EXPLANATORY STATEMENT
BANKRUPTCY RULES (AMENDMENT)
Rules pursuant to section 4
Acts Interpretation Act 1901
1986 No. 95
The Bankruptcy Rules (Amendment) made pursuant to the Acts Interpretation Act 1901 make amendments to the Bankruptcy Rules consequent upon the enactment of the Bankruptcy Amendment Act 1985 (No. 21 of 1985).
The Bankruptcy Amendment Act 1985 (the Amendment Act) amended the Bankruptcy Act 1966 (the Act) in the following ways:
• improving the administration of the Act. The Act provides that appointment of the Inspector-General in Bankruptcy, the Official Receivers and the Registrars and Deputy Registrars in Bankruptcy are made by the Governor-General. In future these appointments will be made by the Secretary of the Department administering the Act, presently the Attorney-General’s Department.
• enhancing the special protection accorded to maintenance creditors. The Amendment Act ensures that orders for the payment of arrears of maintenance will be capable of enforcement by bankruptcy notice.
• achieving greater uniformity with corresponding provisions of the Companies Act. The Amendment Act made changes to the provisions dealing with priority
payments to creditors in a bankrupt estate. This will ensure that in the winding up of a business under the Act creditors will stand in a similar position to creditors in the winding up of a company under the Companies Act.
• modification of the Review of Commonwealth Functions (R.C.F.) decision. The intention of the R.C.F. decision was to transfer a large share of administrations under the Act to the private sector. This R.C.F. measure was not successful as many estates were mishandled and a number of trustees themselves became bankrupt or were deregistered as trustees. There was also a lack of appropriate checks and safeguards to ensure proper scrutiny of the actions of registered trustees. After the Proclamation of the Amendment Act, it will become optional - rather than mandatory - to use a registered trustee, and a range of regulatory measures will come into effect to provide appropriate controls over the actions of registered trustees.
These Rules also make an amendment to the Bankruptcy Rules consequent upon an amendment to the Act made by the Statute Law (Miscellaneous Provisions) Act (No.2) 1985 (the Statute Law Act). A judgment in the Federal Court of Australia, Re Ikin; Ex Parte Ikin v. Lamborghini Tractors of Australia Pty Limited decided that a judgment debt expressed in a foreign currency was not capable of enforcement by bankruptcy notice. The Statute Law Act inserts new provisions into the Act to enable the enforcement of a judgment debt expressed in a foreign currency by the bankruptcy notice procedure.
In outline the rules provide as follows:
Rule 1 amends rule 7 to provide that an applicant for a bankruptcy notice based on a judgment debt expressed in a foreign currency must file along with the application a statutory declaration as to the applicable exchange rates so as to permit conversion of the sum to an equivalent amount of Australian dollars.
Rule 2 amends sub-rule 12(3) by repealing the requirement that a petitioning creditor file an affidavit deposing to steps taken to engage a registered trustee. This procedure is unnecessary because of the repeal of sub-section 52(1A) of the Act. The Amendment Act makes it optional for a petitioning creditor to seek the services of a registered trustee, or to use the Official Trustee.
Rule 3 makes amendments to rule 15 consequential to the amendments to rule 12 made by rule 2.
Rule 4 repeals rule 24AA and inserts a new rule 24AA providing a procedure for the filing of a copy of an instrument of consent by a registered trustee where a registered trustee has consented to act as trustee of a bankrupt estate.
Rule 5 amends rule 32 in order to facilitate the holding of a public examination of a bankrupt on the application of an Official Receiver.
Rule 6 amends rule 40 to rearrange the list of first priority payments out of the proceeds of a bankrupt estate. The amendment provides for a new priority payment in respect of the cost of any audit of the accounts and records of a registered trustee.
Rule 7 amends rule 61 to make consequential changes necessary because of the amendment of section 155 of the Act by the Amendment Act.
Rule 8 inserts rule 61A. This rule incorporates a reference to Schedule 2 which lists the professional accountancy bodies, membership of one of which is required of an applicant for registration as a trustee (Part I of the Schedule). Schedule 2 also lists the universities (Part II) and other educational institutions (Part III) from one of which the applicant must hold relevant academic qualifications. The contents of Schedule 2 reflect regulations 20, 21 and 22 of the Companies Regulations 1981 which relate to an application for registration as a liquidator.
