupt is

entitled to retain income for his own

benefit. It is true that the assertion is L '

prefaced with the words 'Subject to this

section'. But where, as in s.131(2), a

statute permits someone to approach the court

for an order against another, common sense

and logic dictate that it is for the

applicant to satisfy the court that an order

should be made. "

And at p.270, their Honours said:

"The question is one of ascertaining what is

reasonably necessary for the maintenance of

the bankupt and his family, regard being had

to the bankrupt's occupation and station in

life: Re McLachlan (1975) 8 A.L.R. 162. In

making that assessment. the court may bring

into account not only the income in the hands

of the bankrupt but also income or other

funds which are reasonably available to him."

I

- -

3 .

Applying those statements to the present circumstances, it is

necessary to ascertain the Income of the bankrupts in the present

matter, and then to consider, bearing in mind the evidentiary

onus on the bankrupts, but also bearing in mind that the ultimate

onus is on the trustee, whether what is necessary	to sustain an
order has been shown by the trustee.

I

In this case, the bankrupts, through Mr. Townsend, have

provided evidence. It has been tested by cross-examination. The

effect of the evidence of Mr. Townsend is that he and his wife have barely lived on their income of approximately $300 per week

between the two of them. Whlle certain detalls have been

challenged, counsel trustee the for not, in did

cross-examination, either demonstrate any serious mis-statement,

in my opinion, or challenge the general truthfulness of the	t
I '

evidence. In those circumstances I accept that the present income of the bankrupts does not exceed in total, and indeed is

probably a little less than, $300 per week. This is made up of

approximaely $200 per week earned by Mrs Townsend, as a packer

for a bakery at Dubbo, and approximately $100 net per week earned

I

by Mr. Townsend as a self-employed mechanic carrying on motor

vehicle repairs in a shed which he rents for $120 per week.

There are two children who are still at home, one being

in, I think, second year high school, and the other havlng just

attained the age of 16 years and left school. She is at

technical college and unemployed.

I

I

4. i '

The only matter which has raised any real question in my

mind is evidence concerning a horse which, the evidence shows, is

owned by the 18 year old daughter of the bankrupts, now, and for

the past 12 months, living away from home and shortly to be married. The horse was purchased at an auction for $300 some

four years ago, that money being the accumulated savings of the

daughter. The horse was bought in the name of Mr. Townsend

because of his daughter's age. On the evidence, I do conclude

that the horse must have cost him some money to keep and prepare for harness racing. However, I accept his evidence that net expenses have in fact been minimal, after allowing for certain assistance he has received for the purpose of the putting of the horse in work and its maintenance, and to the extent that there

have been some expenses paid by the bankrupts, this seems to me

to be counterbalanced by the fact that I accept his evidence that

their present financial position is rather more precarious than

I

their position was at the time when the horse was being raced and

the expenses of putting it in work, which then cost some	$30 per
week, were being incurred.

The reason why I conclude that their present financial

position is more precarious is that Mrs. Townsend's employment

conditions have changed, and I accept that I should infer there

I

is a risk that she will be retrenched. Apparently other

employees have been retrenched, and the work she was formerly

doing is now no longer being carried out by her employer at its

5.

Dubbo premises. I a l so accept tha t her hours o f work have been

reduced from 25 hours t o 20 hours per week, and t h a t t h i s mus t be

r e f l ec t ed i n some reduct ion in her t ake home pay, even i f her

employment is maintained.

On a l l t h e e v i d e n c e , I am n o t s a t i s f i e d t h a t t h e

bankrupts are in a pos i t ion where any order under s.131 should be

made. I t h i n k t h a t t h e T r u s t e e was j u s t i f i e d i n making t h e

application, having regard to the circumstances as they m u s t have

appeared t o him a t t h e t i m e t ha t t he app l i ca t ion was i n s t i t u t e d ,

and I t h i n k I should make it c l e a r t h a t I t h i n k h e w a s so

j u s t i f i e d . B u t nevertheless , upon a l l t h e e v i d e n c e as it has now

been presented to t he Cour t , I re fuse the appl ica t ion .

I c e r t i f y t h a t t h i s and t h e

C

preceding four ( 4 ) pages are a

t r u e copy of the Reasons for

Judgment he re in o f h i s Honour

M r . Just ice Burchet t .

Dated: 15 Octoger, 1986.

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