Kenneth George Pearce and Official Receiver In Bankruptcy [1994] AATA 299 (11 October 1994)

ADMINISTRATIVE APPEALS TRIBUNAL

KENNETH GEORGE PEARCE v OFFICIAL RECEIVER IN BANKRUPTCY
No. Q93/186
AAT No. 9778
Number of pages - 4
Bankruptcy

COURT

ADMINISTRATIVE APPEALS TRIBUNAL
GENERAL ADMINISTRATIVE DIVISION
K L BEDDOE (Senior Member)

CATCHWORDS

Bankruptcy: Income contribution - variation of assessment - hardship - discretionary expenditure - reluctance to contribute to bankrupt estate

Bankruptcy Act 1966: S.139T

HEARING

BRISBANE, 7 July 1994
11:10:1994

ORDER

The Tribunal decides that the decision under review be affirmed.

The Applicant appeared in person.

Mr A Carrick appeared for the Respondent.

DECISION

K L BEDDOE This is an application for review of a decision of the respondent Official Receiver not to vary an assessment of the income contribution of $156.54 per month to be made by the applicant as assessed by the then trustee in bankruptcy. Subsection 139T(13) of the Bankruptcy Act 1966 ("the Act") provides for the review in this Tribunal. Subsection 139T(1) of the Act provides that if the trustee has made an assessment of a contribution that a bankrupt is liable to pay to the trustee in respect of a contribution assessment period and the bankrupt considers that if required to pay that contribution hardship within the terms of subsection 139T(2) will be suffered, then the bankrupt may apply for a determination under section 139T.

2. Subsection 139T(2) reads as follows:
" (2) The reasons for which an application may be made under

subsection (1) are as follows:
(a) the bankrupt or a dependant of the bankrupt suffers from an
illness or disability that requires on-going medical attention and the
supply of medicines, and the bankrupt is required to meet a substantial
proportion of the costs of that medical attention or those medicines
from his or her income;
(b) the bankrupt is required to make payments from his or her income
to meet the cost of child day-care to enable the bankrupt to continue in
employment or other work;
(c) the bankrupt is living in rented accommodation not provided by,
or by an authority of, the Commonwealth, a State or a Territory, or by a
local government authority, and the bankrupt is required to pay the cost
of that accommodation wholly or mainly from his or her income;
(d) the bankrupt incurs substantial expense in travelling to and
from the bankrupt's place of employment or other work, whether by public
transport or otherwise;
(e) the spouse of the bankrupt, or another person residing with the
bankrupt, who ordinarily contributes to the costs of maintaining the
bankrupt's household has become unable to contribute to those costs
because of unemployment, illness or injury;
(f) any other prescribed reason."

3. Subsection 139T(3) provides that the Official Receiver must not make a determination under the section unless the bankrupt provides satisfactory evidence of the bankrupt's income and expenses and any other matters on which the bankrupt relies to establish the reasons for the application.

4. If the Official Receiver is satisfied that the bankrupt will suffer hardship if required to pay the contribution, subsection 139T(6) provides that the Official Receiver may determine an increase in the actual income threshold amount applicable to the bankrupt when the assessment was made. If, however, the Official Receiver is not satisfied that the bankrupt will suffer hardship if required to pay the contribution then the Official Receiver is to refuse the application (subsection 139T(7)).

5. At the hearing of this matter the applicant appeared in person and the respondent was represented by Mr A Carrick, the Deputy Official Receiver. The documents lodged in the Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act 1975 were placed before the Tribunal ("the T documents") and oral evidence was given by the applicant. No evidence was called by the respondent.

6. The contribution assessment period in question is the period 1 July 1992 to 30 June 1993. A sequestrian order was made against the applicant and his wife on 11 September 1991 (T3). They had entered into a building contract with the petitioning creditor for the construction of a residence on land at Aspley. A dispute arose between the parties to the contract with the result that the builder obtained judgment against the applicant and his wife for a debt of $94,680 plus taxed costs amounting to $66,702.

