The bankruptcy of Alan Bond in the 1990s generated outraged sentiment and language which we may not feel and use today.
My article at the time refers to judicial comments about bankrupts’ “lifestyles of undiminished splendour” leaving their creditors “lamenting”, contrasted with another judge being reassured in seeing the family and friends of a bankrupt rally around to help, and other comments about “cosy financial relationships of Gucci bankrupts” and “hurried ‘political’ reactions to media views”.
This was all in the context of Bond winning the America’s Cup for Australia in 1983, buying van Gogh’s ‘Irises’ for $54 million, incurring debts of $1.8 billion, and going to jail and becoming bankrupt, from which he was released early through an offer to creditors of 0.5c/$.
This was apart from the collapse of his corporate empire.
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This comes from an article of mine from my archives about the bankruptcy of the late Alan Bond, entitled Lifestyles of undiminished splendour – bankrupts on fringe benefits.[1]
Bond v Ramsay
The title comes from words of Justice Robert French on the Federal Court in dissenting from the majority finding that Bond was not required to pay income contributions on the value of gifts and support from family and friends during his bankruptcy, valued at over $713,000.[2]
The amount of the contribution which Bond would have been liable to make would have been in excess of $300,000.
Justice French had said that the law, under Division 4B, was
“remedial of a public mischief which has allowed some bankrupts to enjoy lifestyles of undiminished splendour while their creditors, large and small, are left lamenting”.
Apart from the quality or otherwise of the article, the judicial and media comments reveal certain views about bankruptcy which are interesting from an historical socio-legal perspective and which, perhaps, may not apply so much today.
In interpreting the wide definition of income in s 139L of the Bankruptcy Act, the two majority judges (Cooper and Carr JJ) held that any benefits given to a bankrupt from friends or family had to be provided in an employment context before they could be regarded as forming part of a bankrupt’s income.
Justice Carr said that
“in the case of an ordinary bankruptcy, there are doubtless many people who feel reassured when they see the family and friends of a bankrupt rally around to help that person. This feeling of reassurance may well stem from confirmation of the continuing importance of the family and friends in our rapidly changing society”,
though he did contrast that with the
“suspicion of creditors and others who might well resent the sight of a bankrupt continuing to enjoy the trappings of great wealth”.
As the article explains, there was quite some debate about the judgment.
There were outraged letters to the media from bankruptcy trustees about the “appalling decision” of the majority with references made to
“cosy financial relationships of the Gucci bankrupts”.
Mr Ron Harmer wrote in response that the remedial changes to s 139L had
“every mark of a hurried ‘political’ reaction to media views about a very few bankrupt persons”.
The Minister for Justice, Mr Duncan Kerr, chimed in saying it was
“inappropriate for a bankrupt to be able to enjoy an extremely comfortable if not luxurious lifestyle because of gifts from relatives and friends without these being taken into account as income for the purpose of providing some return to creditors”.
Strong sentiments
It is not that often nowadays in relation to bankruptcy at least for such strong sentiments to be expressed.
These sentiments expressed were no doubt related to the bankruptcy of Alan Bond himself who won the America’s Cup for Australia in 1983, famously bought Vincent van Gogh’s ‘Irises’ for a record $54 million, then had a significant fall from grace, accruing what were said to be debts of $1.8 billion, ultimately going to jail, and going bankrupt but then paying his way out by way of a composition offering creditors just over 0.5c/$. This was apart from the collapse of his corporate empire.
The 1991 book by Paul Barry – The Rise and Fall of Alan Bond – reveals all the details.
Following the Federal Court decision the law was quickly changed to expressly state that benefaction from family or friends could be taken into account in assessing a person’s income for the purposes of income contributions – see s 139L(1)(a)(v).[3]
As I have earlier explained, the government would not publish my article in ITSA’s New Directions in Bankruptcy, as being too political.
The article was subsequently referred to in a very good article by Keith Bennetts about law reform and the need to apply it without and undue emotional response to particular issues, the point being made that objective and empirical data is required for law reform as opposed to reform based on
“unsystematic data, such as bureaucratic value-judgments, anecdotal data or information based on expert opinion … which can lead to costly and inconvenient reforms designed to redress behaviour only rarely encountered”.[4]
Today
Section 139L as amended in 1996 was recently applied to confirm an income assessment based on the value of legal services provided to a bankrupt.
See Insolvency law reform – and income contributions – Murrays Legal
The decision – Bertram v Naudi (No 2) [2024] FCA 1239 – is subject to an appeal: SAD247/24, filed 22 November 2024.
Of $253 million in receipts by registered trustees in 2023-2024, income contributions constituted $21.2 million.
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[1] (1994) 6(4) Australian Insolvency Bulletin 6, Michael Murray Lifestyles of undiminished splendour – bankrupts on fringe benefits (1994) 6(4) Australian Insolvency Bulletin 6, M Murray
[2] Bond v Ramsay, as the Trustee of the Property of Alan Bond [1994] FCA 1411
[3] Bankruptcy Legislation Amendment Act 1996
[4] Bankruptcy Reform: The Significance of Systematic Data and Consultative Processes in Developing Our Bankruptcy Law (1997) Flinders Journal of Law Reform 199, Keith Bennetts.
