A question which often arises, is whether a family provision claim is sufficiently personal to a bankrupt to be excluded from the property which vests in a trustee in bankruptcy?
Our article, What happens to a family provision claim in bankruptcy?, looked at the NSW Supreme Court's consideration of this question. However, the question has recently arisen again in the South Australian case of Pergoleto v Chandler & Ors  SASC 30.
Unbeknownst to Mr Pergoleto's siblings until after the proceedings were commenced, was the fact that Mr Pergoleto was an undischarged bankrupt.
Accordingly, the issue for the Court was whether to grant Mr Pergoleto an extension of time to commence the proceedings.
Notwithstanding, the Court went on to consider the effect of Mr Pergoleto's bankruptcy on his claim for provision from his late mother's estate.
Pursuant to section 116(g) of the Bankruptcy Act 1966 (Cth) (Act) the following property will not be property which is available to a bankrupt's creditors:
(g) any right of the bankrupt to recover damages or compensation:
(i) for personal injury or wrong done to the bankrupt, the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt; or
(ii) in respect of the death of the spouse or de facto partner of the bankrupt or a member of the family of the bankrupt;
and any damages or compensation recovered by the bankrupt (whether before or after he or she became a bankrupt) in respect of such an injury or wrong or the death of such a person;Dart J considered that as the matter was not a claim for damages or compensation for personal injury or wrong done to Mr Pergoleto, it would not fall within the exclusions in s 116(g) of the Act.
Dart J also recognised that, historically, there were a number of authorities which suggested that family provision claims did not vest with a bankrupt's trustee in bankruptcy. However, these authorities relate to a repealed version of the Bankruptcy Act which did not contain an equivalent to section 116(g) above, which now restricts the types of actions that do not vest with the trustee in bankruptcy. His Honour also noted that:
Ultimately, each case must be considered on its own facts, having regard to multiple factors such as the nature of the claim, timing of the claim, size of the estate, amount owed to creditors in the bankruptcy and many others. Early advice is crucial.