Federal Court of Australia

Barnden (Trustee), in the matter of the Bankrupt Estate of Khattar [2026] FCA 306

ORDERS

THE COURT ORDERS THAT:

1.    Grant leave to the Applicant to the Interim Application filed 3 December 2025 (the Interim Application) under rule 1.39 of the Federal Court Rules 2011 (Cth) (the Rules) to bring the Interim Application out of time.

2.    Order under rule 9.63 of the Federal Court Rules 2011 (Cth) that Chahida Khattar of 24 Wyoming Avenue, Oatlands NSW 2117, be appointed as Joseph Khattar’s litigation representative in these proceedings nunc pro tunc and that the requirements of rule 9.63 of the Rules otherwise be dispensed with.

3.    Order under rule 6.11 of the Federal Court (Bankruptcy) Rules 2016 (Cth) that the Summons for Examination issued to Joseph Khattar on 23 October 2025 be discharged.

4.    Order that the Respondent to the Interim Application pay the Applicant’s costs of the Interim Application as agreed or taxed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Delivered ex tempore, revised from transcript

NEEDHAM J:

Mr Khattar seeks to be discharged from a bankruptcy examination

1    By interim application dated 2 December 2025, Mr Joseph Khattar seeks to discharge a summons for examination under s 81 of the Bankruptcy Act 1966 (Cth). The applicant, Mr Barnden, is the trustee of Mr Khattar’s bankrupt estate, and has been conducting examinations of various persons in respect of that bankruptcy. Mr Khattar moves under r 6.11 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules). That rule provides:

6.11 Application for discharge of summons

(1)     If a relevant person is served with a summons under subsection 81(1) of the Bankruptcy Act for examination, the person may apply for an order to discharge the summons by filing:

(a)     an interim application, in accordance with Form B3, in the proceeding in which the summons was issued; and

(b)     an affidavit setting out the grounds in support of the application.

(2)     The interim application and supporting affidavit must be filed at least 3 days before the date fixed for the examination.

(3)     As soon as possible after filing the interim application and supporting affidavit, the relevant person must serve a copy of each document:

(a)     on the person who applied for the summons; and

(b)     if the person who applied for the summons is not the Official Receiver—on the Official Receiver.

(4)     The order to discharge the summons may be made by the Court or a Registrar.

2    The application was brought after the first day fixed for the examination, which does not comply with the provisions of r 6.11(2) of the Bankruptcy Rules. However, Mr Tao who appeared for the trustee did not object to the extension of time. The delay was explained to some extent by Mr Tannous, Mr Khattar’s solicitor.

3    There is no express power in the Bankruptcy Rules as to the dispensing of the requirement of three days’ service prior to the examination, but r 1.39 of the Federal Court Rules 2011 (Cth) would apply, in that a dispensing power is “relevant and not inconsistent” with the provision in r 6.11(2). The Bankruptcy Rules provide for an extension of time in other circumstances, for example, compliance with a bankruptcy notice (see r 3.03 of the Bankruptcy Rules) and so I can, despite the fact that the time for service had expired, make an order extending the time for bringing this application up to and including 3 December 2025.

Does Mr Khattar have impaired capacity?

4    Mr Khattar’s grounds for seeking the discharge of the summons are that he says he suffers from “severe cognitive impairment consistent with Alzheimer’s Disease” and in support of that he relied on two affidavits of Dr Elie Matar, a consultant neurologist, one which contained MRI and PET imaging. Dr Matar was cross-examined. Mr Khattar did not give evidence, but his solicitor and Mrs Chahida Khattar, his wife, made affidavits setting out their observations of Mr Khattar’s cognitive decline. They were not cross-examined.

5    Mr Barnden, the trustee, gave evidence of his own observations of Mr Khattar in July 2024. He was not cross-examined on this, and I accept his evidence that he was able to have a coherent conversation with Mr Khattar about his Personal Insolvency Agreement and his sponsorships of two sports teams through one of his companies, and that he did not appear confused at that time. After that time Mr Barnden only saw Mr Khattar, and exchanged greetings outside court during examinations of other persons and at meetings of creditors. Mr Barnden also attested to the size and complexity of the bankruptcy, and the need to obtain greater clarity about Mr Khattar’s affairs (noting that Mr Khattar has been associated with around 84 companies in the past seven years prior to Mr Barnden’s appointment), and to obtain primary financial records and to trace the flow of funds.

