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Personal Insolvency Regulator
This client newsletter by ITSA’s independent Regulation and Enforcement branch will be issued each quarter to registered trustees, registered debt agreement administrators and controlling trustees. In keeping with one of Regulation and Enforcement branch’s main purposes it is aimed at informing practitioners of changes to personal insolvency law, both legislative and case law, and discussing areas of practice and Inspector-General requirements. ARTICLES ARE WELCOME and can be forwarded by email to br.qld@itsa.gov.au This issue is also available as a PDF document.
1. Inspector-General’s Column a. ITSA’s New National Business Line Structure commences on 1 July 2009 ITSA’s new national business line structure commences on 1 July 2009. I am confident that the new structure will deliver increased transparency, flexibility, clearer accountability and improved decision-making processes. Most importantly, the new structure also will enable seamless, consistent and efficient delivery of services to our stakeholders, no matter where they are located. The new structure comprises five business lines led by National Managers who report to the Chief Executive and are members of the National Management Board (NMB). There will no longer be five Official Receivers based on state lines and ITSA will no longer have a branch operating structure. The new business lines, and the names of their National Managers are:
b. RDAA Professional Development Day – 2 September 2009 Planning is well underway for the next RDAA Development Day in Sydney on Wednesday 2 September 2009. Administrators are encouraged to share their views on what topics they would like to see covered on the day. Please keep your ideas coming direct to Jeff Hanley or Tim Cole of our Regulation and Enforcement business line at tim.cole@itsa.gov.au. I will again be attending and look forward to meeting all administrators in Sydney in September. Veronique Ingram, Inspector-General in Bankruptcy and Chief Executive 2. Trustees and their lawyers – need for independence
Generally therefore, retention of lawyers and other advisers is within the trustee’s power. That decision must be exercised with professional judgment, in terms of relevant experience, cost, timeliness and so on. In general terms, the Federal Court has said that an insolvency practitioner “will shop around to ensure that he obtains the services of good lawyers (solicitors and counsel) at the best possible rate. Personal relationships should not obscure the practitioner’s duty. The sole selection criteria should be the benefit to him as a litigant. So he will avoid cosy relationships with solicitors and counsel. He will negotiate over fees with both solicitors and counsel. He will closely monitor the fees as they are incurred”. Deciding on legal assistance is all a matter of professional and commercial judgment for the trustee. One aspect of that judgment is to ensure that independent lawyers are engaged. The Federal Court has said in one case: The authorities emphasise that a trustee in bankruptcy must take the greatest care to avoid the potential for conflict. In my opinion what has been written about a trustee's responsibilities applies with equal force to a solicitor who acts for a trustee. Southern Hotels Pty Ltd, in the matter of Temple [2000] FCA 1406 The following cases illustrate the need for caution in engaging lawyers who acted for, or have acted for, a creditor, and they also show that much will depend on the extent to which the relevant creditor’s claim is subject to challenge or inquiry by the trustee. Henderson & Ball v Spackman In Henderson & Ball v Spackman [2003] FMCA 466
The Court there took a strict view. It said: In my opinion, and bearing in mind that H&B: a) had previously acted for Mr Spackman (including in relation to the very matter which had generated the legal fees that Mr Spackman had not paid and which had been the genesis of the application for the sequestration order); and b) had itself been the petitioning creditor, H&B should not have acted for Mr Goodin at any time. While the court was critical of the fact that those solicitors had acted for the trustee, it also found that the trustee had properly investigated the claims of all the creditors and that he had “approached and discharged his obligations as trustee properly and in good faith”. That is, it was not a matter of the trustee not acting properly, or, for that matter, the solicitors, but the trustee had allowed a situation to arise where there was a perception of lack of independence to exist. 1. Southern Hotels Pty Ltd, in the matter of Temple [2000] FCA 1406 2. [2003] FMCA 466 Southern Hotels Pty Ltd In another case, Southern Hotels Pty Ltd, in the matter of Temple [2000] FCA 1406, the facts were:
