Think you can escape a foreign bankruptcy? Think again

Case Note on Foreign Bankruptcy

Official Assignee in Bankruptcy of the Property of Ma v Ma [2018] FCA 948

Key Points

  • Don’t bankrupt yourself in a foreign country thinking you can escape liability in Australia.
  • Don’t rely on the principle in Government of India v Taylor (1955) AC 491 that foreign revenue claims are unenforceable when there is a mixed group of creditors (i.e. private parties and a foreign tax authority).
  • Section 29 Bankruptcy Act (Cth) gives the courts wide powers to aid and assist courts in “prescribed countries”. Section 29(2)(b) provides a discretion to assist courts with bankruptcy jurisdiction in other countries as well.
  • The Cross-Border Insolvency Act 2008 (Cth) containing the Model Law can be raised (depending on the circumstances).

On 1 June 2018, Mr Ma made himself bankrupt in New Zealand. His creditors included the New Zealand Inland Revenue for unpaid tax in that country.

Ma lived and owned property in Australia.

After Ma made himself bankrupt, the Official Assignee of New Zealand sought orders in the Federal Court of Australia that recognised the Official Assignee, allowed the appointment of a local receiver to collect and realise Ma’s Australian property, ordered substituted service on Ma and abridged time – at [2].

The Official Assignee obtained a letter of request from the NZ High Court and attempted to serve Ma without success. There was evidence that Ma’s solicitors had received the application and that Ma was on notice – at [3]

The Official Assignee did not press a claim under the Cross-Border Insolvency Act 2008(Cth) because (a) Ma’s centre of main interests was in Australia, not New Zealand; (b) it was unclear whether Ma had an “establishment” that could be used to prove the New Zealand bankruptcy was a “foreign non-main proceeding” under the Model Law – at [6].

Moshinsky J held that the orders sought did not offend public policy by enforcing a foreign revenue claim.

In Re Ayres; Ex parte Evans (1981) 51 FLR 395; 34 ALR 582 (affirmed on appeal) Lockhart J characterised a letter of request from the NZ High Court as a request to administer the estate of a New Zealand bankrupt rather than an attempt to enforce foreign revenue laws. Also, the public policy principle and section 29 of the Act did not interact. They were “qualitatively different” – at [11].

The powers of the court under section 29(3) included power to appoint a receiver. A private trustee was appointed as receiver in Levy v Reddy [2009] FCA 63 – at [15].

Moshinsky J made orders declaring the property vested in the applicant, substituted service and abridging the time of service – at [17] and [18]. This spelled trouble for Ma.

What if the bankruptcy had not been in a “prescribed country”?

The discretionary power in s29(2)(b) allows an Australian Court to aid and assist courts exercising bankruptcy jurisdiction in countries that are not prescribed under the Act. Two examples include aid and assistance offered to South African courts (see Re Gainsford. Tannenbaum v Tannenbaum [2012] FCA 904 at [56] per Logan J) and to the courts of Hong Kong (see Lees v O’Dea (No 2) [2014] FCA 1082 at [19]-[20] per Gordon J).

For a similar case see Official Assignee in Bankruptcy of the Property of Cooksley, in the matter of Cooksley v Cooksley [2017] FCA 1193.


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