Bankruptcy Rules (Amendment)
Statutory Rules No. 183 of 1989
Explanatory Statement
Outline of the rules
These rules make amendments to the Bankruptcy Rules falling into 7 groups. Rules 2 and 3 provide a new procedure for applications by bankrupt persons for an extension of time in which to lodge a statement of affairs and introduce a requirement that applications for annulment of bankruptcy be served on the bankrupt in a case where the applicant is not the bankrupt.
Secondly, procedures relating to meetings of creditors, including notice of meetings, the appointment of proxies and voting by joint and several creditors are revised by rules 5, 11, 12, 13, 14 and 15 to take account of amendments made to the Bankruptcy Act 1966 (the Act) by the Bankruptcy Amendment Act 1987 (the Amendment Act).
Thirdly, under rule 4 which will amend rule 60 of the Bankruptcy Rules, registered trustees in bankruptcy will be required to notify the Inspector-General in Bankruptcy, the Official Receiver and the Registrar of their residential and business addresses, and any change of address.
Fourthly, rule 16 will change the prescribed certification for transcripts of evidence prepared under the Act to recognise the reality that the transcripts are prepared by the Commonwealth Reporting Service.
Fifthly, rule 9 repeals rule 89 of the Bankruptcy Rules to remove the requirement that the Registrar in Bankruptcy advertise the making of orders for the administration in bankruptcy of the estates of deceased persons in newspapers, as the making of such orders is advertised in the Gazette, and it is considered that newspaper advertising is unnecessary.
Sixthly, rule 17 and the Schedule to the rules amend Schedule 1 to the Bankruptcy Rules to insert new forms, to repeal unnecessary forms and to make consequential changes and correct errors in existing forms.
Finally, rules 5, 6, 7, 8, and 10 include miscellaneous amendments to change the language of certain provisions into gender neutral language, and to correct minor errors in language and formal defects in other provisions.
Rule 1 provides that the rules commence on 31 July 1989, the day on which the remaining 34 provisions of the Amendment Act which have not yet been brought into operation have been proclaimed to commence.
The rules in detail
Rule 1
Rule 1 provides that the rules will commence on 31 July 1989, the day on which the remaining provisions of the Amendment Act have been proclaimed to commence.
Rule 2
Rule 31 of the Bankruptcy Rules provides a procedure for making applications to the Court for an extension of time in which a statement of affairs may be filed. Rule 2 amends rule 31 of the Bankruptcy Rules to substitute references to provisions of the Act which have been renumbered by the Amendment Act. Rule 2 also corrects an anomaly by providing for an application to be made by joint debtors, against whom a sequestration order has been made, for an extension of the time prescribed by subsection 54(2) of the Act in which a statement of joint affairs may be filed. There is presently no provision to this effect in the Bankrutpcy Rules.
Paragraph 2(b) omits subrule 31(1A) which relates to the extension of time for filing statements under section 246 of the Act. Section 246 relates to the administration of the estates of deceased persons in bankruptcy. The Bankruptcy Rules (Amendment) made under section 4 of the Acts
Interpretation Act 1901 concurrently with the making of these rules, provide for the insertion of a new rule relating to the extension of time for filing statements of affairs in the case of the administration of deceased estates in bankruptcy in Part VIII of the Bankruptcy Rules. Part VIII of the Bankruptcy Rules contains the general provisions dealing with the administration of estates of deceased persons in bankruptcy. Paragraph 2(c) makes a consequential amendment to subrule 31(2) by omitting the reference to subsection 246(1).
Paragraph 2(d) omits subrule 31(3) and substitutes a new subrule 31(3) which provides that a person shall before filing a request for an extension of time to file a statement of affairs submit the request to the trustee. The trustee may endorse or attach to the request a note of any matters that the trustee wishes the Registrar to take into account when determining the request.
Paragraph 2(e) omits subrule 31(4) and substitutes a new subrule 31(4) which requires the trustee who receives a request under subrule 31(3) to return the request with any note that the trustee wishes to make within 7 days of receiving it. If the trustee omits to return the request to the person applying within 7 days the person may endorse the fact of that omission on the request and file the request.
Rule 3
Rule 3 amends rule 57 of the Bankruptcy Rules so it will provide that an application for an annulment of a bankruptcy under section 154 of the Act shall be served on the trustee, the Official Receiver and if the person applying for the annulment is not the bankrupt, on the bankrupt. Rule 57 previously provided that the application be served on the Official Receiver and the trustee, although an application for an annulment of bankruptcy may be made by a person other than the bankrupt. Procedural fairness requires that in such a case the bankrupt be notified of an application for annulment.
Rule 4
Rule 60 of the Bankruptcy Rules sets out the particulars that are required to be kept in the register of trustees. Paragraph 60(1)(a) specifies that the address and occupation of each trustee must be entered in the register. Paragraph 4(a) amends paragraph 60(1)(a) so as to provide that the business and residential address of the trustee, as well as his or her occupation is included in the particulars that are entered in the register.