In that case, counsel for Southern Hotels had argued that Hynd and Co was in "a hopeless position of conflict" and it could not advise the trustee impartially about the admissibility of a large claim by its client (the Weeks) nor could it advise the trustee impartially about the admissibility of the other large claim (that of Southern Hotels) when its client and Southern Hotels were inimical to the interests of each other. The trustee had in fact earlier written to the parties saying that while he accepted there was a potential for conflict, “if an actual conflict arises he would act accordingly. However it is our opinion that this matter is to be resolved between the trustee, the creditors represented by Messrs Hynd & Co and the solicitors themselves and should not be the concern of third parties”. Underlining added. As the Judge pointed out, the “test is not whether there is a situation of conflict: the test is whether there might be, in the eyes of a reasonable person, a perception of conflict. Such a perception might arise, for example if the solicitor who is advising the trustee is also acting for a creditor who has made a contentious claim against the estate. Importantly, the Court summarised the law like this: It would not be wise to make a global statement that a trustee could never use the service of a solicitor who also acts for a large creditor; indeed there might be occasions when the services of such a solicitor might be beneficial to the estate. However, at any reasonable suggestion of conflict, it would be wise for the trustee to emphasise that mantle of independence and impartiality by ensuring that his legal adviser has had no prior or current relevant contact with any of the disputants”. In particular, the court is saying that it may be beneficial for a trustee to engage lawyers who have acted for the creditor. Those solicitors and their client may be very familiar with the affairs of the debtor whom the creditor has been suing. In the absence of any challenge or dispute about that creditor’s debt, or any other issue of independence, those solicitors will often be the best choice. This could also be the case where an indemnifying creditor asks that its lawyers act for the trustee. 1. [2000] FCA 1406 2. Underlining added. Re Pruzanski As another example, Re Pruzanski; Ex parte Horne [2000] FCA 151 supports this proposition that a solicitor for a trustee in bankruptcy should not have the dual role of also being a solicitor for a major creditor in the bankruptcy if there is appropriate and reasonable opposition to that duality from another major creditor. In that case the applicant sought the removal of the trustee and sought the orders restraining a particular firm of solicitors from further acting on behalf of the trustee due to a conflict of interest. The solicitors also acted for a bank, an alleged creditor of the Pruzanski family. The trustee sought to be indemnified by persons or entities claiming to be creditors of the family in respect of legal costs for the conduct of public examinations. The bank was the only creditor who agreed to indemnify the trustee unconditionally. When other creditors realised that the bank was to fund the legal costs of the trustee, representatives of two creditors raised the issue of a possible conflict of interest. The alleged conflict arose because the solicitors, who were acting for the bank in relation to the bank's claims against the Pruzanskis, were also acting for the trustee. Justice Marshall held that there was a clear conflict of interest existing between the solicitor's duty to assist the bank to defeat the claims of the other creditors and the solicitor's duty to assist the trustee to determine impartially the validity of the claims of all creditors. He ordered that the solicitors be restrained from further acting on behalf of any trustee who may be appointed by the court to administer the bankruptcies of the four Pruzanski family members. The trustee had to therefore find new lawyers. Boensch v Pascoe One final decision concerned a trustee taking advice from the solicitor for a creditor at a meeting where that creditor was “clearly in conflict with other persons at the meeting about the question whether the trustee should continue as trustee”: Boensch v Pascoe. [2007] FCA 1977 The Court acknowledged that the solicitor was seen by the trustee as a source of reliable professional advice but the Court thought it unwise of the trustee to have allowed the position that arose to develop. Summary
Overall, the law expects both trustees and lawyers to be aware of their respective professional obligations to maintain independence and observe the relevant principles. Guidance for trustee and liquidators on independence is given in the Schedule 4A Performance Standards (Part 2 Division 2.2, paragraph 2.3) and also in the IPA Code of Professional Practice (Chapter 6). Michael Murray Legal Director Insolvency Practitioners Association mmurray@ipaa.com.au 1. [2000] FCA 151 2. [2007] FCA 1977 3. APES 330 Insolvency Services Exposure Draft The Accounting Professional & Ethical Standards Board (APESB) sets professional and ethical standards for members of the Institute of Chartered Accountants in Australia, CPA Australia and the National Institute of Accountants (accounting bodies). The existing professional standard for accountants APS 7 Statement of Insolvency Standards was issued in March 1998. During the last decade there have been significant developments in insolvency services which make the existing APS 7 out of date. Accordingly, the APESB established an Insolvency Services Taskforce in February 2008 to inform the development of the APES 330 exposure draft (ED). Taskforce members consisted of subject matter experts drawn from the Insolvency Practitioners Association of Australia (IPA) as well as representatives of firms and the accounting bodies. The Taskforce took into account the Code of Professional Practice issued by the IPA in May 2008. The ED has been primarily written for formal appointments undertaken by accountants in public practice under the