Bankruptcy can feel like the ultimate loss of privacy.
Under section 77 of the Bankruptcy Act 1966 (Cth), a bankrupt has extensive obligations to disclose information, provide documents and assist their trustee in administering the bankrupt estate.
These obligations are deliberately broad. A bankrupt cannot simply wait for the trustee to ask the right questions before cooperating.
But does that mean everything must be handed over?
Not quite.
Legal professional privilege is one important protection that bankruptcy does not automatically remove.
In Daniels Corporation International Pty Ltd v Australian Competition and Consumer Commission (2002) 213 CLR 543, the High Court confirmed that legal professional privilege is a substantive immunity that cannot be overridden without clear statutory authority.
This creates an important distinction: a bankrupt must be an open book about their financial affairs, but confidential legal advice may remain protected.
Importantly, this does not mean the underlying facts are privileged.
Bank statements, tax returns, financial accounts and transaction records do not become privileged simply because they have been provided to a solicitor.
What may be protected are confidential communications made for the dominant purpose of obtaining or providing legal advice, or for use in existing or anticipated litigation.
So, the rule is not:
“Bankruptcy means everything comes out.”
It is more accurate to say:
“Section 77 demands extensive cooperation, but it does not automatically override legal professional privilege.”
Whether privilege applies will depend on the circumstances, including the nature of the documents and who is entitled to assert the privilege.
The bottom line?
The books may have to open. But the lawyer’s confidential advice does not automatically have to.
Ming Yip
Lawyer