Federal Court (Bankruptcy) Rules 2016

The Rules directly regulate every participant in Federal Court bankruptcy litigation. Debtors are affected by the mandatory use of Form B2 for annulment applications (r 7.01), the requirement to file Form B4 and Form B5 if opposing a petition (r 2.06), and the personal service or Court-directed service of examination summonses (r 6.04, r 6.09, r 6.15). Creditors must comply with the detailed verifying affidavit and pre-hearing affidavit regime for sequestration petitions (rr 4.02–4.06, r 4.11 for deceased estates), serve petitions at least five days before hearing (r 4.05), and give Form B13 notice to known creditors before debt-agreement or personal-insolvency-agreement hearings (r 9.04, r 10.04).

Trustees (including the Official Trustee and registered trustees) are subject to service of annulment and review applications (r 7.02, r 7.05), the obligation to prepare directed reports in affidavit form (r 7.06), and the detailed service and notification duties after a sequestration order is made (r 4.07). Applications to remove or replace a trustee under s 90-20 of Sch 2 require 28 days’ service on the trustee and 14 days on creditors (r 8.01). Resignation and release applications must be served on the trustee’s successor interests and the Official Receiver (r 8.02).

Examinable persons and relevant persons summoned under ss 50 or 81 face personal service at least eight days before the examination (r 6.04, r 6.09, r 6.15), the obligation to produce identified books, and the entitlement to conduct money and reasonable expenses (r 6.17). They may apply to discharge the summons by Form B3 at least three days before the examination (r 6.05, r 6.11, r 6.16).

Legal practitioners are affected by the short-form costs regime in Div 13.2 (which dispenses with itemised bills but requires service of receipts and vouchers) and the obligation to use the correct originating or interim form with statutory citations (r 2.01). Foreign representatives in cross-border cases must file Form B2 with art 15 statements and an affidavit, serve in accordance with Court directions, and publish notices in prescribed newspapers (rr 14.03, 14.06–14.07).

Registrars exercise the delegated powers listed in Sch 1 (r 2.02) and issue summonses (r 6.03, r 6.08, r 6.14). The Official Receiver is the recipient of mandatory notifications after sequestration (r 4.07(2) note, r 4.09) and referrals of debtors’ petitions (r 5.01).

Non-parties may seek leave to be heard under r 2.03; if granted on terms, they risk costs orders and restrictions on further audience until costs are paid.

Duties are predominantly procedural. A petitioning creditor must file pre-hearing affidavits proving service, a recent National Personal Insolvency Index search showing no relevant debt agreement, that the petition debt remains owing, and (where a judgment debt was ordered to be paid into Court) a search of that Court’s records (r 4.06). Failure to do so prevents the petition proceeding. An applicant to set aside a bankruptcy notice based on a counter-claim must disclose why the claim was not raised in the original proceedings (r 3.02(3)(c)). Trustees directed to report under r 7.06 must address the bankrupt’s conduct, examinable affairs and estate administration in affidavit form.

Service duties are strict. Bankruptcy-notice setting-aside applications and extension applications must be served on the creditor within three days (r 3.02(5), r 3.03(5)). Creditor petitions must be served at least five days before the hearing date (r 4.05). Examination summonses require eight days’ personal service (or as directed) plus notice to known creditors (r 6.04, r 6.09, r 6.15). Annulment and review applications require seven days’ service on the trustee and on known creditors (rr 7.02, 7.03, 7.05).

Rights include the entitlement of examinees to conduct money and reasonable witness expenses paid in advance (r 6.17), the right to apply to discharge an examination summons (rr 6.05, 6.11, 6.16), and the right to oppose petitions or applications by filing Form B4, Form B5 and supporting affidavit (r 2.06). Non-parties have a right to seek leave to be heard, which the Court may grant, condition or revoke (r 2.03). A person whose costs have been increased by the grant of leave may seek an order that the non-party pay those costs and be barred from further audience until payment (r 2.03(3)–(4)).

