A bankrupt’s travel overseas

Australia is on the outer internationally in imposing restrictions on those who are bankrupt from travelling overseas; they are required to obtain the permission of their trustee to do so.

This perhaps arises from our continued punitive perception of bankruptcy, from our insular geography, and maybe also from the infamous and permanent overseas departure of Christopher Skase, with permission, to Spain, back in 1991. The government spent much money and effort in unsuccessfully seeking Skase’s return.

ALRC 129

The Australian Law Reform Commission in its ‘freedoms inquiry’ – ALRC 129 – accepted a submission from Professor Chris Symes that Australia should review this law.  He explained that other comparable jurisdictions impose no such restrictions – the UK, US, Canada, New Zealand, South Africa, Malaysia, Singapore and India; and directors of failed companies have no similar restrictions, despite their having similar obligations to bankrupts to assist with the resolution of their company’s liquidation. 

The ALRC said that

“Arguably, restrictions on freedom of movement should be imposed subject to precise criteria, and judicial oversight, rather than through automatic forfeiture of a bankrupt’s passport. A possible mechanism would be to provide trustees with a power to apply for court orders similar to those available to liquidators”.

In fact, if necessary, the Court has a wider power – to prevent a person merely served with a bankruptcy notice from travelling overseas: Talacko v Talacko [2010] FCAFC 54.

at 5pm before a planned 8pm flight to Lebanon

In Nasr v Dixon [2018] FCA 1039, on 6 July 2018, at 5pm before a planned 8pm flight to Lebanon, a Judge overturned the bankruptcy trustees’ decision to refuse permission for the bankrupt, Mr Nasr, and his family to leave the country.

The Judge accepted that Nasr’s grandfather was “gravely ill”, prompting Nasr and his ex-wife and two children booking flights to Lebanon to see him. The family’s flights had been booked on 20 June.

The Judge discerned

“a significant degree of distrust on the part of the trustee … in particular as a consequence of asserted dealings between the applicant and his ex-wife [the relationship with whom was] described as ‘on-again, off-again’ [with her holding] a significant amount of the financial assets which may have once belonged to [Nasr]”.

Examination summonses were about to be issued by the trustees.

The trustees claimed that the application, in effect, “smacked of ambush”.

But the Judge accepted that Nasr was “likely to return to Australia as promised”. He had undertaken to pay $20,000 prior to his departure as security.  And his absence from Australia until 9 August 2018 was unlikely to hamper the administration of the estate. He had undertaken to attend a meeting with the trustee as soon as he returned.

Reform?

The government has shown no sign of acting upon any of ALRC 129 let alone the bankruptcy recommendation, though the reduction in the period of bankruptcy to one year will confine the overseas travel restriction to that period.

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