Rule 9 introduces rule 63A which prescribes the form for, and information required in, the triennial statement to be filed with the Registrar in Bankruptcy by a registered trustee.
Rule 10 inserts Form 31A into Schedule 1 of the Rules. Form 31A is the prescribed form of triennial statement.
Rule 11 inserts schedule 2 into the Rules. Schedule 2 details the prescribed bodies (Part I), universities (Part II), and other educational institutions (Part III) for the purposes of rule 61A (inserted by rule 8 of these rules).
DETAILS OF RULES
Rule 1
Section 41 of the Act makes provision in relation to the issue of bankruptcy notices. The Statute Law Act amends section 41 by inserting sub-sections 41(2A), (2B) and (2C). Sub-section 41(2A) provides that where a judgment debt is expressed in an amount of foreign currency, a bankruptcy notice issued in relation to it shall specify that payment may be made in the amount of the foreign currency or in an equivalent amount of Australian dollars. Sub-section 41(2B) provides that the rate for ascertaining the equivalent in Australian dollars of an amount of foreign currency is the average of rates at which Australian dollars may be bought in that foreign currency from 3 authorised foreign exchange dealers selected by the creditor, on the day before the application for the issue of the bankruptcy notice. Sub-section 41(2C) defines “authorised foreign exchange dealer” as a person having a general authority issued by the Reserve Bank of Australia under the Banking (Foreign Exchange) Regulations to buy and sell foreign currency.
Rule 7 sets out the procedure to be followed in respect of bankruptcy notice applications. Rule 1 amends rule 7 by inserting sub-rule 7(4A). Sub-rule 7(4A) provides that where an applicant files an application for the issue of a bankruptcy notice based on a judgment debt in a foreign currency, the applicant shall also file a statutory declaration deposing to the applicable rate of exchange, ascertained in accordance with sub-section 41(2B) of the Act.
Rule 2
Rule 2 amends sub-rule 12(3) by repealing paragraph (bb). Paragraph 12(3)(bb) required a petitioning creditor to lodge an affidavit swearing that the value of the property of the debtor was less than $10,000 or that the creditor had taken all reasonable steps to secure the consent of a registered trustee to act as trustee of the bankrupt estate and had been unable to obtain any such consent. This procedure facilitated a requirement imposed by sub-section 52(1A) of the Act which was repealed by the Amendment Act.
Rule 3
Rule 3 makes a consequential amendment to sub-paragraph 15(b)(iii) of the Rules by removing the requirement to serve on the debtor a copy of the affidavit referred to in paragraph 12(3)(bb). This amendment is consequential upon the repeal of paragraph 12(3)(bb). A new sub-paragraph 15(b)(iii) is inserted requiring that a debtor be served with a copy of the registered trustee’s instrument of consent where a registered trustee has so consented.
Rule 4
Rule 4 repeals former rule 24AA and inserts a new rule 24AA, reflecting amendments to sections 55, 56 and 57 of the Act. The Amendment Act provides for the repeal of certain sub-sections of sections 55, 56 and 57 which required the Registrar not to accept a debtor’s petition unless a registered trustee had consented to act as trustee of the estate. Similarly the Court was precluded from directing the Registrar to accept a debtor’s petition unless a registered trustee had consented to act. The petition could however be
accepted if there was evidence that, despite reasonable steps having been taken, the consent of a registered trustee could not be obtained, or evidence that the value of the estate did not exceed $10,000. Former rule 24AA provided a procedure to facilitate these requirements. New rule 24AA reflects the amendments to sections 55, 56 and 57 under which it becomes optional to have a registered trustee, or the Official Trustee, act as trustee. The rule provides that where a debtor or debtors present a petition under sections 55, 56 or 57 of the Act, and a registered trustee has consented to act as trustee, then a copy of the trustee’s instrument of consent must be filed with the Registrar at the time the petition is filed.
Rule 5
Section 69 of the Act provides that the Registrar may conduct a public examination of a bankrupt as to the bankrupt’s conduct, property, trade dealings and affairs. The trustee may make application for a public examination and, after the commencement of the Amendment Act, the Official Receiver will also be able to apply for a public examination. Section 19 of the Act enables the trustee to take such part as the trustee thinks fit in the public examination of the bankrupt and it imposes a requirement on the trustee to advertise as prescribed the date time and place fixed for the examination. After the commencement of the Amendment Act, the Official Receiver will be empowered to take part in public examinations and to advertise as prescribed the date time and place of any public examination held on the Official Receiver’s application.