The Rules confer procedural protections such as the ability to seek adjournment, amendment or extension of time under the general power in r 2.01 read with s 33 of the Bankruptcy Act, and the right to have recognition, modification or termination applications in cross-border cases determined after prescribed notice and publication (Part 14).

The Rules themselves do not create criminal offences or pecuniary penalties; enforcement is through the Court’s inherent powers, costs orders and the coercive provisions of the Bankruptcy Act. Non-compliance with service or filing timelines may result in adjournment, dismissal or refusal of relief. Failure to comply with an examination summons can lead to adjournment, discharge of the summons or, under s 264B of the Bankruptcy Act, a warrant for apprehension (r 6.10 note). A person arrested under a s 78 warrant must be brought before the Court immediately (r 12.01(4)).

Costs are the primary enforcement mechanism. A party opposing an application must file material at least three days before hearing; late filing requires leave (r 2.06). The Court may order a non-party granted leave to be heard to pay any additional costs caused to a party and may prevent further audience until those costs are paid or secured (r 2.03(3)–(4)). In sequestration proceedings the lawyer for a successful petitioning creditor may recover the short-form amount in item 14.1 of Sch 3 to the Federal Court Rules 2011 plus reserved adjournment costs and disbursements (r 13.03(1)). If the petition is dismissed the creditor’s lawyer may recover item 14.2 plus the same extras (r 13.03(2)). Disputes are resolved by taxation; only directed persons may attend (r 13.05).

The Court may fix costs on an ordinary or indemnity basis and dispense with taxation where a lump sum is ordered (r 13.01(2)). Failure to comply with directions under r 7.06 to file a trustee’s report can be sanctioned by costs orders or dismissal of the annulment or review application. In cross-border matters, failure to publish notices as required by rr 14.06–14.09 may result in the recognition application being dismissed or relief being refused.

The Rules are subordinate legislation made under the Federal Court of Australia Act 1976 (r 1.03) and operate in tandem with the Bankruptcy Act 1966. Rule 1.06 expressly provides that an expression used in the Rules and in the Bankruptcy Act has the same meaning as in the Act. Numerous provisions pick up substantive powers: r 3.01 refers to s 309(2), r 3.02 to s 40(1)(g) and s 41(6A), Part 4 to ss 47 and 52, Part 6 to ss 50 and 81, Part 7 to ss 153B and 252B, Part 8 to ss 180, 183 and Sch 2 s 90-20, Part 9 to ss 185Q and 185T, Part 10 to ss 222 and 222C, Part 11 to ss 244 and 247, and Part 12 to ss 78, 130 and 264B.

The Rules also interact with the Federal Court Rules 2011. Rule 1.05(2) provides that an expression used in the Rules and in Sch 1 to the Federal Court Rules 2011 has the same meaning, subject to r 1.06. Rule 2.05 disapplies r 8.07 of the Federal Court Rules (changing a return date) to creditor’s petitions. Costs generally follow Part 40 of the Federal Court Rules unless fixed or short-form billing applies (r 13.01, r 13.03(4)).

The Insolvency Practice Schedule (Bankruptcy) (Sch 2 to the Bankruptcy Act) is incorporated by r 1.05(1) and by the delegation in r 2.02(1)(aa) and Sch 1 Part 1A. Transitional r 15.01 preserves the operation of repealed s 173 accounts for release applications commenced after 1 September 2017.

Cross-border proceedings engage the Cross-Border Insolvency Act 2008 and the Model Law. Part 14 applies to individual debtors and must be interpreted to give effect to that Act (r 14.02(2)). The Federal Circuit Court has no jurisdiction under the Cross-Border Insolvency Act (note to r 1.04(1)).

The Rules also interact with State and Territory laws governing administration of deceased estates (r 11.03(5)) and proclaimed laws under s 56C(4) of the Bankruptcy Act (r 5.01(3)(c)).

