In the end, the bankruptcy of Mr Hartnett following the Inspector-General in Bankruptcy’s challenge to his Part X personal insolvency agreement (PIA) came down to whether the PIA remained “in force” in terms of s 222(1) of the Bankruptcy Act. It did.
That the PIA would have returned ‘only’ 2.165c/$ was not in issue, not too much below the current PIA average of 3.73c/$.
The law is such that who [of the ‘wealthy’] owns assets nowadays?
Any comprehensive review of the insolvency system will need to consider what impact this has on its purposes and aims.
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The appeal decision in Hartnett came down to a question of statutory interpretation, whether, in circumstances where the personal insolvency agreements (PIA) was fully executed and completed by the time of the application to the Court, it could be set aside pursuant to s 222(1) of the Bankruptcy Act on the basis that it remained “in force”.
Hartnett argued that as the PIA was fully executed and completed by the time of the application to the Court, it was no longer “in force” and therefore the trial Court did not have power to set it aside.
In the circumstances of this case, the Full Court agreed with the trial judge that the PIA was “in force” under s 222(1), although fully executed and completed, by its terms. Hartnett v Inspector-General in Bankruptcy [2025] FCAFC 190 (17 December 2025)
Return to creditors
PIAs
That the PIA offered $15,850 for debts of $4,450,980, being an estimated return of 2.165 cents in the dollar, was not in issue.
Nevertheless, given the low returns across insolvency generally, that percentage is not exceptional.
In fact, in 2024-2025, within the 133 personal insolvency agreements finalised in 2024–25, unsecured creditors received an average of only 3.73 cents in the dollar. This has fallen from 10.36 in 2022-23, to 8.24 in 2023-24 and now 3.73 in 2024-25. That is
Decline in returns to creditors in Part X PIAs
10.36c/$ 2022-23
⇓
8.24c/$ 2023-24
⇓
3.73c$ 2-24-25
Bankruptcy
As for bankruptcy itself, it averages 0.09c/$ for the Official Trustee, and 2.61c/$ for registered trustees.
A reason for setting aside a PIA can be to allow greater investigations in bankruptcy, and access for example to voidable transaction provisions, although the latter are available in a PIA anyway.
But recoveries from voidable transactions have always been low, accounting for under 4% of total receipts in bankruptcies in 2024-25.
Changes in assets and asset holdings
The change from hard assets to the ‘tertiary economic sector’ reduces monetary recoveries. Trusts, equitable and family law claims impede or prevent access to assets such that insolvency generally has become less effective in giving a return to creditors, if it ever did.
As I have said before, things are often not as they seem, noting judicial comments that
“(c)reditors should be expected in these times to be aware of the possibility of constructive trusts or of equitable interests which may arise when the debtor is married or in a de facto relationship”.
See Clout v Markwell [2001] QSC 91 at [21], Atkinson J. See also Keay’s Insolvency 11th ed at [4.132-4.135]: See Ownership is sometimes but not always as it seems – presumptions for, presumptions against, and evidence – Murrays Legal.
Any comprehensive review of the insolvency system as recommended by the 2023 PJC report will need to consider what impact this has on its purposes and aims: see Rebuilding the structure of the Australian insolvency system (2022) 22 INSLB 14, Murray & Harris.
Bankruptcy of Mr Hartnett
It will be interesting to see if the bankruptcy of Mr Hartnett produces more than the estimated return of 2.165c/$ under the PIA and goes on to exceed the average 2.165c/$ for trustees generally, and at what cost.
