PROUD v BRIMS DISTRIBUTORS PTY LTD [1996] NSWCA 439

PROUD v BRIMS DISTRIBUTORS PTY LTD [1996] NSWCA 439

A contingent liability arising from a guarantee executed prior to bankruptcy can be a provable debt under s82 Bankruptcy Act 1966 if its value can be fairly estimated, in which case discharge from bankruptcy under s153 operates to release the bankrupt from that liability. If the value of the contingent liability cannot be fairly estimated, it is not provable and not discharged. As the trial did not consider these matters, the case must be remitted for proper consideration.

Parties
Appellant: Christopher James Proud; Respondent: Brims Distributors Pty Ltd
Jurisdiction
Australia
Judgment Date
26 November 1996
Procedural Posture
Appeal / Judgment
Outcome
appeal upheld
Legal Topics
Guarantees, Contingent Liability, Provable Debts in Bankruptcy
Bankruptcy Contract Guarantees Contingent Liability Provable Debts in Bankruptcy

Case Brief

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Parties

Christopher James Proud

Appellant

Brims Distributors Pty Ltd

Respondent

Procedural Posture

Appeal / Judgment

Legal Issues

  1. 1 Whether a contingent liability under a guarantee executed prior to bankruptcy is provable in bankruptcy under s82 Bankruptcy Act 1966 and thus discharged on the bankrupt's discharge
  2. 2 How the value of such a contingent liability is to be assessed under s82 and the consequences for discharge

Ratio Decidendi

A contingent liability arising from a guarantee executed prior to bankruptcy can be a provable debt under s82 Bankruptcy Act 1966 if its value can be fairly estimated, in which case discharge from bankruptcy under s153 operates to release the bankrupt from that liability. If the value of the contingent liability cannot be fairly estimated, it is not provable and not discharged. As the trial did not consider these matters, the case must be remitted for proper consideration.

Court Disposition

appeal upheld

Orders

  • Orders of Bell DCJ of 24 August 1993 set aside
  • Matter referred back to the District Court to be dealt with in accordance with the reasons