RESTRICTED DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) 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 BURCHETT J. This is an application by a trustee in bankruptcy under s.131 of the Bankruptcy Act 1966, sub~secs.(1) 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 made under s 131 which would contravene the long-standing principle 1 7NOV 1986 FEDERAL cou AUSTRALIA OF PRINCIPA, REGISTRY, ; . 2. \ . income reasonably necessary for the maintenance of himself 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 himself 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 w | ace 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 Jd. 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 with the assertion that a bankrupt is entitled to retain income for his own benefit. It is true that the assertion is 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." wees amore fae Mod, wee ee op aoe 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. 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. While certain details have been challenged, counsel for the trustee did not, in cross-—examination, either demonstrate any serious mis-statement, in my opinion, or challenge the general truthfulness of the 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 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 having just attained the age of 16 years and left school. She is at technical college and unemployed. "At % wv the peony een eer os ay re we meee ~ ren pet Qo oe se ae et — 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 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 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 yr octe Rrra ce cmt cee yooccecrte se Ve Ne a An ag eta 't 5. Dubbo premises. I also accept that her hours of work have been reduced from 25 hours to 20 hours per week, and that this must be reflected in some reduction in her take home pay, even if her employment is maintained. On all the evidence, I am not satisfied that the bankrupts are in a position where any order under s.131 should be made. I think that the Trustee was justified in making the application, having regard to the circumstances as they must have appeared to him at the time that the application was instituted, and I think I should make it clear that I think he was so justified. But nevertheless, upon all the evidence as it has now been presented to the Court, I refuse the application. I certify that this and the preceding four (4) pages are a c true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. Cita Chee "Associate Dated: 15 October, 1986. ay r eo penne pice Spe asp cae hier tiie iy proces es ce > re ' Lot.de see ecnse yee oe ros