Bankruptcy Act 1966, the Corporations Act 2001 or any other legislation. The fundamental responsibilities of members of the accounting bodies relating to professional independence, professional competence and due care, confidentiality and marketing have been revised in line with APES 110 Code of Ethics for Professional Accountants. The ED includes provisions which prohibit accountants from marketing their services when they place advertisements in accordance with statutory requirements. Professional independence requirements for accountants in public practice who undertake formal appointments have been significantly revised and stipulate that accountants must determine whether there are threats to their independence prior to accepting an appointment. The ED states that only trivial or inconsequential threats can be safeguarded against. Members of the accounting bodies have an obligation to consider prior or existing professional relationships with the insolvent entity as these relationships can create actual or perceived threats to the accountant’s independence. Where there are threats to an accountant’s independence and the accountant wants to accept or continue an appointment, the accountant must obtain court approval. The ED prohibits members of the accounting bodies from providing advice to an insolvent entity as well as the insolvent entity’s directors in a personal capacity. An accountant is also prohibited from accepting an appointment which results in payment of referral or recurring commissions, spotters’ fees, or any other arrangements that restrict the proper exercise of the accountant’s judgement. The ED includes a mandatory requirement for accountants in public practice provide a Declaration of Independence and Relevant Relationships and Indemnities which includes:
The ED includes a prohibition that accountants in public practice or their employees cannot derive a benefit from dealing with the insolvent entity’s property, without the prior approval of the court. The ED also includes requirements for an accountant who is asked to act as an expert witness during the course of an administration. The expert witness requirements are based on the professional standard APES 215 Forensic Accounting Services issued by the APESB. The professional fees and expenses section has been substantially revised and updated in the ED. It states that an accountant in public practice can only claim professional fees and expenses that are necessarily incurred for the administration. Where the accountant’s firm provides other professional services to the administration, the ED mandates that the related fees must be claimed as professional fees and not expenses. The accountant can only draw fees once the proper authority has been obtained from the approving body. Where an accountant in public practice receives money prior to acceptance of an appointment, the accountant must hold this money in trust and obtain appropriate approval prior to withdrawing funds from the relevant trust account. It is expected that APES 330 will be issued in late June 2009 and will be effective from 1 January 2010 with early adoption permitted. Readers are encouraged to visit www.apesb.org.au to obtain the latest information on the Code and Professional Standards for members of the accounting bodies. Channa Wijesinghe CA, CPA Senior Project Manager APESB 4. Debt Agreement Practitioners Association (“DAPA”)
DAPA is pleased to advise that not only have a number of practitioners joined as full members but a major creditor has also expressed genuine interest to join as an Associate Member. Membership entitles the member to display the DAPA logo on all stationery and a Certificate of Membership will be issued. All members will be published on the DAPA web site shortly. Regulation 9.02 Regulation 9.02 of the Bankruptcy Regulations relates to prescribed qualifications that registered debt agreement administrators are to have attained by 1 July 2009. is effective 1 July 2009 so now is the time for all practitioners who intend to remain in the profession to join DAPA and form a cohesive body that will effectively represent members for the benefit of all operators including brokers, facilitators and employees. As you would be aware, 2010 will see a further review of the Bankruptcy Act and it is essential that the views of all DAPA members be expressed and considered in order for submissions to be made to that review. Being bound to a professional code of practice is an essential element of acceptance as a professional body and prospective members should peruse the Code thoroughly before seeking membership. Anthony Warner Executive Director DAPA 5. Comparative Study on the Insolvency Profession ITSA recently participated in an international comparative study on the development of the insolvency profession and assessment of its performance. The studies’ findings provide a useful tool for comparison of international insolvency regimes. The Legal and Executive Support team was greatly assisted in formulating its responses to the questionairre by Michael Murray, Legal Director of the IPA, and Tim Cole and Annette Moodie from Regulation & Enforcement. Background to IAIR The International Association of Insolvency Regulators (IAIR) is an international body of government insolvency regulators. Member countries meet annually to share experiences and expertise and to discuss developments in their respective jurisdictions. IAIR was formally established at a meeting in Hong Kong in November 1995 and attended by representatives from Australia, Hong Kong, India, Jersey, Malaysia, New Zealand, Singapore, United Kingdom and United States of America. This core group became the founding members of IAIR. Membership of the organisation has more than doubled since its formation. IAIR describes its aim as ‘to promote liaison and co-operation and provides a forum for discussion amongst insolvency regulators. The Association thereby contributes to a wider understanding of insolvency issues, procedures and practices and the development of approaches that reflect the different legal, socio-economic, historical, cultural and institutional frameworks of the member countries from which members come’. 