Senate

Explanatory Memorandum

(Circulated by authority of the Attorney General, Senator the Hon George Brandis QC)

SCHEDULE 1-BANKRUPTCY

GENERAL OUTLINE

80. Schedule 1 will make amendments to the Bankruptcy Act 1966.

81. The amendments to the Bankruptcy Act provide for:

•

the Official Trustee to act as a special trustee for other Government agencies

•

the Official Receiver to require a person to produce books without also having to require them to physically attend

•

support (either in the form of property or cash) given under the National Disability Insurance Scheme to not be divisible in bankruptcy

•

the offence of concealment under subsection 265(4) of the Bankruptcy Act to be expanded to ensure that it covers electronic fund transfers

•

section 267 of the Bankruptcy Act to be amended in order to provide that if a declaration is contained in a statement that:

(a)

was received by the Official Receiver electronically, and

(b)

was purported to be made by a particular person

the declaration is presumed to have been made by the person, in the absence of evidence to the contrary

•

the distinction in the Bankruptcy Act between indictable and summary offences to be aligned with the distinction in the Crimes Act 1914 between indictable and summary offences, and

•

the locus of certain offences in the Bankruptcy Act to be clarified.

Bankruptcy Act 1966

Item 1: Before subsection 18(1)

82. This item will insert the heading 'Corporate status of Official Trustee' before subsection 18(1) of the Bankruptcy Act 1966.

Item 2: After subsection 18(2)

83. The instrument establishing the Australian Financial Security Authority (AFSA) (formerly the Insolvency Trustee Service Australia) provided that one of AFSA's functions is to act as a special trustee for other Government agencies. This typically involves the seizure and sale of property pursuant to court orders and is now most commonly undertaken in relation to child support matters where AFSA obtains orders for the enforcement of child support arrears. Generally, such an order identifies the property to be sold to enforce the debt and directs that the Official Receiver take control of the property and sell it.

84. In these matters it is necessary to transfer the title of real property before it can be sold. However in most States and Territories it is not legally possible for the Official Receiver to be listed as the owner of record in relation to real property. As a result individual AFSA employees have being listed as the owner of record for property. This is undesirable as it means that AFSA employees become personally responsible for taxes associated with the property and may be liable if a person injures themselves while on the property.

85. Item 2 will expand the functions of the Official Trustee to include acting in accordance with an order of a court relating to the payment of a debt due by a person to the Commonwealth or a Commonwealth authority.

86. Such an order may, for example, provide for the Official Trustee to:

(a)

take custody of, control and own property as security for payment of such a debt, and

(b)

sell the property, and

(c)

apply the proceeds of the sale wholly or partly toward the payment of the debt.

87. The new subsection 18(3) will include a note which recognises that other provisions of the Bankruptcy Act 1966 and other laws of the Commonwealth confer other functions on the Official Trustee.

88. This expansion of the functions of the Official Trustee ensures that where a debt is owed to the Commonwealth or a Commonwealth authority, the Official Trustee can be listed on the title deed. Since the Official Trustee has a separate corporate identity, it can hold property in its own right.

Item 3: Before subsection 18(8)

89. This item will insert the heading 'Official Receiver acting for Official Trustee' before subsection 18(8) of the Bankruptcy Act 1966.

Item 4: Before subsection 18(8B)

90. This item will insert the heading 'Inspector-General acting for Official Trustee' before subsection 18(8B) of the Bankruptcy Act 1966.

Item 5: Before subsection 18(9)

91. This item will insert the heading 'State of mind of Official Trustee' before subsection 18(9) of the Bankruptcy Act 1966.

Item 6: Before subsection 18(11)

92. This item will insert the heading 'General interpretation provisions' before subsection 18(11) of the Bankruptcy Act 1966.

Item 7: Before paragraph 20B(8)(a)

93. Subsection 20B(3) of the Bankruptcy Act 1966 provides that all moneys held by the Official Trustee (other than those to which subsection 20B(8) applies) are to form part of the Common Investment Fund (which is established by subsection 20B(1)).

