Explanatory Memorandum
(Circulated by authority of the Attorney-General, the Hon Mark Dreyfus KC MP)Statement of Compatibility with Human Rights
Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Bankruptcy Amendment (Discharge from Bankruptcy) Bill 2023
1. This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011.
Overview of the Bill
2. The Bankruptcy Amendment (Discharge from Bankruptcy) Bill 2023 (the Bill) amends the Bankruptcy Act 1966 (the Act) to regularise and validate the administrative processes of the Australian Financial Security Authority (AFSA) and its predecessors in relation to determining when a statement of affairs is taken to have been filed for the purposes of a debtor's petition, or as required in relation to a sequestration order.
Statement of affairs and automatic discharge from bankruptcy
3. For a person to apply to enter into bankruptcy voluntarily, they must file a statement of affairs with their debtor's petition. This document outlines a person's financial circumstances and is used to determine eligibility for bankruptcy. Persons who become involuntarily bankrupt through court order must also file a statement of affairs. The information provided within these statements enables the trustee to effectively administer the bankrupt person's estate during the period of their bankruptcy.
4. Under section 149 of the Act, a person becomes discharged from bankruptcy three years and one day after their statement of affairs is filed. The filing of a statement of affairs essentially 'starts the clock' on a person's period of bankruptcy. This provision was inserted in the Act in 1991 and was intended to encourage those who become bankrupt involuntarily to file their statement of affairs.
Established practices of the Official Receiver
5. It has been the long-standing practice of AFSA, and its predecessors, to record a bankruptcy applicant's statement of affairs as having been filed on the date it is accepted, rather than the date it was initially filed or 'presented'. This practice is designed to support debtors by minimising the risk of an application for bankruptcy being rejected, as well as ensuring bankruptcies proceed with adequate information (eg if required, to support applicants to identify and obtain missing information). The same approach has been taken where someone becomes bankrupt involuntarily. This assistance is provided in order to provide a statement of affairs that is adequate for the purposes of administering the person's estate under bankruptcy. In these cases, a delay may occur between filing and acceptance to ensure a statement of affairs is adequate for the purposes of administering the estate.
6. As a consequence of this practice, the date that is recorded on NPII and treated as the 'filing date' of a statement of affairs for the purpose of section 149 is, in some cases, later than the date that the statement of affairs was first provided to the Official Receiver. This means that the date taken to be the 'filing date' by AFSA and that starts the clock on a person's bankruptcy period, may not align with the ordinary meaning of when something has been 'filed'.
Amendments made by the Bill
7. The Bill aligns the Act with the established practices of the Official Receiver and will validate decisions made in reliance on the dates recorded by the Official Receiver. This will enable AFSA to continue assessing statements of affairs for adequacy, and assisting individuals where required, before 'starting the clock' on a person's period of bankruptcy. It will also ensure that section 149 operates as originally intended, to encourage involuntary bankrupts to provide an adequate statement of their affairs as soon as possible after a sequestration order has been made.
8. Under amended section 149, persons who become bankrupt after commencement will be automatically discharged from bankruptcy three years and one day after either the Official Receiver accepts and endorses their debtor's petition and statement of affairs, or in the case of involuntarily bankruptcies, the date that an adequate statement of affairs has been filed.
9. The Bill also amends the Act to ensure that a bankrupt's automatic discharge date under section 149 is consistent with the dates recorded by the Official Receiver in the NPII prior to commencement in respect to their bankruptcy. An amendment to the Bankruptcy Regulations 2021 (the Regulations) aligns the dates that the Official Receiver is required to enter in the NPII with the amendments to the Act.
10. Amendments to the Act will also validate decisions made before commencement of the Bill in reliance on dates recorded in the NPII in relation to the filing of a debtor or bankrupt's statement of affairs. The Bill includes a provision that the Commonwealth is liable to pay a reasonable amount of compensation to a person if the operation of the amendments would result in an acquisition of property other than on just terms within the meaning of paragraph 51(xxxi) of the Constitution.