The Rules were made in 2016 to replace the 2006 version and to implement recommendations of the Council of Chief Justices’ Rules Harmonisation Committee. The most significant recent change is contained in the transitional provision in Part 15 (added by the Federal Court (Bankruptcy) Amendment (Insolvency and Other Measures) Rules 2017). Rule 15.01 applies where a trustee release application under s 183(1) is made after 1 September 2017 and the trustee is still required, by item 143 of Sch 1 to the Insolvency Law Reform Act 2016, to keep accounts under the repealed s 173 of the Bankruptcy Act. In those cases the old accounts must be annexed to the supporting affidavit in addition to the books required by r 8.02(3)(b).

The 2016 Rules themselves introduced the Insolvency Practice Schedule (Bankruptcy) references in r 1.05(1), r 2.02(1)(aa) and Sch 1 Part 1A, expanded the list of Form B2 applications to include trustee resignation and debt-agreement termination, added detailed pre-hearing affidavit requirements for National Personal Insolvency Index searches, and created the harmonised Part 14 for cross-border cases. These changes were made to align Federal Court bankruptcy procedure with the Insolvency Law Reform Act 2016, to reduce reliance on ad-hoc directions, and to implement model rules for cross-border insolvency so that Australian practice is consistent with that in other UNCITRAL Model Law jurisdictions.

The amendments reflect a policy of modernisation: replacing prescriptive paper-based processes with greater use of electronic filing, clarifying timelines to reduce satellite litigation, and ensuring trustees’ reporting obligations keep pace with the new regulatory regime in Sch 2.

The source text does not record any specific court challenges or controversies arising from the Rules. It does, however, contain several provisions that have been the subject of judicial gloss in the wider bankruptcy jurisprudence. The requirement in r 3.02(3)(c) that a debtor explain why a counter-claim was not raised in the original proceedings reflects the policy against abuse of the bankruptcy notice procedure; courts have struck out applications where the explanation is inadequate. The confidentiality regime for s 81 examination affidavits in r 6.12(4)–(6) has been upheld as a legitimate protection of the examinable person’s position pending the issue of the summons. The strict seven-day service requirement for annulment applications (r 7.02(2)) has led to dismissals for want of jurisdiction where notice to the trustee was late.

The short-form costs regime in Div 13.2 has been controversial among practitioners because it limits recovery to a fixed scale even where substantial additional work has been required. Courts have nevertheless enforced the scale strictly, emphasising that the simplification is a trade-off for the expedited sequestration process.

No challenges to the validity of the Rules themselves are recorded in the text. Their authority derives from s 59 of the Federal Court of Australia Act 1976 and they are treated as valid delegated legislation.

Most practitioners assume that “substantial compliance” with a Form B series document (r 1.07(4)) gives wide latitude. In practice, courts have refused to accept petitions that omit the verifying affidavit or that fail to attach the bankruptcy notice to the setting-aside affidavit. The note to r 1.07(4) reminds users that the Court’s requirements are contained in practice notes; ignoring those is not saved by the substantial-compliance clause.

The three-day service obligation for bankruptcy-notice setting-aside applications (r 3.02(5)) is absolute; late service without an extension under s 41(6A) can render the application a nullity. Conversely, an extension obtained ex parte must still be served within three days of the order (r 3.03(5)).

Examination affidavits under r 6.12 may be filed in a sealed envelope or marked “Confidential”. Once so filed, a Registrar must not make them available for public inspection. Many solicitors forget to mark the electronic version with the exact statement required by r 6.12(5)(b), causing the affidavit to lose its protected status.

The National Personal Insolvency Index search required by r 4.06(3) must be made “no earlier than the day before the hearing date”. A search performed two days earlier will not suffice even if it shows no debt agreement. The same one-day rule applies to the judgment-debt-into-court search in r 4.06(5).

