Creditor's Petition Checklist

The Creditor's Petition Checklist is a tool for an applicant creditor preparing for the hearing of a petition in the Federal Court or the Federal Circuit Court.

The checklist sets out relevant references to the Bankruptcy Act 1966 (Cth), Bankruptcy Regulations 1996, Federal Court (Bankruptcy) Rules 2016, Federal Circuit Court (Bankruptcy) Rules 2016, Federal Court Rules 2011 and Federal Circuit Court Rules 2001.

The checklist is intended as a guide only. It is not a substitute for legal advice or representation.

Unserved creditor’s petitions

Where a creditor’s petition has not been served on the respondent, and is likely to remain unserved on the scheduled hearing date, the applicant may approach the Registry to have the scheduled hearing date vacated and a new hearing date fixed. This will avoid an unnecessary appearance in Court by the applicant at which the Court will do no more than note that the creditor’s petition has not yet been served. The Registry where you filed your creditor’s petition can give you more information about how scheduled hearing dates can be vacated and how a new hearing date can be fixed.

Adjournments

Where an application is made to adjourn a hearing of a creditor’s petition at or after the first court appearance, the Court may order the parties file an affidavit that sets out the facts and grounds relied upon for any further adjournment. An affidavit may be required whether or not the application for adjournment is opposed.

Additional costs are allowable for any adjournment for which costs have been reserved by the Court. These costs can be claimed under the scale set out in Schedule 3 to the Federal Court Rules 2011.

Costs

At the finalisation of proceedings relating to a creditor’s petition, the Court will usually make orders that costs be paid. The procedures for making costs orders in proceedings relating to a creditor’s petition vary between the Registries. You should contact the Registry where you filed your creditor’s petition and ask what are the procedures that Registry follows when making a costs order in these types of proceedings.

In NSW, if the Court orders that costs be paid at the finalisation of a creditor’s petition, the Registrar will generally require the parties to be in a position to have the costs of the petition fixed in Court. Part 13 of the Federal Court and Federal Circuit Court (Bankruptcy) Rules provides that the Court has discretion to fix the amount of those costs rather than leave the setting of the amount to a later process called taxation.

Costs on the making of a sequestration order

If the Court makes a sequestration order, the applicant is to provide the Court with a summary schedule setting out a claim for legal costs and disbursements.

The claim for legal costs must be for an amount that is no more than the amount (applying on the date when the creditor’s petition was presented) as stated in item 14.1 of Schedule 3 to the Federal Court Rules and an additional amount in accordance with the scale set out in Schedule 3 for any adjournments for which costs were reserved.

The claim for disbursements may cover reasonable expenses for searches, the fee for the issue of a bankruptcy notice, Court filing fees and service of documents. Receipts of searches and service should be available if required by the Court.

Costs on the dismissal of a creditor’s petition

If the Court dismissed a creditor’s petition and the applicant seeks a costs order, the applicant will be expected to have evidence that they have given prior written notice to the party against whom the costs order is sought that they will be seeking a costs order and details of the costs being sought. The applicant needs to provide the Court with a summary schedule setting out the claim for legal costs and disbursements.

The legal costs must be for an amount that is not more than the amount (applying on the date when the creditor’s petition was presented) in item 14.2 of Schedule 3 to the Federal Court Rules and an additional amount in accordance with the scale set out in Schedule 3 for any adjournments for which costs were reserved.

The claim for disbursements may cover reasonable expenses for searches, the fee for the issue of a bankruptcy notice, Court filing fees and service of documents. Receipts of searches and service should be available if required by the Court.

Claim for costs (not fixed in Court)

If the Court does not fix costs in Court, the applicant is entitled to claim costs under Part 40 of the Federal Court Rules. The applicant must serve on:

• the trustee, if a sequestration order is made, or
• the debtor, if the creditor’s petition is dismissed

a bill of costs and disbursements and a copy of any receipts for the disbursements claimed. If any of the costs or disbursements are disputed, the trustee or the debtor must within 14 days of being served with the bill give to the applicant a written notice setting out the costs or disbursements disputed.

At least 14 days after a written notice setting out the costs or disbursements disputed has been served on the applicant, the applicant may file with the Court a copy of the bill of costs and disbursements, an affidavit of service of the bill of costs and disbursements and a copy of any notice given by the trustee or debtor disputing the costs or disbursements.

If required, a taxation hearing may be arranged to set the amount of costs. The Registry will contact you if this is required.

GST amounts are not allowed. Accordingly any amounts claimed for disbursements must not include a GST component.

Defects and irregularities

Proceedings relating to a creditor’s petition are not invalidated by a formal defect or irregularity, unless the Court is of the opinion that substantial injustice has been caused. (See: section 306 Bankruptcy Act 1966). Furthermore, various provisions of the Federal Court Rules 2011 and the Federal Circuit Court Rules 2001 also provide the Court with power to:

• allow evidence to be read notwithstanding an irregularity in form (see: r 2.27 Federal Court Rules 2011]; and/or
• dispense with compliance with the relevant rules [see: r 1.34 Federal Court Rules 2011; r 1.06 Federal Circuit Court Rules].

In certain circumstances, the Court may therefore allow evidence provided in proceedings relating to a creditor’s petition to be re-served or read where there has not been strict compliance with the Federal Court and Federal Circuit Court (Bankruptcy) Rules.