Paragraph 4(b) inserts two new subrules. Subrule 60(1A) requires a person who becomes registered as a trustee to notify the Inspector-General, the Official Receiver and the Registrar in writing within 14 days of becoming registered of his or her occupation and residential and business address. Subrule 60(1B) requires a trustee of the trustee to notify the Inspector-General, the Official Receiver and the Registrar in writing of any change in his or her occupation and residential and business address within 14 days of the change taking place. Administrative difficulties have been encountered in locating some trustees who have changed their address. Statistical returns are required to be lodged by trustees for the purposes of collating tables to be included in the Annual Report on the operation of the Act. The preparation of the Report is made more difficult when the whereabouts of a trustee is unknown. The Inspector-General, the Registrars and the Official Receivers all have roles to play in monitoring the activities of registered trustees by carrying out such functions as the audit of trustee accounts, the investigation of complaints by the public and the payment into Consolidated Revenue of unclaimed dividends, and the efficient administration of the bankruptcy system is hindered when insolvency practitioners cannot be readily located. This amendment will diminish the incidence of this problem.
Rule 5
Rule 5 is a purely technical amendment providing for the repeal and remaking of rule 71. There was some doubt whether
the amendment made to rule 71 by Statutory Rules No. 343 of 1988 was effective to remove the two references to ‘the first meeting of creditors’ that rule 71 formerly contained. The remaking of the rule will eliminate that doubt.
Rule 6
Rule 6 amends rule 81A of the Bankruptcy Rules to make the language gender neutral.
Rule 7
Rule 82 of the Bankruptcy Rules modifies general provisions of the Act applied to deeds of assignment by section 231 of the Act. Paragraph 82(aa) provided that section 112 of the Act did not apply to deeds of assignment, Section 112 was repealed by the Amendment Act, thus making paragraph 82(aa) unnecessary. Rule 7 omits paragraph 82(aa).
Rule 8
Rule 83 of the Bankruptcy Rules modifies general provisions of the Act applied to deeds of arrangement by section 237 of the Act. Paragraph 83(1)(aa) provided that section 112 of the Act did not apply to deeds of arrangement. Section 112 was repealed by the Amendment Act, thus making paragraph 83(1)(aa) unnecessary. Rule 8 omits paragraph 83(1)(aa).
Rule 9
Rule 9 repeals rule 89 of the Bankruptcy Rules. Rule 89 required the Registrar to publish notices in an appropriate newspaper advertising the making of orders for the administration in bankruptcy of the estates of deceased persons. The making of such orders is advertised in the Gazette. The repeal of the requirement to advertise the making of such orders in newspapers is a cost saving measure. Statutory Rules No 19 of 1988 abolished the requirement to advertise bankruptcies, and various steps in the administration of bankruptcies in newspapers. The change did not generate any adverse public reaction, and accordingly it was decided to abolish the requirement for newspaper
advertising of the making of orders for the administration of deceased estates in bankruptcy as well. No adverse public reaction is anticipated.
Rule 10
Rule 90 of the Bankruptcy Rules modifies general provisions of the Act applied to the administration in bankruptcy of the estates of deceased persons by section 248 of the Act. Rule 10 amends Rule 90 of the Bankruptcy Rules by omitting paragraphs (g), (ga) and (h). These paragraphs referred to sections 111 and 112 of the Act which were repealed by the Amendment Act with effect from 1 March 1988.
Rule 11
Rule 96 of the Bankruptcy Rules sets out the requirements as to quorums at meetings of creditors. Rule 11 amends rule 96 by omitting subrules 96(1) and 96(1A) and substituting a new subrule 96(1). Subrule 96(1) provides that at a meeting of creditors, a quorum is constituted by not less than 2 persons. The quorum can be constituted by creditors who are entitled to vote at the meeting and who are present personally, by attorney or by proxy or one creditor, who is entitled to vote at the meeting, and is present personally, by attorney or by proxy and the trustee or a person authorised in writing by the trustee to represent the trustee. This rule recognises the decision in the Federal Court of Bankruptcy in Re Nelson (1963) 19 ABC 172 that there cannot be a meeting unless more than one person is present.
