Re: JOHN HUME and JANET LORAINE HUME

EX PARTE: THE BANKRUPTS

No. QLD E382 of 1983

Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA



GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND

Pincus J.

CATCHWORDS

Bankruptcy - application for discharge - test of "cogent ground" - bankrupt desiring to go back into business - large deficiency - application refused.

Bankruptcy Act 1966, s.150

HEARING

BRISBANE



#DATE 24:1:1986

ORDER

THE COURT ORDERS THAT:

The application be dismissed.



NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicant bankrupts apply for an order of discharge under s.150 of the Bankruptcy Act. They became bankrupt on 15 August 1983.

  1. It appears from the report of the trustee and the evidence of the applicant Mr. J. Hume that the applicants formerly traded in partnership in a business of laying concrete slabs. In 1982 that business encountered financial problems and Mr. Hume made an arrangement with major creditors which was intended to get him out of his difficulties. When that did not work, he decided to cease "operating my business", meaning, of course, the business carried on in partnership with his wife. He was able, however, to continue to take advantage of his business connection and skills by going to work for a company named Jondare Pty. Ltd., owned by his mother-in-law. He currently works for that company for a wage which he said is $375 per week. He also said that another employee who was formerly his leading hand (Mr. G. G. Anderson) makes between $500 and $700 per week working for the same company. Mr. Hume swore that Mr. Anderson "works on an hourly basis. Everybody works on an hourly basis". I do not find it easy to follow why Mr. Hume receives $375 per week, apparently a fixed sum, nor is it easy to comprehend why Mr. Anderson is paid more than Mr. Hume who works "a lot more hours possibly than" Mr. Anderson, as Mr. Hume said.

  2. The trustee appeared in person to oppose the granting of an order of discharge and submitted, among other things, that the company just mentioned is a "convenient facade through which the Humes could trade". While it seems clear that the material initially filed on behalf of the applicants did not adequately explain their connection with the company, and I am not quite satisfied that all the most pertinent facts about its genesis and current operations have yet emerged, I cannot accept the trustee's submission. In such a situation there may be a tendency to suspect that Mr. Hume is trading "through" the company, as was submitted, but the evidence is to the contrary and I cannot disregard it.

  3. In an affidavit filed in support of his application, Mr. Hume said:



"I say that I have the capacity to operate my own business and to secure a real return for my



endeavours and to provide a better more secure



life for my wife and children."



In short, Mr. Hume wants to go back into business. He went bankrupt some 17 months ago; there was a deficiency in the claims of secured creditors amounting to $54,235 and the unsecured creditors were owed $166,805. It is not expected that there will be any significant dividend.

  1. In Re Tarvydas (unreported, 22 November 1985) Toohey J., after referring to recent decisions in this court, said their effect:



"...is that a bankrupt seeking a discharge before the statutory period of three years need not show special circumstances in order to succeed but that there must be some cogent ground for a favourable exercise of discretion."



I propose to apply the test mentioned. Here, although Mr. Hume was a rather impressive witness, I find myself unable to see any cogent ground for granting a discharge. Although I accept that there was a downturn in the activity of Mr. Hume's business late in 1982, and that he was owed some $50,000 by building companies, I have to take into account that there was an ultimate deficiency of well over $200,000. Mr. Hume has the advantage that, despite his bankruptcy, he has been able to earn a reasonable wage, in addition to which he has the free use of a dwelling house provided by his employer. The principal effect of granting an order of discharge, as it seems to me, would be that Mr. Hume would quickly relaunch himself in business. I am not satisfied that it is consistent with the public interest that he do so.

  1. Mrs. Hume, the other applicant, does not give any reason for desiring a discharge, nor is it suggested in argument that any such reason exists. Presumably, she has applied simply because her husband did.

  2. The application must be refused.