What you need to know
An Official Trustee in Bankruptcy has extensive powers to investigate the affairs of a bankrupt - including the right to force third parties to produce documents to them.
An Official Trustee in Bankruptcy has the power to investigate the conduct and affairs of a bankrupt person and the books, accounts and records kept by the bankrupt. This power extends to an ability for the Official Trustee in Bankruptcy to require an associated party to produce documents relating to the bankrupt person, pursuant to notice under section 77A of the Bankruptcy Act 1966 (Cth). What do you need to consider if you are served with a Section 77A Notice to produce documents?
If you are served with a Section 77A Notice, you will only be required to produce the documents if:
the documents sought are for the legitimate purpose of the examinable affairs of the bankrupt;
you are an associated entity of the bankrupt; and
you do not have a reasonable excuse for not producing the documents.
Examinable Affairs of the Bankrupt
If you are reasonably able to say that a particular document does not relate to the examinable affairs of the bankrupt, you are justified in not providing the documents requested under a Section 77A Notice.
The examinable affairs of the bankrupt include the financial affairs of an associated entity, in so far as they are, or appear to be, relevant to the bankrupt person or to any of his or her conduct, dealings, transactions, property and affairs.
Associated Entity of the Bankrupt
You are required to comply with a Section 77A Notice if you are an associated entity of the bankrupt.
Different rules apply depending upon whether a Section 77A Notice is directed to a company, natural person, partnership or trust.
Some of the circumstances in which a company is considered an associated entity are where the bankrupt is or was a company officer or a member of the company, if the bankrupt is financially interested in the company’s success or if the bankrupt is owed a debt by the company.
Examples of when a natural person is considered an associated entity of a bankrupt are where the bankrupt holds property jointly with person, the bankrupt is a trustee of a trust under which the person is capable of benefiting, the bankrupt is employed by the person, the bankrupt gives professional advice to the person or the bankrupt is given profession advice by the person.
If you have a reasonable excuse for non-compliance, then you won’t be required to comply with a Section 77A Notice.
A reasonable excuse is an excuse which would be accepted by a reasonable person to justify non-compliance. You must establish a particular prejudice in producing the documents. For example, a reasonable excuse may include physical or practical difficulties for you in complying with the notice.
Caution must be exercised when determining whether compliance is required, due to the extensive consequences against an unjustified failure to fully comply.
If you are served with a Section 77A Notice and you are unsure whether you are required to comply, you should consider seeking professional legal advice as a matter of urgency.
About the author
Peter’s areas of expertise are probate law and litigation, commercial litigation, and employment law. He is a member of the Elder Law and Succession Planning Committee of the Law Society of Western Australia, and is a full member of the Society of Trust and Estate Practitioners.