In our work as trustee in bankruptcy we are often faced with the misconception that people believe the only assets that ultimately will be realised by a trustee in bankruptcy are those that are located in Australia. This is simply not the case.
The Bankruptcy Act clearly provides that all real property of a bankrupt vests in the trustee in bankruptcy as soon as they are appointed, or as soon as it devolves upon the bankrupt until their discharge.
A recent case in our Melbourne office involved a bankrupt who was a joint registered owner of a property in New Zealand. Our investigations located the property and found that it was encumbered by a very small mortgage—in fact, less than $2,000.
We looked at what steps were required to realise the property. Unfortunately, as the bankruptcy was an Australian bankruptcy and the assets were overseas, it was necessary to apply to the High Court of New Zealand to have the Australian bankruptcy recognised in New Zealand.
This was the first of a number of steps in the process, which culminated with an application to the High Court of New Zealand for sale of the property. That order has been recently granted.
Curiously, the High Court of New Zealand is controlling the sale and the order provides for the property to be sold and the proceeds divided between the joint owners. The costs are to come from the proceeds of sale prior to the division of the residual, including our legal costs in obtaining the order.
The unfortunate consequence of the bankrupt’s lack of co-operation in this case is that instead of paying all creditors in full and returning a surplus to the bankrupt, the costs of the above applications have meant that there will be a shortfall to the creditors and as a result no surplus back to the bankrupt.
The bottom line is that a bankrupt should not assume that property located overseas is safe from realisation, even if not disclosed on the statement of affairs.