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amounts. 223 In Hussein v Good, 224 the Supreme Court of Victoria excluded
contingent debts and its meaning was limited to only a debt owed immediately
after it was incurred. In contrast, the Supreme Court of New South Wales in
Hawkins v Bank of China 225 concluded that the word debt could include
contingent debts. In Bans Pty Ltd v Ling, 226 it was decided that whether
contingencies should be included has to be evaluated in a practical and
commonsense manner. 227
Hodgson J in Standard Chartered Bank of Australia v Antico 228 , stated that a
company incurs a debt when " by its choice, it does or omits something, which as
a matter of substance and commercial reality renders it liable for debts which
otherwise it would not have been liable." This decision has been suggested that,
for the section to be applied, there needs to be some positive acts on the part of
the company to bring the debt into existence. 229 Therefore, only debts deemed to
be voluntary, such as contractual debts, are included, while others, such as
payment for damages, are not. 230 Hence, the application of the section is limited
which means involuntary creditors or torts claimants are not protected.
10.5.2.2 When debt is incurred
It is crucial to determine when a company incurs a debt because that is the time
when the liquidator or a creditor has to show that there are reasonable grounds to
223 See Hawkins v Bank of China (1992) 7 ACSR 349.
224 (1990) 1 ACSR 710.
225 (1992) 7 ACSR 349.
226 (1995) 16 ACSR 404 (408).
227 The decision is also consistent with the concept of „substance and commercial reality‟ in
Standard Chartered Bank of Australia v Antico (1995) 131 ALR 1.
228 (1995) 131 ALR 1.
229 Niall F Coburn “Insolvent Trading in Australia: The Legal Principles” in Ian M Ramsay (Ed.)
Company Directors’ Liability for Insolvent Trading (CCH Australia Ltd, Centre For
Corporate Law and Securities Regulation, Faculty of Law, University of Melbourne, 2000)
73 at 96; see also reference therein; Austin and Ramsay above n34 at [20- 090].
230 Ibid.
281