Can Section 30 of the Bankrupty Act apply to non-bankrupts
Section 30 of the Bankruptcy Act 1966 (as amended) (“the Act”) provides as follows:
Section 30 General Power of Courts in Bankruptcy
“1) The Court (the Federal Court having jurisdiction over the Act (“the Court”): ….
(b) may make such orders (including the declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving of effect to this Act in any such case or matter.”
The operative provision of that Section are the words “necessary for the purposes of carrying out or giving effect to this Act“.
The words “carrying out” are not defined in the Act and accordingly, their ordinary meaning is to cause or enable or to put into action and the words “giving effect” are not defined in the Act and accordingly, their natural meaning is being to put forth, to effect and with “effect” meaning the result or consequence (of the Act). Section 30 empowers the Court to undertake any action which has the purpose of enabling the Court to implement the Act and to bring about the purpose of the Act and its effect upon the debtor.
Notwithstanding the all encompassing nature of the words “carrying out” or “giving effect” they are predicated by the words “for the purpose of” and followed by the words “to this Act”. Accordingly, the limitation of the words “the purposes of” and “to this Act” clearly restrict the words “carrying out” and “giving effect” to what is available to the Court within the Act.
The Act therefore and its being carried out or giving effect to can only apply to a debtor/bankrupt or a trustee as the case may be. (The Act in Section 7(1)(A) provides:
“This Act applies to debtors whether or not they have attained the age of 18 years.”)
The definitions and the preamble to the Legislation does not identify that it incorporates associates, friends or relatives and accordingly it confines itself to the debtor/bankrupt.
A person who is not a debtor or bankrupt is outside the ambit of the Act and therefore orders that are made against that person could not be seen to be made for the purposes of carrying out or giving effect to the Act.
The intent of the legislation (from the explanatory memorandum) was to allow for orders for the purposes of carrying out and giving effect to the purpose of the Act namely the bankruptcy procedure and administration of the bankrupt’s property vested in the Trustee.
Can the Court make an order that an asset be sold which is partly vested in the Trustee and for which another party owns an equal or part share the Court? The Act gives the Court jurisdiction over a debtor or Trustee (under the Act). How can Section 30 increase the jurisdiction of the Act to encompass non-debtor’s property. Surely a general provision of the Act can only have effect upon what is the existing jurisdiction of the Act.
To suggest that the Court has jurisdiction over a person who is not a debtor or a bankrupt would necessitate that the property of the non-bankrupt be governed by the Act. If this applies then why would not the property of the non-debtor then be capable of being sold or dealt with by the Trustee.
The Act provides a Trustee and the Courts with a power to recover property from a non-bankrupt (see Sections 120 to 122 of the Act) however the distinguishable characteristic is that the asset or item sought to be recovered has been transferred to that party as a result of an action on the part of the bankrupt.
The asset that is being recovered has been transferred to the third party as a result of an action on the part of the bankrupt. This is clearly distinguishable from the joint ownership which on its face has not been transferred by the bankrupt but is bona fide purchased for valuable consideration by the third party.
An analogous situation was that of the pre-amendment provisions of the Bankruptcy Act and their application to Family Law issues (Family Law and Bankruptcy Acts Amendment Act 2005). Until the amendments occurred to the Bankruptcy Act and the Family Law Act the Court was not able to apply Section 30 of the Act to interfere into Family Court proceedings. Surely an order preventing the transfer of what would otherwise have been vested property would have been for the purpose of carrying out and giving effect to the Act (Section 30(1B) of the Act) however the Court did not accept that it had jurisdiction to do so. (See Section 79H of the Family Law Act and Section 120 and 122 of the Bankruptcy. See also Official Trustee in Bankrupty v Mateo (2003) SLR 217).
Accordingly, until such time as the legislature (as has occurred in respect of Family Law issues) alters the legislation to allow the jurisdiction of the Act to encompass non-bankrupts then the sale of non-bankrupt assets pursuant to the Act cannot occur and the applicable Courts having jurisdiction over the Act (Section 27 of the Act) are powerless to affect non-bankrupt assets.
(Please note this is not intended to be and is not advice on the topic referred to. It is merely the opinion of the writer on the topic).