1.1 Section 19 of the Bankruptcy Act 1966 (the Act) outlines the duties of a trustee in bankruptcy. Paragraphs 19 (1)(g), (h) and (i) specifically provide statutory obligations for trustees to enquire into the conduct of a bankrupt to ensure the bankrupt discharges his or her obligations under the Act, to consider whether the bankrupt has committed an offence against the Act and refer to the Inspector- General, or to the relevant law enforcement authority, evidence of any offence by a bankrupt against the Act.
1.2 Trustees are considered officers of the court and have a pivotal role in supporting the integrity of the Australian personal insolvency system. Trustees are therefore expected to discharge their duties in a manner that not only serves the operation of the Act, but also provides equality between creditors and fairness to bankrupts and debtors.
1.3 AFSA's Regulation and Enforcement division acts as a delegate of the Inspector-General and consequently conducts enquiries and investigations into alleged offences contrary to the Act. Where appropriate, AFSA Regulation and Enforcement refers matters to the Commonwealth Director of Public Prosecutions (CDPP) for prosecution actions.
1.4 This document seeks to provide guidance to practitioners on when to refer matters to AFSA Regulation and Enforcement and to clarify what information may be required to support an offence referral.
1.5 AFSA Regulation and Enforcement categorise offence referrals as either 'compliance offences' or 'complex offences' and each type is discussed in detail below.
2. Compliance offences
2.1 Compliance offences are administrative-type bankruptcy offences where an individual, whether bankrupt or not, has failed to comply with a legislated requirement under the Act or the Bankruptcy Regulations 1996 (the Regulations). Typically, these offences involve a failure by a person to provide the trustee or Official Receiver with specific information and/or documents and the matter can be dealt with, in the first instance, by way of a letter seeking voluntary compliance.
2.2 Compliance matters that are punishable by a term of imprisonment of six months or less (eg matters under sections 139U, 139ZO, 139ZIE, 139ZIEA and 80) have a 12-month statutory period of limitations (See section 15B of the Crimes Act 1914 (Cth)). This means prosecution actions must be commenced within 12 months of the commission of the offence or the matter cannot be actioned by way of a prosecution. Due to this time constraint, these matters will not be accepted for investigation if the referral is received within four months of the expiry of the statutory period of limitations. The reason these matters cannot be accepted is that it is probable the statutory period of limitations will expire before prosecution actions can be commenced.
2.3 In offence referrals pertaining to the alleged failing to comply with a trustee’s direction or a formal notice, there must be evidence accompanying the referral that the intended recipient received the direction or notice. Proof of notification in these instances can be supported by the provisions outlined below.
Proof of receipt of correspondence / notice
2.4 Confirmation of receipt of correspondence or notice may include:
- an Australia Post delivery confirmation receipt signed by the intended recipient
- an affidavit of personal service of documents
- a contemporaneously-made case note detailing a conversation or meeting with the bankrupt or individual during which their obligations are explained, directions given and/or documents served.
2.5 Not withstanding that Bankruptcy Regulation 16.01 allows for service of documents by other means, by itself this provision is insufficient for criminal prosecution standards.
Statement of affairs
2.6 Subsection 6A(2) of the Act states that:
'A reference in a provision of this Act referred to in subsection (1) to a statement of affairs is a reference to a statement that:
(a) is in an approved form; and
(b) includes a statement identifying any creditor who is a related entity of the debtor or bankrupt; and
(c) contains a declaration that, so far as the debtor or bankrupt is aware, the particulars set out in the statement are correct.'
2.7 In Wangman v The Official Receiver  FCA 202 the Federal Court also considered the extent to which a statement of affairs needed to be completed before it could be considered to be a valid statement of the debtor's affairs. In his judgment Jarrett FM stated that a statement of affairs form must carry sufficient information for it to be considered a statement of the debtor's affairs and to assist the trustee in the administration, otherwise it fails to comply with the Act.
2.8 Due to the operation of subsection 6A(2) of the Act and further supported by Wangman v The Official Receiver, the Official Receiver has a discretionary power to either accept or not to accept a statement of affairs as being a valid statement of the debtor’s affairs.
2.9 Should a trustee receive a completed or partially completed statement of affairs from a bankrupt, that document (or an original copy of it) should be forwarded to the Official Receiver for consideration as to whether or not it has been properly completed. It is not appropriate for trustees to make a determination as to whether or not such a document is properly completed and therefore acceptable to the Official Receiver. To facilitate this process, statement of affairs forms may be faxed, delivered or posted to any AFSA Registry or emailed to registry [at] afsa.gov.au
2.10 It is the Inspector-General’s expectation that trustees will ensure any statement of affairs form they receive directly from the bankrupt or the bankrupt's proxy is forwarded to the Official Receiver as soon as practicable. This expectation is in line with the trustee’s duty to take whatever action is practicable to try to ensure that the bankrupt discharges all of his or her duties under the Act (refer to paragraph 19(1)(g)). It is also important to ensure that the term of bankruptcy is not extended due to procedural inefficiencies. This gesture of client service will also serve to reduce the number of complaints made to the Regulator alleging that a practitioner allowed a statement of affairs to remain outstanding in order that they might benefit from a longer term of bankruptcy.