11. The validation of things done before commencement will not apply to criminal proceedings. This is to ensure that, if a person believes they were wrongfully convicted of a crime due to a mistaken understanding that they were bankrupt at a particular time, the Bill will not restrict their ability to challenge their conviction.
12. These amendments will allow bankrupted persons, the trustees of their estates, and other entities who rely on the dates within the NPII, to be assured that the discharge dates of bankruptcies, current and past, are not changed and that they will not be penalised for having relied on the dates recorded in the NPII.
13. New provisions will be inserted into the Act to require the Official Receiver to either accept, or refuse to accept, a statement of affairs within 14 days of receiving it. The Bill provides that the Official Receiver must accept a statement of affairs, unless the Official Receiver thinks it is inadequate. If the Official Receiver refuses to accept the statement of affairs, it must specify the respects in which it is inadequate and invite the person to file an updated statement of affairs. These new provisions are designed to ensure that decisions are made within a reasonable time and that individuals are supported to provide all required information in their statement of affairs.
Human rights implications
14. This Bill engages the following rights:
- a.
- Right to privacy in Article 17 of the International Covenant on Civil and Political Rights (ICCPR).
- b.
- Right to work in Articles 6(1) of the International Covenant on Economic, Social and Cultural Rights (ICESCR).
- c.
- Right to freedom of movement in Article 12 of the ICCPR.
- d.
- Right to equality and non-discrimination in Articles 2 and 26 of the ICCPR.
Right to privacy
15. Article 17(1) of the ICCPR states:
'No one shall be subjected to arbitrary or unlawful interreference with his privacy, family, home or correspondence, nor to unlawful attacks on his honour and reputation.'
16. The right to privacy under Article 17 can be subject to permissible limitations in order to achieve a legitimate objective. Permissible limitations on privacy must be authorised by law and must not be arbitrary, meaning the limitation on privacy must be in accordance with the provisions, aims and objectives of the ICCPR and reasonable in the particular circumstances.
17. The Bill engages the right to privacy, in that the Bill provides a mechanism for the Official Receiver to seek further information, which could be personal information, from a debtor or bankrupt for the purposes of receiving and accepting an adequate statement of affairs. Further, the Bill includes provisions requiring the giving of personal information by the bankrupt person to a third party (being the trustee for the bankrupt person's estate) through a requirement to provide the accepted statement of affairs to their trustee within a particular time period.
18. An individual is required to provide details of their estate through a statement of affairs which must be provided to the Official Receiver either on becoming bankrupt through court order or to accompany their debtor's petition to become bankrupt. The purpose of a statement of affairs is to provide sufficient detail to enable the trustee of the bankrupt estate to administer it effectively over the period of the bankruptcy. In this way, statements of affairs are, by nature, documents containing personal information. Information contained in these documents includes personal family details, whether the debtor is involved in legal action, and their assets, liabilities, and any other business details. Some of these details are also made public through the NPII, which is a publicly available electronic record of personal insolvencies.
19. The provisions within this Bill that require disclosure of personal information are reasonable limitations on the right to privacy. It is necessary to achieve the legitimate objective of the statement of affairs, which is to enable a trustee to appropriately administer the bankrupt estate. In doing so, the measures will allow the Official Receiver to accept a statement of affairs that is adequate for its purposes. The provisions are also proportionate, requiring the disclosure only where necessary in order to achieve the policy intent specified above.
Right to work
20. Article 6(1) of the ICESCR states:
'The States Parties to the present Covenant recognise the right to work, which includes the right of everyone to the opportunity to gain his living by work which he freely chooses or accepts, and will take appropriate steps to safeguard this right.'
21. The right to work may be permissibly limited by law for the purpose of promoting the general welfare in a democratic society. The Bill engages this right because it affects automatic discharge from bankruptcy under section 149 of the Act. Under amended section 149, the automatic discharge date of a person who has been bankrupt during the validation period is altered so that the Official Receiver's recorded date determines the period that the automatic discharge date will commence. This date may, for some individuals, be later than it would otherwise have been under the current framing of section 149.
