The Bankruptcy Act 1966 (Cth) provides a comprehensive framework for the administration of bankruptcy in Australia. One of its key provisions, Section 81, grants the Court and the Registrar significant powers to summon individuals for examination in relation to a bankruptcy.

Legal Framework

Section 81(1) of the Bankruptcy Act 1966 allows a person with the relevant authority to apply for the examination of a bankrupt individual or any related examinable person. The Court or a Registrar can summon these individuals at any time to provide information pertaining to the bankruptcy.

Who Can Be Examined?

The scope of examinable persons under Section 81 is broad, ensuring that all relevant parties can be scrutinised. This includes:

1. Bankrupt Persons: Individuals who have been declared bankrupt, including those who have been discharged, if they are suspected of possessing the bankrupt’s property.
2. Examinable Persons: Defined under Section 5 of the Act, these include:
   1. Persons holding or suspected to hold the property of the bankrupt.
   2. Individuals indebted to the bankrupt.
   3. Persons capable of providing information about the bankrupt’s examinable affairs, including associated entities and individuals associated with those entities.
   4. Associated Entities

The term “associated entity” is broadly defined in Sections 5(1) and 5B – 5E of the Act. It encompasses:

1. Natural persons.
2. Private companies.
3. Partnerships.
4. Trusts.

Procedural Aspects

Public Examination

Examinations under Section 81 must be conducted publicly, emphasising transparency in the bankruptcy process. The individuals being examined have the right to legal representation, ensuring their interests are adequately protected during the proceedings.

Timing of Examinations

Examinations can be conducted at any time during or after the bankruptcy. This flexibility ensures that the trustee can gather necessary information throughout the entire process of managing the bankrupt’s estate.

Legitimate Matters for Inquiry

Examinable Affairs

The scope of matters open to inquiry under Section 81 is defined by the term “examinable affairs,” which includes:

1. The bankrupt’s dealings, transactions, property, and general affairs.
2. The financial affairs of associated entities, as they relate to the bankrupt.

Trustee’s Duties and Powers

Under Section 19, the trustee is obligated to investigate various aspects of the bankrupt’s estate. This includes:

1. Identifying property that can be realised to pay creditors.
2. Reporting to creditors on the potential for dividend distribution.
3. Investigating transfers of property void against the trustee.
4. Considering potential offences committed by the bankrupt under the Act.

Legal Principles

Broad Scope of Inquiry

Section 81’s broad language ensures that trustees can comprehensively investigate the bankrupt’s affairs. The definitions of “examinable affairs” and “financial affairs” (Sections 5G – 5K) are expansive, covering all relevant aspects that might impact the bankruptcy administration.

Inquisitorial Nature

The power granted by Section 81 is fundamentally inquisitorial. This “extraordinary power” supports the trustee’s duty to gather information critical for the fair and effective administration of the bankruptcy. It is intended to uncover the true state of the bankrupt’s affairs, verify asset disclosures, and identify undisclosed assets.

No Privilege Against Self-Incrimination

A notable aspect of Section 81 is that it overrides the privilege against self-incrimination. Individuals summoned for examination must answer all questions, thereby facilitating a thorough investigation.

Practical Implications

Trustee’s Investigative Role

The trustee’s role is pivotal in the bankruptcy process. By leveraging Section 81, trustees can ensure they fulfil their duties under Section 19 and Section 19AA, which include examining books, accounts, and records, and scrutinising the bankrupt’s conduct and financial dealings.

Assisting Creditors

The examination process aids creditors by confirming the accuracy of the bankrupt’s statements, uncovering the true value of assets, and identifying any hidden assets. This transparency helps in making informed decisions regarding the recovery of debts.

Conclusion

Section 81 of the Bankruptcy Act 1966 is a powerful tool in the hands of trustees and creditors, designed to ensure a thorough investigation of a bankrupt’s affairs. Its broad scope allows for a thorough investigation into the bankrupt’s financial affairs and those of associated entities, ensuring that all relevant information is brought to light. This provision supports the trustee’s duty to uncover hidden assets, verify the bankrupt’s disclosures, and facilitate the fair distribution of assets to creditors.

For further guidance and expert legal advice tailored to specific circumstances, please do not hesitate to contact our experienced team. We are committed to assisting you through every step of the bankruptcy process, ensuring that all legal avenues are thoroughly explored and utilised to achieve the best possible outcomes for our clients.

The content of this publication is intended to provide a summary and commentary only. It is not intended to be comprehensive nor does it constitute legal advice, and has been prepared based on applicable legislation and case authority at the date of publication. You should seek legal advice on specific circumstances before taking any action.