7. The trustee of the bankrupt's estate assessed the contributions to be made by the applicant of $156.54 per month during the contribution assessment period (T1). The Official Receiver was asked to review this assessment but refused the application (T1). There is no dispute as to the actual income threshold amount of $31,131.28 and the assessed income threshold amount of $34,888.33.

8. Documents T4 and T1 include statements of joint income and expenses of the applicant and his family. There are three children in the family aged 15, 11 and 9 as of 15 July 1992.

9. Details of the household expenditure are to be found in Document T1 as follows:

Household Expenditure Per fortnight
$
Rent 520
Electricity 27
Telephone 15
Car Expenses 82
Milk 50
Meat 100
Fruit and Vegetables 60
Groceries 240
Chemist 8
Gifts/donations 52
Repairs and Miscellaneous 10 1164
Expenses - Applicant
Bus fares 45
Institution fees 9
P O A fees 5
Engineers Registration 1
University Books etc 10
(fees partially reimbursed)
Shoes 10
Clothes 13
Haircuts 5
Miscellaneous 10 108
Expenses - wife
Shoes 6
Clothes 12
Hairdressing 8
Dental 4
Miscellaneous 10 40
Expenses - children
School books 10
School fees 3
School camps 23
School excursions 2
Sporting activities 36
Music books 2
Dental 4
Miscellaneous 15
Hairdressing 5 100
Outgoings by way of Salary Deduction
Tax instalments 557
Superannuation 107
Medical Benefits Fund 67
Insurance - CML 72
Ambulance 2 801
TOTAL EXPENSES AND OUTGOINGS
PER FORTNIGHT $2213

10. The total expenses and outgoings of $2213 compare with the gross fortnightly income of $1965, i.e. there is a deficiency of $248.

11. This apparent deficiency has now been reduced by moving to a less expensive rental property. Except for the reduction in the rent payment the applicant said that he had not considered reducing the family expenses and outgoings. In this regard I gained the distinct impression from the applicant's oral evidence that he does not accept that he should be making a contribution to the respondent who has now replaced the official trustee in the administration of the bankrupt estate.

12. I am satisfied, and so find, that there is a significant element of discretionary expenditure in the fortnightly outgoings and expenses. There is insufficient material before me to quantify the amount of that discretionary expenditure.

13. I am satisfied, and so find, that the applicant is and has been living in rented accommodation not provided by a relevant authority and is required to pay the cost of that accommodation wholly or mainly from his income. I am not satisfied, and so find, that any other relevant paragraph in subsection 139T(2) applies in this case.

14. The question to be decided is whether the applicant suffers hardship by reason of being required to pay $520 per fortnight for rented accommodation during the period 1 July 1991 to 30 June 1992. The "hardship" must refer to financial burden because it is the requirement to pay the contribution which must be considered and that is the context of section 139T.

15. It seems to be the clear intention of the legislation that a contribution is required only where there is a contribution as calculated under section 139S of the Act and it must be the requirement to pay that contribution which creates a financial burden which is such as to justify a finding of hardship.

16. The fact that the applicant pays $520 per fortnight for rent is not a cause of financial hardship if that rental is a discretionary amount. The evidence is that the applicant has since removed his family to a less expensive house and is now paying $380 per fortnight for rent. That rental does not suggest that the present house is less than adequate and appropriate for the family and except for the distance from schools that was not suggested to be the case. The distance from schools is a factor only because a decision was made not to change schools.

17. I am left with a very clear overall impression, and I so find, that the applicant does not suffer financial hardship. His deficit in cash flow arises only because of two factors:

(a) discretionary spending decisions such as excessive rental which
can only be described as above the necessary amounts; and
(b) a reluctance on the part of the applicant to make any
contribution to his bankrupt estate.

18. For these reasons the decision under review will be affirmed.