1. Regulation 9.02 of the Bankruptcy Regulations relates to prescribed qualifications that registered debt agreement administrators are to have attained by 1 July 2009. Activities As well as annual meetings, it conducts workshops for the benefit of non member government agencies. An IAIR Workshop was held in Vancouver on 21 June 2009. The workshop covered topics such as the global financial crisis, fraud in the insolvency process and the importance of institutional strength (practitioners, courts and regulators) in supporting a well functioning insolvency system. Terry Gallagher, former Inspector-General in Bankruptcy and current IAIR Executive Director, attended. The comparative study is one of a number of projects conducted by IAIR. Members were required to complete a detailed questionnaire. Topics covered by the questionnaire included licensing; training and education; work capacity; performance standards; funding for the realisation of assets; remuneration; monitoring and supervision; and sanctions for breach of duty. ITSA’s response was comprehensive, and comprised 29 pages. The draft report of the study is expected to be presented at the next IAIR General Meeting and Conference and shared among members. The final report will be placed on the IAIR website subsequently. 6. Knowledge Management - Index of Personal Insolvency Regulator articles I am pleased to announce the uploading to ITSA’s Internet of an A to Z index of all Personal Insolvency Regulator (PIR) articles and Inspector-General Practice Directions and Practice Statements. You can access the facility by clicking on this link. This index & search tool will be a useful knowledge management reference point for all ITSA stakeholders. It offers a useful and practical guide to personal insolvency knowledge that is generated by our quarterly publication. This index will be expanded upon as each new PIR, I-GB Practice Direction or I-GB Practice Statement is published. Your feedback is welcome at any time - to either myself or Tim Cole at tim.cole@itsa.gov.au. Jeff Hanley Acting National Manager Regulation and Enforcement 7. Prosecution Statistics remain high ITSA’s Enforcement unit has again experienced an increased number of persons being prosecuted, with year to date statistics revealing 189 persons being convicted of 294 charges. This compares to 169 persons being convicted of 225 charges for the same period last year - an increase of 11.8 %. In addition to the 189 convictions, 32 persons have been prosecuted for 35 offences with no convictions recorded. While a large portion of the persons convicted were prosecuted for compliance related offences (eg not filing a statements of affairs) there was a large number of persons convicted of more serious offences and sentenced to terms of imprisonment. As a result of our close working relationship with the Australian Federal Police and State Police Departments, several persons were charged with a combination of Bankruptcy Act 1966 and state criminal charges. These matters tend to attract higher penalties by providing the relevant Courts with a clearer indication of the level of criminality by the offending bankrupt. Some of the Australia-wide prosecution results for the current financial year include: Queensland bankrupt George Carras convicted of obtaining property by fraud to the value of $358,392 from a number of victims in the Southeast Queensland area. Mr Carras was sentenced to six years imprisonment to be released after serving two years and two months in jail. The Official Trustee, Queensland was the referrer and trustee for Mr Carras. Western Australian bankrupt Colin Bloomfield convicted of making a false declaration, failing to disclose property to his trustee and obtaining $15,000 in property by fraud. Mr Bloomfield was sentenced to 10 months imprisonment to be released forthwith upon entering into recognisance in the sum of $10,000 on the condition that he be of good behaviour for five years. The Official Trustee, Western Australia was the referrer and trustee for Mr Bloomfield. Victorian bankrupt Peter Koumaros convicted of obtaining $114,900 by fraud and incurring $33,000 in debts without a reasonable expectation of being able to repay the debts. Mr Koumaros was sentenced to six months imprisonment to be served by way of an Intensive Correction Order. Rotman & Morris Solicitors, Melbourne were the referrer for this matter. Northern Territory bankrupt Shannon Condon convicted of obtaining $240,000 in credit without disclosing his bankruptcy status. Mr Condon was sentenced to an aggregate of two months imprisonment, released forthwith upon entering into a recognisance in the sum of $1,000 on the condition that he be of good behaviour