Rule 12
Rule 100 of the Bankruptcy Rules enables a person to appoint another person as his or her proxy at a meeting of creditors. Rule 12 omits subrule 100(1) and substitutes a new subrule 100(1). Under the new subrule 100(1), an instrument of appointment of a proxy shall, unless the proxy is appointed to vote on a special resolution under section 204 of the Act be in accordance with Form 43. If the proxy is appointed to vote on a special resolution under section 204 of the Act the form
of proxy shall be in accordance with Form 44. This amendment is consequential upon the commencement of subsection 200(3A) of the Act, inserted by the Amendment Act, which imposes limitations in respect of the appointment of proxies for the purposes of voting on special resolutions under section 204 of the Act. Form 44, which is inserted into the Bankruptcy Rules by these rules will be used in appointing proxies to vote on special resolutions under section 204 of the Act. In accordance with subsection 200(3A) the form will require the creditor to indicate whether the proxy should vote in favour of, or against or to abstain in relation to any of the five special resolutions of creditors that a meeting may pass under section 204 of the Act, and the other conditions, if any, that the creditor wishes to specify in guiding the vote of the proxy holder.
Rule 13
Part IXA of the Bankruptcy Rules sets out special provisions relating to joint debtors, and rule 100A defines various terms that are used in Part IXA. Rule 13 amended rule 100A of the Bankruptcy Rules to extend the definition of ‘joint bankruptcy’ and to insert a definition of the term ‘joint and several creditors’, so as to eliminate doubts about the application of the rules relating to the conduct of meetings in a case where there are joint creditors, separate creditors, and joint and several creditors. Paragraphs 13(a) and 13(b) expand the definition of ‘joint bankruptcy’ to include bankruptcies that occur under section 55 of the Act where the date of each bankruptcy is the same and immediately before the bankruptcies occurred, the bankrupts were joint debtors or partners who owned property jointly. Where there is a joint bankruptcy of two debtors, there are three bankrupt estates, that is the two separate estates and the joint estate. Assets that were jointly owned prior to bankruptcy form the joint estate, and assets that were owned by the debtors individually form the separate estates. Joint creditors are able to prove their debts against the joint estate, and separate creditors prove their debts against the separate estates. In the event of a surplus in the separate estates, joint creditors may
prove against the separate estates, and likewise, when there is a surplus in the joint estate, separate creditors may prove against that estate. In some cases, although section 57 of the Act provides for joint debtors to present a petition against themselves, as does section 56 in the case of partners, individual petitions are presented by the debtors under section 55 on the same day, in a case where the debtors are joint debtors. This gives rise to a technical problem that a joint estate does not exist, notwithstanding that it would come into existence if the petitions were presented and accepted under either section 56 or section 57 of the Act. This disadvantages joint creditors, who must depend upon the existence of a surplus in the separate estates before being entitled to rank for dividend. The amendments made by these rules overcome that problem.
Paragraph 13(c) inserts a definition of ‘joint and several creditors’. Joint and several creditors are creditors of joint debtors or partners to whom the debtors are liable both as joint debtors and as individual debtors. Paragraph 13(d) qualifies the definition of ‘separate creditors’ by providing that ‘separate creditors’ in relation to a joint bankruptcy means creditors other than joint creditors or joint and several creditors.
Rule 14
Rule 14 repealed 100B of the Bankruptcy Rules and substituted a new rule 100B. Rule 100B provides that a notice under rule 93 of each meeting of creditors in a joint bankruptcy shall be given to the joint creditors, the separate creditors and the joint and several creditors. This amendment is consequential to the amendment to rule 100A inserting the definition of ‘joint and several creditors’. The rule also corrects an incorrect reference in the former rule 100B to the provision of notice of meetings under rule 92. Rule 92 was in fact repealed with effect from 3 January 1989.
Rule 15
Rule 100C of the Bankruptcy Rules provides that at a meeting of creditors, separate creditors may vote only on resolutions proposed for separate creditors, and joint creditors may vote only on resolutions proposed for joint creditors. Rule 15 amends rule 100C by inserting a new paragraph (c) which provides that at a meeting of creditors, joint and several creditors may vote on resolutions proposed for joint creditors and on resolutions proposed for separate creditors.
Rule 16
Rule 16 repealed rule 131 of the Bankruptcy Rules and substituted a new rule which provides that for the purposes of subsection 255(6) of the Act, the prescribed certification on transcripts of proceedings is an endorsement signed by an officer or employee of the Commonwealth Reporting Service in the following words - ‘This document is a transcript of a record of proceedings prepared in accordance with section 255 of the Bankruptcy Act 1966 by the Commonwealth Reporting Service’. Alternatively the form of the endorsement may be in substantially similar words. The change is to be made to reflect the practical reality that transcripts of proceedings are prepared by the Commonwealth Reporting Service, something which the Bankruptcy Rules do not presently acknowledge.
Rule 17
Rule 17 amends Schedule 1 to the Bankruptcy Rules. Schedule 1 to the Bankruptcy Rules prescribes a number of forms, and rule 17 amended Forms 9, 9A 9B, 10, 13, 33A, 33B, omitted Forms 11, 35, 39, 41, 43, 33 and 49, and substituted new Forms 43 and 44.
