Family Costs Order

Levy v Legal Services Commission (TLR 1 December CA)

Rule 12.3 of the Insolvency Rules 1986 provides: ‘(1) Subject as follows, in bankruptcy … all claims by creditors are provable as debts against … the bankrupt … The following are not provable – (a) in bankruptcy, any fine imposed for an offence and any obligation arising under an order made in family proceedings or under a maintenance assessment made under the Child Support Act 1991 …’. Under rule 6.5(4) the court might set aside a statutory demand (a) if the debtor had a set-off or counterclaim equal to or exceeding the amount of the debts specified in the demand; or (b) the debt was disputed on apparently substantial grounds; or (c) the creditor held adequate security or (d) the court was satisfied on other grounds that the demand ought to be set aside. On this basis Mr Levy, who was a bankrupt, applied to set aside a statutory demand served by the Legal Aid Board, now the LSC, claiming £62,732 costs incurred by his former wife in her family proceedings. The judge had refused to set aside the statutory demand on the basis that although the debt was not provable in the bankruptcy, s382(1) of the Insolvency Act 1986 made no distinction between a provable and a non-provable debt, so the court had jurisdiction to make a bankruptcy order on a petition based on such a debt.