22. Becoming bankrupt does not prevent a person from working, however bankrupted persons may be subject to obligations and restrictions related to their work. A bankrupt person must not act as a director of a company without the permission of a court, and failure of a bankrupt person to disclose certain details when operating a business is an offence under subsection 269(1) of the Act. Additionally, many industries have specific licensing regulations and association requirements, which may restrict a person's ability to hold a licence or impose additional obligations based on their bankruptcy. Such limitations predominantly cease upon discharge from bankruptcy, though in some cases restrictions may continue for a further period of time after a person's bankruptcy has ended.
23. To the extent that the Act engages the right to work, it is for the purpose of promoting the general welfare in our democratic society through providing an appropriate framework to enable individuals in severe financial stress to discharge unmanageable debts while providing for the distribution of a debtor's available assets to affected creditors. The impact of the Bill on the period of time that a person's right to work may be affected by bankruptcy is necessary and proportionate to achieving the policy intent of the Bill described above.
Right to freedom of movement
24. Article 12(2) of the ICCPR states:
'Everyone shall be free to leave any country, including his own.'
25. The right to freedom of movement under Article 12 can be permissibly limited by law if necessary to protect the rights and freedoms of others, provided the restrictions are proportionate and the least intrusive means of achieving the desired result.
26. The Bill engages the right to freedom of movement as section 272 of the Act provides that a person who is bankrupt must not leave Australia during the period of their bankruptcy without the written consent of the trustee of their estate. Under amended section 149, the automatic discharge date of a person who has been bankrupt during the validation period is altered so that the Official Receiver's recorded date determines the period that the automatic discharge date will commence. This date may, for some individuals, be later than it would otherwise have been under the current framing of section 149, meaning that their right to freely leave Australia may be restricted for a longer period of time.
27. The restriction on the right of a person to freely leave Australia during a period of bankruptcy is necessary to protect the rights of others, including their creditors. The impact of the Bill on the period of time that this restriction will apply to a person who becomes bankrupt is necessary, proportionate and the least intrusive means to achieve the policy intent of providing certainty to all those impacted by the Official Receiver's practice of recording the date of filing as a date linked to its acceptance of an adequate statement of affairs.
Right to equality and non-discrimination
28. Article 2(1) of the ICCPR states:
'Each State Party to the present Covenant undertakes to respect and to ensure to all individuals within its territory and subject to its jurisdiction the rights recognized in the present Covenant, without distinction of any kind, such as race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.'
29. Article 2(2) of the ICESCR states:
'The States Parties to the present Covenant undertake to guarantee that the rights enunciated in the present Covenant will be exercised without discrimination of any kind as to race, colour, sex, language, religion, political or other opinion, national or social origin, property, birth or other status.'
30. The Bill engages the right to equality and non-discrimination because the Act may indirectly discriminate on the basis of property, since bankruptcy affects individuals who are unable to pay their debts.
31. Not all treatment that differs among individuals or groups on a ground mentioned in Article 2(1) of the ICCPR and Article 2(2) of the ICESCR constitutes discrimination. Differential treatment is permitted if it is reasonable, objective and aimed at achieving a purpose that is legitimate under the ICCPR or ICESCR.
32. The rights recognised in the ICCPR and ICESCR that the Bill engages, to which the right to equality and non-discrimination apply, are the right to privacy in Article 17 of the ICCPR, the right to work in Article 6(1) of the ICESCR and the right to freedom of movement in Article 12 of the ICCPR. As outlined above, to the extent that the Bill limits these rights on the basis of bankruptcy, the limitations are reasonable, objective and for a legitimate purpose.
Conclusion
33. This Bill is compatible with human rights as, to the extent it may limit some human rights, those limitations are reasonable, necessary and proportionate.