A bankrupt has successfully obtained a copy of a s 77A notice to produce served by his trustees on the police which resulted in 600,000 documents being produced. The bankrupt’s request was made under s 70-56 to Schedule 2 to the Bankruptcy Act, which relevantly allows the bankrupt to request information etc. from trustee. The bankrupt wanted to take advice whether or not there had been any unacceptable over-reach by the trustees as to the type of documents which had been sought.
The trustees’ reasons for refusing to provide the s 77A notice were found to be inadequate. They had commenced an investigation pursuant to s 19AA of the Bankruptcy Act. Some 600,000 documents had been produced by the police in response to the notice.
Section 70-56(2) of Schedule 2 provides that the trustee must comply with any such request unless it would be unreasonable. This requires persuasive evidence to be positively adduced by or on behalf of the trustees so as to enable the Court to at least infer that production of the notice would be unreasonable. No such persuasive evidence was here adduced; rather, there were merely general statements going to the criteria which were legislatively required to be satisfied under the section.
Those criteria come from section 70-17(1) of the IPRB made for the purposes of s 70-56 of the IPSB.
Unreasonable requests
70-17(2) It is not reasonable for the trustee of a regulated debtor’s estate to comply with a request to give information, provide a report or produce a document to the regulated debtor if the trustee, acting in good faith, is of the opinion that:
(a) complying with the request would substantially prejudice the interests of one or more creditors or a third party and that prejudice outweighs the benefits of complying with the request; or
(b) the information, report or document would be privileged from production in legal proceedings on the ground of legal professional privilege; or
(c) disclosure of the information, report or document would found an action by a person for breach of confidence; or
(d) there is not sufficient available property to comply with the request; or
(e) the information, report or document has already been provided; or
(f) the information, report or document is required to be provided under the Act (including regulations made under the Act) within 20 business days of the request being made; or
(g) the request is vexatious.
The reasons given by the trustees here were
“so general, lacking in precision, formulaic and non-specific as to be of insufficient weight to justify non-compliance with the Notice”.
The Court would not even infer that the trustees were acting in good faith and reasonably simply because they were conducting an ongoing investigation into the bankrupt’s affairs.
The actual receipt by the trustees of a huge volume of documents without the trustees having explained why it was necessary for these to be examined prima facie lacked transparency. The due administration of justice required that a more considered and fulsome explanation be given by the trustees as to why they resisted showing the bankrupt the s 77A notice.
The Court itself read the s 77A notice and found that the bankrupt would gain no forensic advantage by being made aware of its contents.
Rutherfurd v Offermans [2023] FedCFamC2G 60 (6 February 2023) (austlii.edu.au)
Comment
Under the former law, s 170(2) of the Bankruptcy Act provided that the “trustee shall, at the request of the bankrupt, furnish to the bankrupt information reasonably required by the bankrupt concerning his or her property or affairs”. A request for information by a bankrupt concerning the trustee’s investigations was refused by the Court in Dudley v White [2009] FMCA 1329.
Since the Insolvency Law Reform Act 2016 reforms, the onus is on the trustee to justify any refusal to provide documents or information, as this case shows.
As to the s 77A notice, it could be and was issued by the trustees themselves, without being vetted by the Official Receiver. While the Court found that the bankrupt would gain no advantage by seeing the notice, if he wanted to take advice whether there had been any unacceptable over-reach by the trustees as to the documents sought, the fact that the s 77A notice produced 600,000 documents might raise some issues.
