Friday, February 10, 2012

Costs orders made after administration will not be caught by a DOCA

Larkden Pty Ltd v Lloyd Energy Systems Pty Ltd [2011] NSWSC 1567 dealt with the question of whether a costs order made after a company entered into administration was caught by a deed of company arrangment (DOCA) so as to bind creditors.

The court held that only the making of a costs order itself can constitute the 'circumstances giving rise to the claim' to bind creditors and therefore the costs award was not caught by the DOCA. He also held that a costs order is not a contingent claim which exists prior to the making of the order itself.

This decision is important because it provides a test of general application for what constitutes the 'circumstances giving rise to the claim' and hence when a claim will be caught by a DOCA or provable in a liquidation. It is also authority for the proposition that a costs order made after a company enters into administration will not be caught by a DOCA or provable in a liquidation.

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