Trustee release applications under r 8.02(3) require both a realisation statement and “a copy of the books referred to in section 70-10 of Schedule 2”. Where the transitional rule 15.01 applies, the old s 173 accounts must also be annexed. Failure to include any of these documents has led to adjournments and, on occasion, refusal of release until a fresh application is filed.

Cross-border recognition applicants must file the art 15 statements and s 13 affidavit at the same time as the Form B2 (r 14.03(2)). Filing the interim application for service directions is mandatory even though it need not be served initially. Omitting this step has resulted in the recognition application being stood over.

Finally, r 2.05 excludes the ordinary return-date variation rule (FCR 8.07) for creditor’s petitions. The only way to change a petition return date is by specific Court order; assuming the general Federal Court Rules apply is a common and expensive error.

Compliance begins with identifying the correct form and Part. For a creditor’s petition, prepare Form B6 with the verifying affidavit either included or annexed (r 4.02(1)–(2)). Attach any r 4.04 affidavits (bankruptcy-notice search and service) and the s 156A trustee consent if filed. File sufficient copies for service unless lodging electronically. At least five days before the hearing date, personally serve the debtor with the petition, verifying affidavit, r 4.04 material and any trustee consent (r 4.05). By the hearing date file:

• proof of service affidavit with annexures (r 4.06(2));
• a National Personal Insolvency Index search affidavit no earlier than the day before the hearing, confirming no debt agreement on the petition date and on the search date (r 4.06(3));
• an affidavit that the debt remains owing, sworn as soon as practicable before the hearing (r 4.06(4)); and
• if the debt arose from a judgment payable into Court, a search of that Court’s records (r 4.06(5)).

If the Court makes a sequestration order, notify the appointed trustee in writing on the same day, serve the Form B7 order on any s 156A consenting trustee within two days, and give a copy to the Official Receiver before the end of the second day after the order (r 4.07 and s 52(1A) of the Bankruptcy Act). Request entry under Div 39.4 of the Federal Court Rules if the order is not entered at the time of pronouncement.

For examination summonses, file the supporting affidavit identifying the examinee, establishing examinable status, and detailing books if required. The affidavit for a s 81 examinable-person summons may be filed sealed or marked confidential (r 6.12(4)–(6)). Serve the Form B9 summons at least eight days before the examination and give written notice to known creditors (r 6.15). Pay conduct money before the examination date (r 6.17(3)).

Trustee removal or replacement applications under s 90-20 require 28 days’ service on the trustee and petitioning creditor and 14 days on other known creditors (r 8.01(3)–(4)). Release applications under s 183 must annex a realisation statement and the s 70-10 books (r 8.02(3)); if the transitional rule applies, also annex the old s 173 accounts (r 15.01(2)).

In cross-border recognition applications, file Form B2 with the art 15 and s 13 statements and verifying affidavit. Simultaneously file (but need not serve) an interim application for service directions (r 14.03(3)). Serve the originating documents at least five days before the hearing on any named respondent and any other persons directed (r 14.03(4)). Publish the prescribed Form B20 notice in a newspaper circulating in the debtor’s principal place of residence and send the notice to known creditors (r 14.06).

Keep a diary for all statutory timelines. Three-day, five-day, seven-day and eight-day periods are calendar days unless the Rules or the Bankruptcy Act specify otherwise. Where an affidavit must be sworn “as soon as practicable before” a hearing, swearing it a week earlier risks judicial criticism. Electronic filing does not excuse compliance with form or attachment requirements; the Court’s practice notes (referred to in the note to r 1.07(4)) contain additional metadata and PDF-tagging obligations.

Finally, when in doubt about service or form, seek a specific direction at the first directions hearing. The Court’s power under r 1.04(1) to order that the Rules do not apply in a particular case is a safety valve, but it must be sought by Form B3 and supported by affidavit explaining why departure is necessary.