6    A number of summonses have been issued to various people associated with Mr Khattar, including his wife, his solicitor, his accountant, and various relatives and relatives-in-law, and companies. Mr Barnden sets out a reasonably complex history including proceedings in the NSWSC and NSWCA, a Deed of Settlement and subsequently, bankruptcy proceedings in this Court.

7    It appears that Mr Barnden seeks that an inference be drawn from the late disclosure of Mr Khattar’s alleged cognitive difficulties. He says, at paragraph 79 of his affidavit of 9 March 2026 that, “[t]his was the first time that I was made aware of any alleged cognitive difficulties that the Debtor might be experiencing”. In part J of that affidavit, Mr Barnden says that he considers that the public examination is “necessary and in the interest of creditors”, and that “the investigation into his bankrupt estate would be significantly hindered and result in substantial increase in time and costs”, as he would have to review documentary material “without the benefit of the Debtor’s input as to the context and importance of those documentary materials”. He offered to build in “regular breaks” and to take reasonable steps to ensure Mr Khattar’s reasonable needs were met during any examination.

8    Dr Matar gave evidence that he would adhere to the Expert Evidence Practice Note (GPN-EXPT) as well as the Harmonised Expert Witness Code of Conduct and other requirements for an expert witness. He interviewed Mr Khattar and his wife on 4 February 2026, and conducted both an MMSE equivalent (Mini-Mental State Examination) and an ACE-III (Adenbrooke’s Cognitive Examination-III) on Mr Khattar. He was assisted, he said, by being able to ask questions in Arabic and asking Mr Khattar to reply in Arabic, his first language, if he was having difficulties, for example, in answers which required him to name objects: see Transcript of Proceedings on 10 March 2026 p 18.

9    Mr Khattar scored generally poorly on the tests, and his score in relation to “verbal fluency” was 0 out of 14. He scored poorly on memory (6 out of 26) and inattention (6 out of 18). His overall scores were:

•    ACE-III: 36/100

•    MMSE-equivalent score: 11/30

10    Verbal fluency is not, Dr Matar said, a language task. It is a task of executive function. To answer the question the subject must name as many words as they can think of starting with a particular letter, in this case “P”, excepting names of people and places. That question tests strategic thinking, planning, finding an order by which the subject needs to generate as many words as possible. Mr Khattar was able to name two words, one of which was a proper noun and so excluded by the rules of the question. Dr Matar did not regard Mr Khattar as feigning his results. His tests for category fluency, naming as many animals as you can think of, was better, but only slightly better, Mr Khattar being able to name three animals. Dr Matar said this was consistent with a proper response to the question given that most people are better at naming animals than words beginning with a letter.

11    Dr Matar was able to interview Mrs Khattar as to the collateral history, and review the MRI scan and the FDG-PET CT scan, as well as the reports of those scans. Although the use of the opinions of the doctors who undertook the reports was limited by s 136 of the Evidence Act 1995 (Cth) as not being evidence of the truth of the matters stated, along with those parts of the reports recording the instructions as to Mr Khattar’s memory, as not being truth of that matter. Dr Matar was asked to identify the condition affecting cognition, if any, from which Mr Khattar suffered, and whether, and to what degree, Mr Khattar may be prevented from:

•    Comprehending questions;

•    Recalling his own evidence;

•    Recalling past transactions;

•    Understanding legal implications;

•    Otherwise complying with his obligations as an examinee.

12    Dr Matar’s diagnosis was that of the moderate stage of Alzheimer’s disease, reflecting neurodegeneration on the imaging and severe multi-domain cognitive impairment on formal testing. He was tested by Mr Tao on whether he was able to make such a diagnosis in the time taken, with Mrs Khattar present, and that his recollections of making queries in Arabic was not documented in his report. However, I do not regard Mr Tao’s cross-examination, skilful though it was, as denting my confidence in Dr Matar’s opinion as to the diagnosis.

