+ Provable Debts and Costs Orders

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 and cost For bankruptcy, s82 of the Bankruptcy Act provides that debts "incurred" before the date of the bankruptcy are provable. In Foots -v- Southern Cross Mine Management P/L [2007] HCA 56, the question of costs orders was considered.

At the time of the bankruptcy, judgment had been handed down, but no costs order had been granted. The High Court said that the costs order must have been granted before the date of the bankruptcy for the costs to be provable. That is logical.

However, under s553(1) of the Corporation Act, a provable debt in the liquidation of a company means a debt the "...circumstances giving rise to which occurred before the relevant date...".

In Environmental and Earth Sciences P/L -v- Fouris [2006] 152 FCR 510, a costs order had not been made before the relevant date but was based on a judgment which was given before the liquidation commenced. The Court found that the costs order was a provable debt because the basis for granting the order (being the judgment) had been granted before the relevant date and so the circumstances giving rise to the costs order occurred before the relevant date.

It seems that our lawmakers go out of their way to make life difficult for the community’s legal advisers.

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