2.11 In instances where a trustee does not receive a statement of affairs form, the following criteria should be met before an allegation contrary to section 54 (failure to file a statement of affairs) is referred to AFSA Regulation and Enforcement:
- confirmation that the bankrupt has been advised of their bankruptcy status and their legal obligation to file a statement of affairs (see the proof of notification provisions in paragraph 2.4 of this Practice Statement)
- the proposed referral is within 12 months of the date the bankrupt was notified of their bankruptcy and the requirement to file a Statement of Affairs.
Matters in excess of 12 months will be considered where there are justifiable delays or hindrances in contacting the bankrupt.
2.12 At the conclusion of a prosecution for an offence contrary to section 54 of the Act and where the bankrupt continues to fail to file their statement of affairs, AFSA Regulation and Enforcement will consider re-prosecuting the matter if the trustee requests in writing that AFSA Regulation and Enforcement continue their involvement.
2.13 Failure to refer matters to AFSA Regulation and Enforcement that meet the above standards may constitute an AFSA Regulation inspection error as a breach of a trustee’s paragraph 19(1)(i) duty. If it is considered a breach has occurred, an inspection error will be recorded by AFSA Regulation and noted on the trustee’s file.
2.14 Trustees may choose not to refer matters to AFSA Regulation and Enforcement if the above criteria (paragraphs 2.9 to 2.13 inclusive) are not met. In these matters it may be prudent to make a notation on the administration file indicating that a referral to AFSA Regulation and Enforcement was considered; however, due to the requirements contained within this Inspector-General Practice Statement, the matter was not referred.
2.15 When a statement of affairs has not been filed and the trustee has evidence that the bankrupt is aware of their bankruptcy and the obligation to file a statement of affairs, the trustee may apply for a 77CA notice. When the Official Receiver issues a 77CA notice there will be no expectation that the trustee will refer an allegation of non-compliance with section 54 of the Act to AFSA Regulation and Enforcement.
2.16 The provision of information to the Inspector-General in these circumstances will be deemed compliance with the trustee’s obligations in accordance with paragraph 19(1)(i) of the Act in relation to referring a bankrupt for not filing their statement of affairs form.
3. Complex offences
3.1 Complex offences are those offences which do not fall within the definition of a compliance offence (administrative) and cannot be resolved by way of a compliance letter. Typical offences within this category may include subsections 263(1), 265(4), 265(5), 265(8), 267(1) and 269(1), and sections 266, 271 and 272. Generally speaking, complex offences are those that involve fraud and/or financial loss.
3.2 All complex offences are to be referred to AFSA Regulation and Enforcement for consideration. Failure to refer matters where there is sufficient information to indicate that an offence may have occurred may constitute an AFSA Regulation inspection error as a breach of a trustee’s paragraph 19(1)(i) duty. If it is considered a breach has occurred an inspection error will be recorded by AFSA Regulation and noted on the trustee’s file.
4. Objections to discharge
4.1 Where a trustee files an objection to discharge pursuant to section 149B of the Act and the grounds for the objection relate to conduct which could be defined as a 'complex' bankruptcy offence, the trustee, pursuant to section 19 of the Act, is also expected to refer the alleged conduct to AFSA Regulation and Enforcement for consideration.
4.2 Failure to refer matters where there is sufficient information to indicate that an offence may have occurred may constitute an AFSA Regulation inspection error as a breach of a trustee’s paragraph 19(1)(i) duty. If it is considered a breach has occurred, an inspection error will be recorded by AFSA Regulation and noted on the trustee’s file.
5. Referral forms
5.1 An individual offence referral form is to be completed for each alleged offender. Each referral requires information to be provided, such as the alleged offender's details, a summary of the alleged offender's conduct and a list of all relevant documents. Care should be taken to provide all relevant information in possession of the trustee.
5.2 Template offence referral forms are accessible from the AFSA website at www.afsa.gov.au.
5.3 The following documentation is to be attached to every offence referral as a minimum:
- a copy of the sequestration order (if relevant)
- a copy of all letter(s) sent to the alleged offender
- copies of all file notes
- copies of Bankruptcy Act notices (eg 77C, 77A, 139V, 6A(3), 139ZL)
- proof of service/notification (if applicable)
- copies of any other information or documents that relate to the allegation (eg bank statements, title searches, account applications, loan documentation etc).
5.4 The proper completion of the offence referral form and the inclusion of all relevant documents best enables AFSA Regulation and Enforcement to properly assess the complaint. If a referrer is unsure if a piece of information is relevant or not, it would be prudent to attach it to the referral for AFSA Regulation and Enforcement's consideration and determination. If there is insufficient information attached to the referral the matter may be rejected by AFSA Regulation and Enforcement.
5.5 If there is any doubt about referring a matter to AFSA Regulation and Enforcement, trustees should contact any Enforcement office (via 1300 364 785) and seek advice. A notation can then be made on the relevant administration file detailing the contact that was made with Enforcement and this notation will address a trustee’s section 19 duty and reporting obligations.
6. Further information
6.1 For more information please contact AFSA Regulation and Enforcement at fraud.enquiries [at] afsa.gov.au