13    The cognitive testing is consistent with the clear signs of neurodegeneration on the scans, and there is no real doubt in my view as to the support the totality of the evidence, including the lay evidence from Mrs Khattar and Mr Tannous, gives to the opinion. In answer to the questions he was asked, Dr Matar took the view that Mr Khattar, was severely impaired in attention and working memory. He had severe impairment in his memory, creating “A high risk of rapid forgetting”. His Alzheimer’s would make detailed and accurate recall of his complex financial history unreliable. He would have difficulty in assessing the issue of privilege or self-incrimination due to his impairment in executive and working memory, and as an examinee, his current cognitive functioning would significantly compromise the “reliability, consistency, and accuracy of his participation in a detailed forensic examination conducted under oath”.

14    Under cross-examination, Dr Matar agreed that he was only stating likelihoods and there was necessarily a degree of speculation in his assessment. He was cross-examined on a number of assumptions expressed in his report, including that questions might be complex, multi-part or rapidly delivered questions, that the proceedings were adversarial, and that the examination setting would be prolonged. Dr Matar said that shorter questions were easier to answer and breaks might assist, but he said that a simple question may not assist the reliability of the retrieval of the memory purely by changing the way that the question was delivered. But essentially his opinion was that it was more likely than not that the severity of the cognitive impairment would affect Mr Khattar’s ability to recall, process and deliver information in an examination setting, together with a lack of insight into his own condition.

15    I find on the basis of the lay observations of Mr Tannous and Mrs Khattar, and in particular on the evidence of Dr Matar, including the “hard” evidence of the scans and his opinion as to Mr Khattar’s inability to engage with the ACE-III test, that Mr Khattar now has an impaired capacity to give evidence in these proceedings.

What kind of capacity is needed for a bankruptcy examination?

16    The basis of the application to discharge the summons is that Mr Khattar does not have capacity to be able to participate in any examination. Mr Smith, who appeared for Mr Khattar noted that “the case law concerning discharges of summons under s 81 [of the Bankruptcy Act] exercising the power under r 6.11 [of the Bankruptcy Rules] is not well-developed in relation to people with mental infirmity”. That appears to be the case.

17    In Karounos v Official Trustee [1988] FCA 284; 19 FCR 330, the Full Court (Forster, Woodward and Spender JJ) set out a number of principles relating to discharge of summonses under s 81 of the Bankruptcy Act. These appear at pp 335-356 of the report and include the following relevant principles:

1. The power given by s 81 of the Act is an unusual and far-reaching one (Re North Australian Territory Company (1890) 45 Ch D 87 at 93; Ex parte Willey (1883) 23 Ch D 118 at 128) and its use could easily become oppressive and vexatious if it is not approached responsibly by applicants for summonses, and controlled carefully by the Registrar and the court: see Re Price (No 3) (1948) 14 ABC 137 at 139-140.

2. However the power is exercised in the interests of creditors, and those interests should not be defeated by an unduly technical or restrictive approach to the use of the power. The procedure is basically designed to establish what assets the bankrupt had, what has happened to those assets, and whether action should be begun (or continued) to recover them: see Re Price (No 4) (1948) 14 ABC 142 at 144; Re Andrews (1958) 18 ABC 181 at 184; Re Poulson [1976] 1 WLR 1023 at 1032; [1976] 2 All ER 1020 at 1029.

…

7. If a person summoned believes that compliance with the summons would be oppressive or vexatious, he can apply to the court to have the summons set aside or adjourned to a more convenient time. Such an application to the court will usually be determined on a broad view of the issues in the particular case and a weighing of competing principles: see Re Castle New Homes Ltd [1979] 1 WLR 1075; 2 All ER 775 and cases there cited; Re John Arnold's Surf Shop (supra); Re Nalanda Pty Ltd [1983] I Qd R 269.

(emphasis added)

18    The ninth principle, on page 336, sets out that this is not a review of the Registrar’s decision to issue the summons in the first place; the evidence must be reviewed as to whether it establishes that “the summons should be set aside or adjourned to a more convenient time”. The onus, it was agreed, lies on Mr Khattar. The closest case to the present was Official Trustee in Bankruptcy v Povey [1998] FCA 1760 (Lindgren J) where the summons was not set aside. Mr Povey suffered from depression, and his treating psychiatrist opined that needing to travel from regional Victoria to Sydney for an examination could have deleterious effects on his mental health.

