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Bankruptcy, right of bankrupt to bring proceedings for personal injury or wrong

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Liristis v Gadelrabb (No 2) [2012] NSWCA 363. Basten JA.

12. The exemption in s 60 for proceedings of that kind follows from the terms of s 116(2)(g) of the Bankruptcy Act, which says that the designation of property divisible among creditors does not extend to certain property which includes "any right of the bankrupt to recover damages or compensation... for personal injury or wrong done to the bankrupt" and other members of the bankrupt's family.


13. There is a long history to the construction of this provision. It is sufficient for present purposes to note that the matter was dealt with by Dixon J in Cox v Journeaux (No 2) [1935] HCA 48; 52 CLR 713. 

It was also dealt with by Lockhart J in Faulkner v Bluett [1981] FCA 3; (1981) 52 FLR 115 stating at 119, in reference to cases dealing with the exceptions to the rule that rights of action generally pass to the trustee of a bankrupt's estate:

"The common thread running through these cases is that where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt, the right to sue passes to the trustee notwithstanding that it may have produced personal inconvenience to the bankrupt.... Where the essential cause of action is the personal injury done to the person or feelings of the bankrupt the right to sue remains with the bankrupt."

 14. The passage was approved by the Full Court in Bryant v Commonwealth Bank of Australia (1997) 75 FCR 545 at 547 (Lockhart J) and 562 (O'Loughlin and Merkel JJ).

 15. The present proceedings do not involve interests personal to the bankrupt or to his feelings. The proceedings relate to interests in a house on the land of the respondent and the contents of the house which were said to have been the subject of certain contractual arrangements. Such proceedings do not fall within the exemption in s 60(4) of the Bankruptcy Act. Accordingly, I am satisfied that these proceedings do fall within the terms of sub-s (3) and are deemed to have been abandoned.

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