Re Khattar [2026] FCA 306

Federal Court of Australia | Needham J | 17 March 2026

Background

Joseph Khattar sought to be discharged from a bankruptcy examination summons issued under s 81 of the Bankruptcy Act 1966 (Cth).

The trustee, Mr Barnden, gave evidence as to the size and complexity of bankruptcy, noting that Mr Khattar had been associated with approximately 84 companies in the seven years prior to Mr Barnden's appointment. The trustee emphasised the need to obtain primary financial records and trace the flow of funds.

The trustee’s evidence included that proofs of debt totalling more than $114 million had been received, while gross assets recovered to date were less than $6 million.¹

Issue

Whether Mr Khattar's significant cognitive impairment provided grounds to discharge the examination summons under r 6.11 of the Federal Court (Bankruptcy) Rules 2016 (Cth).

Evidence of cognitive impairment

Mr Khattar sought discharge on the basis that he suffered from severe cognitive impairment consistent with Alzheimer's Disease, relying on medical evidence contained in two affidavits from Dr Elie Matar, consultant neurologist, supported by magnetic resonance imaging (MRI) and positron emission tomography (PET) imaging.

Mr Khattar performed poorly across all cognitive tests. Dr Matar diagnosed moderate-stage Alzheimer's disease, reflecting both neurodegeneration on imaging and severe, multi-domain cognitive impairment on formal testing.

Dr Matar concluded that Mr Khattar's condition would make detailed and accurate recall of his complex financial history unreliable, and that his cognitive impairment would significantly compromise the reliability, consistency, and accuracy of his participation in a detailed forensic examination conducted under oath.

Key legal issues

Competence vs reliability: Needham J rejected the trustee's submission that competence should be conflated with reliability, finding that Mr Khattar's ability to give evidence concerns his competence, and that reliability must necessarily flow from that impaired competence.
Applicable capacity test: Her Honour held that the relevant assessment of capacity must consider not only Mr Khattar's welfare, but also a prudent assessment of his ability to understand and answer questions in the specific context of the examination.

Decision

The examination summons was discharged. The Court gave three reasons:

1. Inefficiency: Requiring a person with significant memory and executive-function impairment to recall the financial history of over 80 companies was inconsistent with the overarching purpose in s 37M of the Federal Court of Australia Act 1976 (Cth) to resolove disputes justly, quickly and efficiently.
2. Oppression: Compelling Mr Khattar to give evidence on oath while suffering significant cognitive impairment would result in unfairness of an oppressive kind, particularly if the transcript were later used to prejudice his position in subsequent proceedings.
3. Wellbeing: Where a person lacks sufficient capacity to protect his own interests, compulsory examination may be deleterious in a manner distinct from the ordinary hardship associated with examination.

Orders

The Court granted leave to bring the application out of time, appointed a litigation representative, discharged the examination summons, and ordered that the trustee pay Mr Khattar's costs.

Impact

A Trustee’s power to compel witnesses (including the bankrupt) to be examined is a vital tool in all bankrupt estates. Nonetheless, there will, on occasions, be cases where the potential benefit to the bankrupt estate is outweighed by the impact of examination on an individual examinee.

This case turned on its own facts. The serious and unfortunate health challenges faced by Mr Khattar led the Court to conclude that compelling his examination would not fairly or meaningfully achieve the forensic outcomes sought by the trustee.

This summary is prepared for general information purposes only and does not constitute legal advice. Please contact us to discuss how these principles may apply to your specific circumstances.

¹ Re Khattar.rtf