19    Mr Smith noted that this was not exactly the same situation as the current situation. Mr Povey was not, by way of his depression, adversely impacted in his ability to give evidence; rather, it was the oppressive nature of giving evidence which may have impacted him. In a different context, Stellios J recently considered the impact of physical and mental health challenges (which affected cognition to some extent) to the setting aside of a sequestration order. While that decision does go through the impact of a “blunting” of cognition, the evidence was insufficient either to extend time or to allow the application, and the proceedings were dismissed (see Strata Plan 94402 v Chen, in the matter of Chen [2025] FCA 1071 at [59], [71]). Mr Smith submitted that the Evidence Act does not apply to a s 81 summons under the Bankruptcy Act, and cited Allsop J in Griffin v Pantzer [2004] FCAFC 113; 137 FCR 209, where his Honour said at [206]-[207]:

… The examination may be a proceeding for the Federal Court of Australia Act. It does not follow that it is a proceeding in which it is intended that evidence be adduced from witnesses ...

In my view, section 128 of the Evidence Act, along with other provisions of the Evidence Act, does and do not apply to an examination under section 81.

(emphasis in original)

20    Section 128 of the Evidence Act relates to the privilege against self-incrimination, but Allsop J's analysis relies on evidence not being adduced in a section 81 examination, it being more properly regarded, as he said at [204], as:

... an interrogation supervised by the Court, the Registrar or a magistrate.

21    Mr Tao relied on the reasons for Mr Barnden wishing to examine Mr Khattar, characterising them as “to investigate Mr Khattar’s complex affairs, [and] to identify and assess the viability of potential claims that may be brought”. The bankrupt estate is a significant one, with proofs of debt totalling more than $114 million, and gross assets recovered to date being less than $6 million (see the 26 September 2025 report to creditors, exhibited to Mr Barnden’s 9 March 2026 affidavit). On behalf of Mr Barnden, it was submitted that the correct meaning of “oppressive” or “unfair” is that an inquisitorial proceeding is effectively, inherently (as noted above) an interrogation. The real issue was whether Mr Khattar’s evidence would be reliable.

22    ​​​​​​​Secondly, it was submitted that the Evidence Act would govern the admission of the transcript into evidence in any subsequent proceedings and the argument could then be had under ss 135 or 136; and that competence should not be conflated with reliability, citing Yates (a pseudonym) v The Queen [2021] VSCA 190 at [42] (a case under s 13 of the Evidence Act where no assessment of reliability was required in the test of whether the witness has the basic comprehension skills to understand a question and provide an intelligible answer to it). See also Gray v The Queen [2020] NSWCCA 240 at [88] per Lonergan J, with whom Hoeben CJ at CL and Johnson J agreed.

23    The question here, in my view, is whether Mr Khattar has the capacity to be examined, and if he does not, whether it would be oppressive nonetheless to make him do so. Lindsay J of the Equity Division of the NSWSC writing extra judicially on 30 July 2019 asked the question: “(In)capacity – for what?”, stressing that an assessment for capacity needs to take into account both the person and the nature of the task. His Honour said at paragraph 6:

A reference to “(in)capacity” implicitly invites attention to the question, “(In)capacity for what?” What is it a person is said to be, or to have been, incapable of doing?

24    His Honour then set out a range of tests for capacity – as examples, the McNaghton Rules (1843) 10 Cl. & F. 200 for criminal responsibility, Banks v Goodfellow (1870) LR 5 QB 549 at 565 for testamentary capacity, and Gibbons v Wright (1954) 91 CLR 423 at 437-438 for capacity to enter into a binding contract. Citing that last case at 437, his Honour noted at paragraph 13(b):

The law does not prescribe any fixed standard of capacity as requisite for the validity of all transactions. It requires, in relation to each particular piece of business the subject of a transaction, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he or she is doing …

25    Clearly this is not a question of entering into a transaction, but it seems to me that the test for capacity in relation to contracts with the requirements to understand the elements of the contract may have more applicability to the current question than criminal responsibility or testamentary capacity.

