Written by Padmini Saheb in December, 2009

Pursuant to Section 82(3) of the Bankruptcy Act, penalties and fines imposed by a Court in respect of an offence against a law are generally not provable. Upon discharge from Bankruptcy, a Bankrupt is released from all of his or her provable debts. As fines and penalties, are not considered to be provable debts, a Bankrupt will not be released from these debts as part of his or her Bankruptcy.  Accordingly, the Bankrupt may be pursued in the future for the recovery of these monies.

The importance of the above was considered in relation to “Disciplinary Action” was commenced against Glenn William Low by The West Australian Real Estate and Business Agents Supervisory Board (“the Board”).

On an application heard on 12 April 2006 before the State Administrative Tribunal, it was found that there was cause for disciplinary action against Mr Low under s103 (1) of the Real Estate and Business Agents Act 1978 (WA).  The Tribunal ordered that:

1)                  from 12 April 2006, the respondent’s licence and triennial certificate was cancelled and the respondent was permanently disqualified from holding a licence and a triennial certificate under the Real Estate Business Agents Act1978;

2)                  the respondent was fined $10,000, payable to the applicant within 28 days; and

3)                  the respondent was to pay the applicant’s costs fixed at $65,000 within 28 days.

The Board then applied to the Court and was successful in obtaining a Sequestration order against Mr Low considering its claim of $75,000 as provable in his Bankruptcy.

The Court held that the Tribunal’s Orders were in relation to a disciplinary action, and the levies imposed were of a compensatory nature and not a fine or penalty.  As a result of the above, the claim of the Board of $75,000 was considered as a provable debt in the Bankruptcy, and was not excluded by the provisions of Seciton 82(3) of the Bankruptcy Act.

The result of the finding of the Federal Magistrate Court had two effects.  Firstly it allowed the Board to claim for dividend purposes in the Bankrupt Estate, and secondly, as it was considered a provable debt, Mr Low would be released from the debt upon his discharge from Bankruptcy.

Readers of this article should take caution when considering the content of this article. There may be instances where people have declared themselves Bankrupt in the hope of ridding themselves of any outstanding fines or penalties, only to find that subsequent to their discharge from Bankruptcy, they may still be pursued for payment in relation to same.