for a period of 12 months. Paul Pattison, Melbourne was the referrer and trustee for Mr Condon. NSW bankrupt Leigh Gordon Bagshaw convicted of obtaining goods and services amounting to $66,320 without informing the persons he dealt with he was an undischarged bankrupt. Mr Bagshaw was discharged without proceeding to conviction and entered into recognisance in the sum of $3,000 on the condition that he be of good behaviour for three years. Phil Jefferson, Brisbane was the trustee and referrer for Mr Bagshaw. South Australian bankrupt Constantinos Gounas convicted of making a false declaration and obtaining goods and services amounting to $18,789 without informing the person he dealt with he was an undischarged bankrupt. He was sentenced to 22 months imprisonment to be released after serving nine months jail upon entering into a recognisance in the sum of $100.00 to be of good behaviour for 2 years. David Highet of Westlake Shores South Australia was the referrer for this matter. Tasmanian bankrupt Kerrie Cann convicted of removing $7,029 from her estate after bankruptcy. Ms Cann was sentenced to one month imprisonment to be released forthwith on the condition that she be of good behaviour for a period of three years. The Official Trustee, Tasmania was the referrer and trustee for Ms Cann. We would like to thank all the referrers and those who provided assistance and support to BFI this financial year. We understand that this can be time consuming, however your assistance has enabled BFI to make a great contribution to the integrity of the personal insolvency system. John Maloney Business Manager Enforcement Northern Region Regulation and Enforcement 8. Changes to Forms a. Consents to Act Situations have occurred recently where registered trustees have filed Consent to Act forms with the Official Receiver without providing supporting documentation that would assist the Official Receiver to link that Consent to a specific Creditor’s Petition or other personal insolvency administration. There have also been situations where more than one registered trustee has filed a Consent in relation to the same debtor. On occasions this has caused the Official Receiver to inadvertently appoint the wrong trustee. To minimise these instances in the future, the Consent to Act form is being changed to allow a trustee to clearly indicate on the form the type of administration that they are consenting to along with the appropriate reference number. This will enable ITSA to match the consent to the correct administration. The new form will be effective from 1 July 2009. You can view the new form on ITSA’s website www.itsa.gov.au>Trustees>Forms for trustees b. Debtors Petition The Debtor’s Petition form is being changed from 1 July 2009. Debtors often omitted to sign the Debtors Petition as the signature panel was contained on the second page. The form has been reformatted so that all required data fields are on the first page of the form. Following client feedback, we have also taken the opportunity to review how the prescribed information is presented to the debtor. The prescribed information now appears on the second page of the Debtors Petition form. There are short paragraphs containing information relevant to most debtors presenting a petition for bankruptcy. More detailed information on relevant topics will continue to be carried in the Personal Insolvency Information booklet. You can view the new form on ITSA’s website at www.ITSA.gov.au>Debtors>Forms for debtors. The Instructions, Debtors Petition form and the Statement of Affairs will be available for download as a single package for the convenience of clients. Ordering Debtor Packs Trustees can order Debtor Packs containing the new form from ITSA. Orders should be placed using the order form on ITSA’s website (Trustees>Forms>Debtor Pack order) and emailing it to info@itsa.gov.au. The pack contains a fact sheet on the latest indexed amounts. The next update of the indexed amounts is expected towards the end of July. It is recommended that you only order stocks that you expect to use within a month. Dipen Mitra Assistant National Manager Information & Registry Email: Dipen.Mitra@itsa.gov.au 9. Recovery of Superannuation Contributions The Bankruptcy Legislation Amendment (Superannuation Contributions) Act 2007 was enacted on 15 April 2007. These amendments enable the recovery by a trustee of superannuation contributions made to defeat creditors, and abolished the reasonable benefits limit. The amendments were introduced to allow trustees to recover superannuation contributions that were made prior to bankruptcy with the intention of defeating creditors, and also allow the recovery of contributions by a person other than the bankrupt, for the benefit of the bankrupt, where the bankrupt’s main purpose in participating in the arrangement was to defeat creditors. The High Court’s decision in Cook v Benson (2003) 53 ATR 195 triggered the amendments as it was found that the existing provisions dealing with undervalued transactions and transfers to defeat creditors (sections 120 and 121 of the Bankruptcy Act 1966) did not adequately address these situations. The reason for this was that the High Court found that the contributions were made in return for rights and benefits under the superannuation policies and accordingly there was valuable consideration provided. As such, prior to the amendments, the funds transferred into superannuation for the benefit of a bankrupt could not be “clawed back.” Pertinent dates The amendments came into effect on 15 April 2007 and apply only in relation to contributions made after 26 July 2006. Has there been a voidable contribution? A superannuation contribution made by a bankrupt for his or her benefit is void against the trustee, pursuant to section 128B of the Bankruptcy Act 1966 (the Act) if:
An eligible superannuation plan is defined in the legislation to mean any of the following:
A superannuation contribution made by a third party for the bankrupt’s benefit is void against the trustee pursuant to section 128C of the Act if: The contribution was made on or after 27 July 2006;
The definition of “scheme” is very broadly defined in order to capture any arrangement a person may make to defeat creditors which involves converted money or property which would otherwise be available to a trustee in bankruptcy to an interest in superannuation. An example would be a salary sacrifice arrangement with an employer. Evidence required A trustee needs to establish that the transfer was made to defeat creditors. It is inferred that the purpose in making the transfer was to defeat creditors if, the transferor was, or was about to become insolvent. In determining whether the main purpose was to defeat creditors a trustee can consider the pattern of making superannuation contributions and whether the contributions made were out of character in view of that pattern. If a trustee is not relying on these measures, the trustee would require other reasons and evidence to support the claim that the transfer was made to defeat creditors. Recovery of contributions If a trustee considers that there has been a void contribution, the trustee can either make an application to the Court for an order, under section 128B or 128C of the Act; or request the Official Receiver to issue a notice under subsection 139ZQ(1)(c) of the Act to the trustee of the superannuation plan to pay the void contribution to the bankruptcy trustee. In the case that the void contribution has been rolled over, a Court application under section 139ZU of the Act would be required. Interim measures – superannuation account freezing notice If a trustee believes there has been a void contribution under section 128B or 128C, or a trustee has made an application to Court under section 139ZU (where the funds have been transferred to another fund), the trustee can apply to the Official Receiver for a Superannuation account freezing notice, pursuant to section 128E. The freezing notice will prevent the bankrupt from dealing with the superannuation interest without the consent of the Official Receiver. If a notice is issued, the trustee of the plan, the bankrupt or another interested person can apply to Court to have the notice set aside, pursuant to section 128J. The freezing notice is automatically revoked if any of the following events occur:
The Official Receiver may make an application to the Court to extend the 180 day period before the freezing notice lapses. Abolition of The Reasonable Benefits Limit (RBL) Prior to these amendments, moneys held by a bankrupt in a regulated superannuation fund, or approved deposit fund up to the RBL were protected from any claim by the trustee of a bankrupt estate. The RBL was removed by legislation on 1 July 2007. As a result, there is no limit to the amount of money that a bankrupt may hold in a regulated superannuation fund, or approved deposit fund. This amendment applies to both pre and post 1 July 2007 bankruptcies. Helen Karalemas Inspector Regulation Central Region Regulation and Enforcement 10. Family Tax Benefit and Bankruptcy A recent case of a bankrupt who justifiably complained about her trustee claiming her FTB payment of $4500 as property in the bankrupt estate indicated that there may be a lack of understanding on the part of trustees about the status of Family Tax Benefit in bankruptcy. Family Tax benefit is a payment intended to help with the cost of raising dependent children. It is neither income for the purposes of the Bankruptcy Act nor is it property. Bankruptcy Regulation 6.12C specifically excludes FTB from the definition of income in the Bankruptcy Act: Family assistance and social security payments (1) For subparagraph (b) (v) of the definition of income in section 139L of the Act, the following payments or amounts are not income of a bankrupt: (a) a payment or amount of family tax benefit paid under the family assistance law; (b) an amount that is not income for the purposes of the Social Security Act 1991 because of subsection 8 (8) of that Act, except for a payment or amount mentioned in paragraph (a), (h), (ha), (k), (ka), (m), (z), (za) or (zb) of that subsection”
(1) Payments of the following are absolutely inalienable, whether by way of, or in consequence of, sale, assignment, charge, execution, bankruptcy or otherwise: (a) family tax benefit; (b) family tax benefit advances; (c) baby bonus; (d) maternity immunisation allowance; (e) child care benefit; (ea) child care tax rebate; (f) payments under section 219Q or subsection 219QA(2) in respect of fee reduction; (fa) payments of enrolment advances under section 219RA; (g) one-off payment to families; (h) economic security strategy payment to families; (i) back to school bonus or single income family bonus. (2) For this regulation, family assistance law has the same meaning as in the A New Tax System (Family Assistance) (Administration) Act 1999 .”