Rule 5 amends rule 32, which provides a procedure for public examinations, to give effect to the amendments to sections 19 and 69 of the Act. Rule 32 as amended provides that where a
date time and place is fixed for the examination of a bankrupt the Registrar is to issue a summons to the bankrupt to attend and to forward the summons to the applicant, who may be either the trustee or the Official Receiver. The applicant is then to serve the summons on the bankrupt and each of the bankrupt’s creditors of whose debt the applicant has notice. The applicant must then advertise the date, time and place fixed for the examination of the bankrupt in the Commonwealth Government Gazette, and in such newspapers as the applicant thinks fit.
Rule 6
Paragraph 109(1)(a) of the Act provides that the trustee shall, before applying the proceeds of the property of the bankrupt in making other payments, apply those proceeds first in payment of the taxed costs of the petitioning creditor and the costs, charges and expenses of the administration of the bankruptcy including the remuneration of the trustee in the order prescribed by the Rules. After the commencement of the Amendment Act, this first priority will be accorded also to the costs of any audit of the trustee’s accounts other than audits carried out by the Auditor-General.
Rule 6 amends rule 40, which prescribes the order of payment for the purposes of paragraph 109(1)(a) of the Act, to reflect the amendment to paragraph 109(1)(a) of the Act made by the Amendment Act.
Rule 7
Section 155 of the Act provides that a person may be entered in the register of trustees in bankruptcy. A person may apply to the Court for a direction that he or she be entered in the
register but before registration can take place the person is required to enter into a bond in the prescribed form. Section 155 is amended by the Amendment Act, so that this requirement is relocated from sub-section 155(2) into sub-section 155(3A).
Rule 7 makes minor consequential amendments to sub-rules 61(1) and 61(2).by substituting references to sub-section 155(3A) for references to sub-section 155(2).
Rule 8
Section 155 of the Act provides for the registration of natural persons as trustees in bankruptcy. The section has been amended by the Amendment Act which inserts sub-section 155(3A) setting out matters of which the Court must be satisfied before making an order that a person be registered. Sub-paragraph 155(3A)(a)(i) specifies that the applicant be a member of a prescribed body. Rule 61A, inserted by rule 8, refers to a new Schedule 2 to the Rules which, in Part I, prescribes professional accountancy associations for the purposes of this sub-paragraph of the Act. The organisations are the same as those prescribed in sections 18 and 20 of the Companies Act 1981 and regulation 20 of the Companies Regulations 1981. The Amendment Act also inserts sub-paragraph 155(3A)(a)(ii) which provides that prior to making an order for registration the Court must be satisfied that an applicant for registration as trustee holds relevant academic qualifications from a prescribed university or a prescribed institution in Australia. Schedule 2 Part II prescribes universities. It corresponds with regulation 21 of the Companies Regulations. Schedule 2 Part III, which corresponds with regulation 22 of the Companies Regulations, prescribes other tertiary institutions for the purposes of sub-paragraph 155(3A)(a)(ii).
Rules 9 and 10
The Amendment Act inserts section 161A into the Act. Section 161A provides that a person who is a registered trustee is to lodge with the Registrar in Bankruptcy a triennial statement in respect of trustee business, setting out such information as is prescribed.
Rule 9 inserts rule 63A. Sub-rule 63A(1) provides that the triennial statement shall be in accordance with Form 31A. Sub-rule 63A(2) provides that the information prescribed for the purposes of section 161A of the Act is the information required by Form 31A.
Rule 10 amends Schedule 1 of the Bankruptcy Rules by inserting Form 31A entitled “Triennial Statement by Registered Trustee”. The Form requires information as to the name, residential address and particulars of the person’s business dealings as a trustee. The Form also requires information as to whether the person has been convicted of any offence, other than a traffic offence, and whether the person has become an insolvent under administration.
Rule 11
Rule 11 inserts a new Schedule 2 to the Rules. This schedule specifies the prescribed bodies (Part I), universities (Part II), and other educational institutions (Part III) for the purposes of rule 61A which is inserted by rule 8.
Authorised by the
Attorney-General.