94. Item 7 will amend subsection 20B(8) through the insertion of new paragraph (aa). The new paragraph will provide that money received or held by the Official Trustee that is related to the Official Trustee acting in its new capacity under the new subsection 18(3) does not form part of the Common Investment Fund.

Item 8: At the end of section 27

95. Section 273 of the Bankruptcy Act 1966 provides for the trial of offences. Section 273 will be repealed and replaced by a new section 273 (see item 16).

96. However, case law suggests that a combined reading of the existing section 27 and section 273 of the Bankruptcy Act provides State and Territory courts with the authority to determine ancillary bankruptcy matters in criminal proceedings.

97. Item 8 will insert a new subsection (2) which will provide (to avoid doubt) that subsection 27(1) does not:

(a)

confer jurisdiction in a criminal matter, or

(b)

exclude the jurisdiction of a court of a State or Territory under the Judiciary Act 1903 in a criminal matter relating to the Bankruptcy Act.

98. This provision will clarify the jurisdiction of the State and Territory courts. It will ensure that despite the repeal of the existing section 273 of the Bankruptcy Act, State and Territory courts will still be able to determine ancillary bankruptcy matters when trying offences under the Bankruptcy Act.

Item 9 and Item 10: Subsection 77C(1) and after paragraph 77C(1)(b)

99. Subparagraph 77C(1)(b)(ii) provides that the Official Receiver may by written notice given to a person require the person to attend before the Official Receiver and produce all books in the person's possession relating to any matters connected with the performance of the functions of the Official Receiver or a trustee under the Bankruptcy Act 1966.

100. Item 9 will omit 'both' in subsection 77C(1) and substitute 'more' in its place.

101. Item 10 will add an additional paragraph (c) after paragraph 77C(1)(b) which will provide that the Official Receiver may, by written notice given to a person, require them to produce all books in the person's possession relating to any matters connected with the performance of the functions of the Official Receiver or a trustee under the Bankruptcy Act.

102. The effect of this amendment will be to enable the Official Receiver to require that a person produces books without having to require them to attend before the Official Receiver.

Item 11: At the end of subsection 116(2)

103. This item will insert a provision which provides that a bankrupt's property is not divisible property (and does not vest in the trustee) where it was a 'support' that was funded under the National Disability Insurance Scheme or an 'NDIS amount'. The definitions of 'support' and 'NDIS amount' that applies for the purposes of this item are the ones that are found in the National Disability Insurance Scheme Act 2013.

104. This item will ensure that where a bankrupt has received payments or property under the National Disability Insurance Scheme Act, the property will not vest in the trustee.

Item 12: Application of paragraph 116(2)(s) of the Bankruptcy Act 1966

105. This item will insert a provision which will provide that item 11 will apply to bankrupts whose bankruptcies are taken under section 115 of the Bankruptcy Act 1966 to commence on or after the commencement of item 11 whether the property or payment in question was acquired or paid before, on or after the commencement of item 11.

Item 13: Paragraph 265(4)(a)

106. Paragraph 265(4)(a) of the Bankruptcy Act 1966 provides that 'A person who, after the presentation of a petition on which, or by virtue of the presentation of which, he or she becomes a bankrupt' commits an offence if they conceal or remove any part of their property to the value of $20 or more.

107. Item 13 will omit the reference to 'or removes' in paragraph 265(4)(a) and replace it with 'removes, disposes of or deals with'.

108. The current wording in paragraph 265(4)(a) arguably limits the offence to the physical removal of tangible property. The new wording will extend the scope of paragraph 265(4)(a) to cover electronic financial transactions such as electronic funds transfers.

Item 14: At the end of section 267

109. Section 267 of the Bankruptcy Act 1966 makes it an offence to make a declaration to which section 267 applies that the person knows to be false.

110. Item 14 will add a new subsection (3) to section 267 which states that if a declaration is contained in a statement that:

(a)

was received by the Official Receiver electronically, and

(b)

was purported to be made by a particular person,

the declaration is presumed to have been made by the person, in the absence of evidence to the contrary.

111. Australia's personal insolvency system can only function properly if the various statements that a person is required to give to the Official Receiver contain accurate information.

