(1) Where, in proceedings brought to establish a claim, the Court is satisfied that there was a defalcation or fraudulent misuse of property on which to found the claim and that otherwise the claimant has a valid claim, the Court must, by order:

(a)

declare the fact and the date of the defalcation or fraudulent misuse of property and the amount of the claim; and

(b)

direct the board to allow the claim as so declared and deal with it in accordance with the provisions of this Part.

(2) In any such proceedings all questions of costs are in the discretion of the Court.