11. BR People Andrew Robinson, National Manager Bankruptcy Regulation, recently returned to work with ITSA after an extended period of leave. Andrew is currently working on several important projects using his extensive knowledge of personal insolvency administration. We all look forward to his full return to work later this year. I also take this opportunity to introduce Katrina Woodrow, one of the Senior Inspectors in our North West Region.
Jeff Hanley Acting National Manager Regulation and Enforcement 12. Trustee Information Sessions As mentioned in the March 2009 edition of the Personal Insolvency Regulator, BR is continuing to roll-out educational sessions around the country. On 30 April, 1 May & 7 May 2009, Bankruptcy Regulation (BR) held Trustee Information Sessions in Sydney for trustees and their employees. Over 70 trustees and employees were in attendance over the course of three days. This same session was repeated for Adelaide based trustees and their employees on 16 June 2009. These sessions again focussed on issues regarding joint and separate estates, the Inspector-General Practice Statement 10 which relates to complaint handling and all sessions were very well received. If you are a Sydney or Adelaide based registered trustee and were not able to attend the session but would like a copy of the material provided, please contact Mark Findlay at mark.findlay@itsa.gov.au. Further updates on BR's ongoing educational role in the industry will be provided as we move forward. If you have any queries in the interim or ideas for topics you would like covered in future sessions please contact Tim Cole, BR's Practice Manager at: tim.cole@itsa.gov.au Mark Findlay Business Manager Regulation Central Region Regulation and Enforcement 13. Changes to ITSA NPII Search Service from 1 July 2009 As of 1 July 2009, ITSA will no longer be providing a National Personal Insolvency Index (“the NPII”) search service for commercial and individual clients. However, the service will continue to be provided to government agencies, Registered Trustees and Debt Agreement Administrators who have a credit account with ITSA. The fee remains at $20.00 per search. Search requests should be sent by email to NPIIsearch@itsa.gov.au. Please note that a counter service will not be available. Any Government Agencies, Registered Trustees and Debt Agreement Administrators currently without an existing account with ITSA and who wish to use ITSA as a search service for the NPII please either contact the manager of the ITSA branch in your state or territory, make contact with ITSA via the above mentioned email address, or alternatively contact Ms Bhawna Sharma on (02) 8233 6901. Should you prefer not to use ITSA’s NPII search services, the service is also accessible from the following providers:
Bradley O’Brien 14. Trustee On-line Services The first phase of Trustee Online Services is now expected to be implemented in early August 2009. You are invited to information sessions being held in capital cities as per the schedule below:
Please confirm your attendance by email to the Business Managers in each site no later than 6th July 2009. Please include the name/s of the attendees and preferred session in your email. Places are limited and at this stage attendance is being restricted to a maximum of two persons from each trustee’s office. Trustees and/or senior managers would benefit from these sessions. A list of functionalities being rolled out is available on our website at www.itsa.gov.au>Trustees> Online Services Dipen Mitra Assistant National Manager Information & Registry Phone 08 9268 1262 Fax 08 9268 1299 Email Dipen.Mitra@itsa.gov.au 15. RDAA Inspections – Multiple three months arrears default This article is aimed at clarifying an issue that has recently arisen on the annual inspection of some RDAAs. For full guidance on dealing with a registered debt agreement administrator’s duty to report to creditors on 3 months arrears default please refer to Inspector-General Practice Direction 17 (IGPD 17) at this internet link. If a three month arrears default is reported to creditors, the administrator is not required to report to creditors on each missed payment or partial payment which occurs during the three month period to which the first default relates. If, after the expiry of the test period for which the first 3-month arrears default has been reported on another payment is missed, then a new 3 month test period commences and if the arrears are not cleared at the end of the 3 months, then the new 3-months arrears default is to be