The summons should be discharged

26    In this case, unassisted by a specific authority in the field of bankruptcy examinations, I am of the view that the relevant assessment of capacity should take into account the following factors; not only Mr Khattar’s welfare, but a prudent assessment of his capacity to understand and answer questions in the particular context of this examination.

27    I have set out above the words of r 6.11 of the Bankruptcy Rules. Notably, the rule does not restrict discharge of a summons to situations where a summons is oppressive, unfair or vexatious. These are the words of the Full Court in Karounos describing the application in that case of the principles I have set out. I do not accept Mr Barnden’s submissions which go to a conflation of reliability and competence; they are two different things. Mr Khattar’s ability to give evidence relates to his competence to do so. The reliability of the evidence he gives must flow from his impaired competence. I agree, however, that reliability is not the test to which I need to have regard.

28    It seems to me that from a number of viewpoints the summons should be discharged. Firstly, the inherent inefficiency of asking someone who is significantly impaired, both in his memory and his executive function, the kinds of questions which are in contemplation. This seems to be contrary to the principles in s 37M of the Federal Court of Australia Act 1976 (Cth). Mr Khattar, in order to provide appropriate responses to questions, must understand the question asked. It appears that he will be required to recall the financial history of some 80 plus companies as well as the detail of transactions between himself and his family, and the flow of money from significant property developments in the context of having been a party to prior NSWSC proceedings. Given Dr Matar’s evidence, in particular, of his recall, verbal fluency and executive function, I have no confidence that it would be facilitative of the just resolution of disputes according to law as quickly, inexpensively and efficiently as possible.

29    A second, aligned reason, is the possible oppression of Mr Khattar in the sense used in the first principle set out in Karounos – that the use of the unusual and far-reaching power in s 81 of the Bankruptcy Act to examine someone who is substantially impaired in his ability to answer may have the capacity to prejudice the defence of any proceedings which may be brought against him. The question of the use of the transcript in subsequent proceedings could only, in my view, result in unfairness of an oppressive kind if Mr Khattar were required to give evidence on his oath while having the significant cognitive impairment opined by Dr Matar and demonstrated in the scans.

30    The third reason is the wellbeing of Mr Khattar himself. Of course, most bankruptcy examinees will suffer at the hands of well-briefed counsel for trustees. However, where a person does not have sufficient capacity to protect his own interests, it could be deleterious in a way which is different from that in the decision of Povey noted above.

31    The summons should be discharged.

Mr Khattar needs a litigation representative

32    I note that it was said against Mr Khattar’s application that Mr Tannous asserted he had instructions from Mr Khattar and that that was inconsistent with Mr Khattar lacking capacity. It seems to me that once Mr Tannous suspected that Mr Khattar did not have capacity, he should have sought the appointment of a litigation guardian, and in any event, at the latest, after receiving Dr Matar's report.

33    Rule 9.63 of the Federal Court Rules provides that a party or interested person can apply for an order appointing a person as litigation representative. The rule does not specify at what point in the proceedings this needs to be done. Rule 9.61 may be used to regularise a situation where proceedings have commenced without a litigation representative having been appointed. Leave to amend by adding a litigation representative may be given: see Paroczy v Cook (1971) 2 SASR 14. Thus, where proceedings have been commenced without a litigation representative being validly appointed, the proceedings are not a nullity and may be “regularised”: R v Danaher; Ex parte Olzer Industries Pty Ltd [1969] VR 445 at 448 per Newton J; Akpata v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1619 at [26]–[28] per Mansfield J.

Costs

34    There was no particular argument on costs. Mr Khattar has been successful. I note that in In the matter of Cousins and Ors t/as Active Construction Services; Cousins and Ors t/as Active Constructions Services v Clout [1998] FCA 1462 (Spender J), his Honour did not regard there to be any special rule as to costs of these kind of applications. I will order that the trustee pay Mr Khattar’s costs of this application. I will ask the parties to bring in orders which reflect the following:

(1)    leave to bring this application out of time;

(2)    appointing a litigation representative for Mr Khattar;

(3)    discharging the examination summons served on Mr Khattar pursuant to r 6.11 of the Federal Court (Bankruptcy) Rules 2016 (Cth); and

(4)    costs of the interlocutory application to be paid by the trustee.

Associate:

Dated:    20 March 2026