In a previous update1 we notified you of a number of cases in both personal and corporate insolvency concerning the transitional arrangements relating to the Insolvency Law Reform Act 2016 (Cth) (ILRA).
One of those decisions related to section 179 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act),2 which was directed to the control of trustees by the Court.
For now section 179 continues to apply and provides that:
From September 2017 when the ‘tranche two’ changes of the law reform come into effect, there will be a suite of provisions which will replace section 179 of the Bankruptcy Act.
To understand these provisions you first need to know where to find them. For that, you need to look in two places:
as well as the Bankruptcy Act itself (to see if any complementary provisions or general provisions about bringing applications to the Court are applicable).
Division 45-1 of the Schedule (which is already in effect), is a fairly generic provision allowing the Court to make orders that it thinks fit regarding a registered trustee, on its own initiative, or on an application by the Inspector General, or the registered trustee but not the bankrupt.
When making the orders, the court may take into account:
Division 90-15 of the Schedule, which commences on 1 September 2017, gives the Court broad powers in relation to orders that can be made and provides examples of such orders, including as to:
Relevantly, under this provision (as read with the Rules) any party (including the bankrupt) can bring an application provided they do so within 60 days of becoming aware of the trustee’s act, omission or decision.
The way in which the Courts will apply these interrelated provisions is yet to be seen, but it is expected that guidance will be found in the way section 179 of the Bankruptcy Act was applied, albeit that the new provisions appear to be somewhat broader than section 179.
As the Court noted in Szepesvary,3 in considering a section 179 application, the Court:
As can be seen from the above provisions, there may well be a range of outcomes available in future to disgruntled parties short of (but also including) removal from office, but with a focus still heavily on conduct.
Aside from the above, there are a range of related powers now in force favouring the Inspector General, including the ability to suspend a trustee’s registration4 and to direct a trustee not to accept further appointments.5
For example the Inspector General can direct a trustee not to accept further appointments if the trustee:
Additionally, the Inspector General can suspend a trustee’s registration where the trustee:
The net effect of these provisions is a fairly comprehensive regime for the oversight of the conduct of trustees.
Helpfully, we expect that the cases around the regulation of trustee conduct will be applicable in the era of the ILRA.
However, as with any broad changes to any legislative framework concerning regulation in the area of insolvency (a recent example being the Personal Property Securities Act 2009), the bedding down of these changes are somewhat a case of ‘wait and see’.
It is important for practitioners in both corporate and personal insolvency to be aware of the timing and the substance of these changes (as well as where to find the legislative instruments themselves).
We will continue to provide updates on developments in the law throughout the year. We also commend to practitioners the use of the comparative guides on the AFSA website, www.afsa.gov.au
 Szepesvary v Weston (Trustee), in the matter of Szepesvary (Bankrupt)  FCA 344 (Szepesvary).
 Citing French J in Macchia v Nilant (2001) 110 FCR 101 (French J) –.
 Insolvency Law Reform Act 2016, Division 40-25.
 Ibid Division 40-15.
 Ibid Division 70-70.
 Ibid Division 40-15.