Cross-border Insolvency Act and the Model Law

Articles, Restructuring + Insolvency

Cross-border Insolvency Act and the Model Law

Nov 16, 2016

In the recent case of Gladstone (Trustee) v Digrigoli (No 2) [2016] FCA 1220 the Court was asked to consider the interplay between the operation of the Cross-Border Insolvency Act 2008 (Cth) and the UNCITRAL Model Law on Cross-Border Insolvency (the Model Law).

In this case, Glastone (the Trustee) was appointed as Digrigoli’s bankruptcy trustee by the United States Bankruptcy Court in California. Digrigoli and her former husband (who reside in the USA), formerly owned a property in Queensland which the Trustee was trying to sell. Upon organising the sale, the Trustee became aware that the property had already been sold by the local council for unpaid rates and a residual amount of $67,000 was paid to the Public Trustee of Queensland as unclaimed money.

The Trustee sought orders pursuant to Article 21 and 22 of the Model Law to allow money held by the Public Trustee to be repatriated to the United States and to deal with the residual money in the administration of the Digrigoli’s bankrupt estate in the United States.

In assessing whether to grant the orders sought, the Court noted the following:

  1. Pursuant to section 6 of the Cross-Border Insolvency Act, the Model Law has force in Australia;
  2. Pursuant to sections 8 and 11 of the Cross-Border Insolvency Act, relief available under Article 21 (1)(g) of the Model Law includes any relief available to a trustee in bankruptcy under the Bankruptcy Act 1966 (Cth); and
  3. On the Trustee’s evidence, the Court was satisfied that the property in Queensland was property referred to as ‘community property’ pursuant to the United States Bankruptcy Code and the funds held by the Public Trustee were the proceeds of the sale of the community property.

Ultimately, the Court ordered that the assets, located in Australia, be entrusted to the foreign representative of the Trustee. In coming to its final determination to grant the relief sought by the Trustee, the Court found that there were no public policy grounds to prevent the making of the orders given the interests of the creditors and other relevant parties were adequately protected.

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