By Christina Cavallero and Nicholas Simpson -
Snapshot
- Contract claims of a personal nature, such as a personal injury or wrong, will not be stayed by virtue of a claimant’s bankruptcy.
- Any benefits or damages awarded from such actions will not be divisible amongst a bankrupt’s creditors if the claim and estimation of damages is centrally focused on the personal injury or
- The intention of ss 116(2)(g) and 60(4) of the Bankruptcy Act 1966 is to protect a bankrupt’s right to compensation for personal injury or wrong from his or her creditors.
The recent Western Australian decision of Berryman v Zurich Australia Ltd [2016] WASC 196 (‘Berryman’) is the first time an Australian court has considered whether a benefit payable pursuant to a bankrupt’s disability insurance policy falls outside the scope of property divisible amongst creditors and, if so, whether the bankrupt may continue court action in his or her own name to recover that benefit.
Background
Mr Berryman was a self-employed carpenter who had held a life insurance policy with Zurich Australia Ltd (‘Zurich’) since 17 June 2009.
It was a term of the policy that, upon Mr Berryman becoming totally and permanently disabled within the meaning of the policy, Zurich would pay Mr Berryman a total and permanent disability (‘TPD’) benefit of $2 million.
On 7 July 2009, Mr Berryman suffered an injury whilst at work when a large granite rock crushed his foot. Mr Berryman subsequently made a claim on his policy with Zurich for payment of the TPD benefit, however, his claim was declined.
On 29 August 2014, Mr Berryman commenced proceedings in the Supreme Court of Western Australia seeking damages for breach of contract in the sum of $2 million.
On 10 August 2015, Mr Berryman was declared bankrupt. As a result, Zurich sought to have the action dismissed on the basis that Mr Berryman’s bankruptcy trustee was deemed to have abandoned the proceedings by operation of section 60(3) of the Bankruptcy Act 1966 (Cth) (‘the Act’).