reported to creditors. See IGPD 17 Paragraph 8 For example, if a payment is missed on 29 October 2009 and is not caught up by midnight 29 January 2010 a 3-month arrears default will occur (ie on 30 January 2010) which is to be reported to creditors within 10 days of the default. If payments are missed on 29 November 2009 and 29 December 2009 and two other three-month arrears defaults occur as a result, the administrator is not required to report these 3-month arrears defaults because the two payments that were missed occurred in the three month period being reported on. If the missed payment is not caught up after a 3-month arrears default is reported to creditors and the account remains in arrears, the administrator is not required to report another 3-month arrears default unless a payment is missed resulting in the commencement of a new test period and another 3-month arrears default occurs (ie. another 3-month arrears default does not occur on 30 April just because the account remains in arrears and no payments due within that period were not paid). On the other hand, if a payment is missed on 5 March 2010 which is not caught up by midnight 5 June 2010 a three-month arrears default will occur (ie on 6 June 2010) which is to be reported to creditors. For any queries or further information please contact your regional BR office or Tim Cole, BR’s Practice Manager. 1. See IGPD 17 Paragraph 8 16. Attending Meetings of Creditors As part of ITSA’s regular inspection program, BR proactively reviews debtor’s/bankrupt’s proposals under section 73 and Part X of the Bankruptcy Act 1966 (the Act). BR also attends a sample of creditors meetings called in pursuance of these provisions. BR reviews these matters as part of performing the Inspector-General’s duties under section 12 of the Act to monitor and report on the standard of trustee’s and controlling trustee’s practices. Issues and trends identified during this process are presented in the Inspector-General’s annual report to Parliament. The process commences with BR examining section 189A and section 73(2) reports for compliance with legislative requirements to ensure all issues relevant to the debtor/bankrupt’s proposal or affairs are identified and properly addressed in the report. Should BR have any queries or concerns we will generally discuss these with the practitioner concerned in the first instance and, if necessary, seek clarification by way of supplementary report to creditors or request the matter be addressed prior to creditors voting at the meeting. Should BR elect to do so, we may attend and participate in a meeting of creditors by virtue of section 12(4) of the Act. Section 12(4) states as follows: “The Inspector-General: (a) is entitled to attend any meeting of creditors held under this Act; and (b) subject to section 64ZA, is entitled to participate in any such meeting as the Inspector-General thinks fit” BR’s attendance at creditors’ meetings is generally subject to a number of criteria – including:
BR may also elect to attend a meeting where none of the above criteria apply. As part of BR’s ongoing inspection program, where possible, BR will attend at least one meeting for each practitioner annually. Generally BR will attend meetings in person and, where deemed appropriate, may ask questions or seek clarification of the debtor/bankrupt, practitioner or creditor(s). After the conclusion of the meeting and as part of our educative role, BR will provide the practitioner with feedback on the meeting process and any issues arising from the meeting, as appropriate. The above is a short summary of BR’s policy and practices in relation to attending meetings of creditors as outlined in Inspector-General Practice Statement No.11. A copy of Inspector-General Practice Statement No.11 is available on the ITSA website www.itsa.gov.au. For any queries or further information please contact your regional BR office or Tim Cole, BR’s Practice Manager. Tim O’Neill Inspector Regulation Southern Region Regulation and Enforcement 17. Annual Estate Returns for 2008/2009 Financial Year Administrators and trustees will be receiving the Annual Estate Return (AER) form by Monday 6 July 2009. Please note that the completed AER form and payment of any Realisations & Interest Charge liability is due on 4 August 2009. Dipen Mitra Assistant National Manager Information & Registry Phone 08 9268 1262 Fax 08 9268 1299 Email Dipen.Mitra@itsa.gov.au How to contact Regulation: For Regulation locations and contacts click here. |
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