Paragraph 17(a) amended Form 9, Debtor’s Petition by inserting a paragraph that requires the person presenting the petition to declare that he or she is not disqualified by the Act from presenting a petition under section 55 of the Act. This is a purely technical amendment to the form. The Act imposes a number of disqualifications on debtors seeking to present a
debtor’s petition for bankruptcy. The amendment will cast the onus on a debtor who is presenting a petition to declare that he or she is not disqualified from presenting a petition, rather than leaving it as a matter for the Registrar in Bankruptcy to ascertain.
Paragraph 17(b) amended Forms 9A and 9B by inserting in each form a paragraph that requires that the debtors presenting debtors petitions under section 56 of the Act which relates to partnerships, and under section 57 of the Act which relates to joint debtors to declare that they are not disqualified by the Act from presenting a petition. This amendment is made for the same reason as the amendment to Form 9 discussed in the previous paragraph.
Paragraph 17(c) amended Form 10, Affidavit Verifying Statement of Affairs by replacing the reference previously contained in the Form to rules 24 and 30 with a reference to rules 30 and 78. Upon the commencement of these rules, the requirement to make out an affidavit verifying a statement of affairs was relocated into rules 30 and 78.
Paragraph 17(d) further amended Form 10 by expanding note (a) to refer to the date a debtor executes an authority under section 188 of the Act. The Amendment Act substituted for the requirement that a debtor who executes an authority under section 188 must make out a statutory declaration verifying the statement a requirement that the debtor make out an affidavit verifying the statement. This amendment to Form 10 enables it to be used as the form of affidavit verifying a statement of affairs prepared by a debtor under paragraph 188(2)(c) of the Act.
Paragraph 17(e) amended Form 13 which is the form of summons to a bankrupt to attend for examination under section 69 of the Act. The prescribed forms of summons no longer specify that the person being summoned will be examined about their conduct, trade dealings, property and affairs. The Amendment Act replaced all references to trade dealings, property or affairs with references to ‘examinable affairs’. ‘Examinable
affairs’ is defined in the Act to include the trade dealings, property and affairs of a person and it extends to the financial affairs of associated entities, which include companies, partnerships, trusts and other persons that are or have been associated with the person. After the commencement of the relevant provisions of the Amendment Act, it is possible to conduct an examination of a person who is or has been a bankrupt under section 69 of the Act, in relation to the person’s ‘conduct and examinable affairs’. Because the expression ‘examinable affairs’ is given a broad definition by the Act it would be unweildy to outline the potential scope of the examination in the form of summons.
Paragraph 17(f) provides for the repeal of a number of forms in Schedule 1 to the Bankruptcy Rules namely:
Form 11 - Statement of Affairs;
Form 35 - Statutory Declaration verifying statement of affairs;
Form 39 - Statement of Affairs;
Form 41 - Notice of First Meeting of Creditors;
Form 43 - Instrument of Appointment of Proxy;
Form 44 - Appointment of Proxy by telegram; and
Form 49 - Summons under section 81.
Each of the statements of affairs are to be converted to administrative, rather than statutory forms. Form 3 5 is unnecessary, as all statements of affairs will be required to be verified by affidavit. Form 41 is unnecessary because the statutory first meeting of creditors has been abolished. Forms 43 and 44 are replaced by new forms inserted by these rules, and Form 49 is replaced by a new form inserted by rules under the Act made pursuant to the Acts Interpretation Act 1901 concurrently with these rules.
Paragraph 17(g) amends Forms 33A and 33B by substituting a reference to rule 74 for the former incorrect reference in those forms to rule 74A.
Paragraph 17(h) provides for the insertion of new Form 43, Appointment of Proxy and Form 44, Appointment of Proxy to vote on a special resolution under section 204 of the Bankruptcy
Act 1966. Form 43 will be the general form of proxy for meetings under the Act at which resolutions and special resolutions other than special resolutions under section 204 of the Act are to be considered. Form 44 will reflect the requirement inserted into the Act by the Amendment Act that in relation to proxies to vote on special resolutions under section 204 of the Act, a creditor must specifically indicate how the proxy is to exercise the creditor’s vote, and to specify the conditions if any that the proxyholder is to observe in exercising the creditor’s vote. The ability to appoint a proxy by telegram presently contained in the Bankruptcy Rules is to be abolished, as telegrams no longer exist as a means of communication.
Paragraph 17(h) is a mechanical provision which provides that the forms contained in the Schedule to these rules are to be inserted into their proper numerical position in Schedule 1 to the Bankruptcy Rules.
Schedule to the rules
The Schedule to the rules contains new Forms 43 and 44 to be inserted into the Bankruptcy Rules. Form 43 is the form of appointment of proxy provided for under rule 100 of the Bankruptcy Rules, and Form 44 is the form of appointment of proxy to vote on a special resolution under section 204 of the Act, also provided for in rule 100 of the Bankruptcy Rules.