Guardianship and bankruptcy – NSW law reform report misses the point?

A father who suffered a debilitating stroke left his son with the legal difficulty, in a quagmire of state and federal laws, of trying to deal with his father’s insolvency arising from his large accumulated debts.

The father suffered a significant cognitive impairment, with no mental capacity to decide to make the legal and financial decision to make himself bankrupt, and the son had no legal authority as his guardian to seek that under Queensland law, where they then lived.  But an asset of the father – an unclaimed money account for 45 cents from an inoperative TAB betting account – was located in WA, where he had lived years before. This gave a jurisdictional ‘hook’ to allow the matter to be determined under WA law.  That law gave authority for the son to voluntarily put his father’s estate into bankruptcy.[1]

Review of the Guardianship Act 1987

The NSW Law Reform Commission report on a Review of the Guardianship Act 1987 has just been tabled in NSW parliament. The report also covers the NSW Trustee and Guardian Act 2009 and other related laws.

That Act of 2009 created the new statutory agency of the NSW Trustee and Guardian which is given authority to apply for a financial management order in respect of a person coming under the Guardianship Act. The 2009 Act has an antique and probably legally ineffective provision allowing the NSW Guardian, in relation to a person under its protection, to

“(q) sequestrate the estate under the bankruptcy laws”.

The Commission Report does not address this, merely saying that a financial decision that can be made for a person includes

“making decisions on legal matters relating to a person’s finances or property (for example, bankruptcy, signing contracts or deeds, and retaining a lawyer for legal advice)”.

In fact, consistent with how the term bankrupt is seen, the Commission Report focuses more on a new concept in insolvency terminology “a history of bankruptcy”, as in “people with a history of bankruptcy” coupled with their “convictions for dishonesty offences”.

The report is not examining the plight of the son and his father, rather saying that

“people who have a history of bankruptcy or have been found guilty of an offence involving dishonesty should not be eligible to act as a representative with a financial function unless they have disclosed this in the enduring representation agreement”.

The report mentions this issue numerous times.

The Report then incorrectly refers to the NSW Powers of Attorney Act as currently excluding “people with a history of bankruptcy from acting as attorneys”. Section 5 in fact provides that there is a vacancy in the office of an attorney if:

(d) the attorney becomes bankrupt, or

(e) where the attorney is a corporation, the corporation is dissolved (sic)…”.

The NSW government 

The NSW government and its parliament now have to decide whether people in similar circumstances to those of the son and his father will be alleviated, in NSW at least.

And it might refer to debates, and textbooks, in the Commonwealth sphere about the ‘modern’ benign and alleviating nature of bankruptcy.

[1] SAL and JGL [2016] WASAT 63. See Keay’s insolvency, 10th ed, at [3.50].

Posted by admin