Can compensation received by victims of negligence be recouped from them if they are subsequently declared bankrupt? In a hugely significant ruling, the High Court has answered that question resoundingly in the negative.
The case concerned a man in his 60s who received almost £720,000 in damages after a road accident left him permanently blind. He was, about two years later, declared bankrupt at the behest of HM Revenue and Customs.
His trustee in bankruptcy sought the Court’s guidance as to whether the damages could properly be described as property forming part of his bankruptcy estate. If so, the trustee would be duty-bound to recover anything that remained of his compensation and distribute it to his creditors.
Ruling on the matter, the Court noted that the damages were meant to compensate the man for his pain, suffering and loss of amenity and to cover the costs of his past and future care. He could do very little for himself and had disbursed a significant part of the damages to members of his family who acted as his primary carers.
The Court did not accept that his damages in respect of care costs could be viewed as relating to his rights in property. The position might have been different had the damages been converted into some other form of property in which he had a clear interest. However, he was free to make payments or gifts to his family and any part of the damages that he had retained was in the form of cash.
The Court concluded that the damages were uniquely personal to him and that no part of them constituted property which formed part of his bankruptcy estate. None of the money had, therefore, vested in his trustee in bankruptcy. The gifts or payments to his family were also irrecoverable. The trustee had acted responsibly in bringing such an important legal issue before the Court and he was awarded his legal costs out of the bankruptcy estate.