112. Many of the statements that the Official Receiver receives are now provided to the Official Receiver electronically. Item 14 will help to ensure that statements received electronically are treated in the same way as declarations received in hardcopy.

113. This amendment will not impose a legal burden of proof upon the defendant under section 13.4 of the Criminal Code Act 1995.

Item 15: Application of subsection 267(3) of the Bankruptcy Act 1966

114. Item 15 will provide that subsection 267(3) of the Bankruptcy Act 1966 (to be inserted by item 14) applies to statements received electronically on or after the commencement of that subsection.

Item 16: Section 273

115. Item 16 will repeal section 273 of the Bankruptcy Act 1966 and substitute a new section 273.

Repeal of existing section 273

116. Section 273 provides for the trial of offences under the Bankruptcy Act.

117. Subsection 273(1) provides that subject to section 273 an offence against the Bankruptcy Act, other than an offence that is punishable by a fine only, is punishable either on indictment or on summary conviction.

118. Subsection 273(1) makes offences that would be summary offences under the Crimes Act 1914 indictable offences. For example, an offence under section 80 of the Bankruptcy Act is indictable for the purposes of subsection 273(1) even though the penalty is only six months imprisonment.

119. The repeal of subsection 273(1) will mean that the demarcation between summary and indictable offences in the Bankruptcy Act will be governed by section 4G and section 4H of the Crimes Act.

120. Subsection 273(2) will be repealed as it derives its application from subsection 273(1).

121. Subsection 273(3) of the Bankruptcy Act provides that (subject to subsection 273(4)) an offence against the Bankruptcy Act that is punishable by a fine only is punishable by a court of summary jurisdiction.

122. Subsection 273(3) will be repealed and the jurisdiction of a court of summary jurisdiction to try an offence against the Bankruptcy Act that is punishable by a fine only will be governed by the Crimes Act.

123. Subsection 273(4) of the Bankruptcy Act provides that the Federal Court has jurisdiction to try summarily any offence against the Bankruptcy Act.

124. As bankruptcy offences are rarely (if ever) tried in the Federal Court and there is no reason for them to be tried in the Federal Court, subsection 273(4) will be repealed.

125. Subsection 273(5) will be repealed as it derives its application from subsection 273(4).

The new section 273

126. Currently the locus of certain offences in the Bankruptcy Act may be unclear. The purpose of the new section 273 is to put the issue of territoriality beyond doubt.

127. Subsection (1) of the new section 273 provides that it applies where a physical element of an offence under the Bankruptcy Act involves:

(a)

a refusal, failure or omission to act, or

(b)

a contravention constituted by a refusal, failure or omission to act.

128. Subsection (2) of the new section 273 provides that, in relation to an offence that comes within the scope of the new section 273, a person may be charged with, and convicted of, the offence as if the place of the refusal, omission or contravention were any of the following:

(a)

the place where the person should have done the act

(b)

the person's usual place of residence at the time the act should have been done, or

(c)

the person's last place of residence known to the Official Receiver.

129. Subsection (3) of the new section 273 provides that subsection (2) of the new section 273 is subject to section 80 of the Commonwealth of Australia Constitution Act (the Constitution). Section 80 of the Constitution provides that '[t]he trial on indictment of any offence against the law of the Commonwealth shall be by jury, and every such trial shall be held in the State where the offence was committed, and if the offence was not committed within any State the trial shall be held at such place or places as the Parliament prescribes'.

130. The effect of section 80 of the Constitution is that if an offence under the Bankruptcy Act is tried on indictment then the trial will be held in the State where the offence was committed despite the new section 273.

131. Subsection (4) of the new section 273 provides that subsection 2 of the new provision does not apply to an offence against subsections 264A(1A), 264C(1) or 267F(1). As subsection 264A(1A) concerns a failure of a person to attend court the locus of an offence under that subsection is clear. Similarly, as subsections 264C and 267F(1) concern a refusal to be sworn or give evidence the locus of an offence under those subsections is also clear.

Item 17: Application of section 273 of the Bankruptcy Act 1966

132. This provision provides that the new section 273 applies whether the refusal, failure, omission or contravention occurred before, on or after the commencement of item 16.