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PROPERTY OF BANKRUPT - Rights of civil action

Monday, April 06, 2020 @ 10:21 AM  


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Appeal by the plaintiff from dismissal of his action as a nullity due to a lack of capacity as an undischarged bankrupt. The plaintiff sought damages from his former solicitor based on professional negligence in connection with a personal injury claim alleging that his former employer and union ruined his mental health. The parties agreed that the underlying personal injury action was exempt from the vesting provisions of the Bankruptcy and Insolvency Act. The action against the solicitor alleged that he was negligent in advising acceptance of an improvident settlement. In dismissing the action against the solicitor, the motion judge concluded that the action was a nullity, as any cause of action was vested in the trustee in bankruptcy due to the plaintiff’s status as an undischarged bankrupt. The plaintiff appealed.

HELD: Appeal allowed. The objective of the exemption vesting personal injury claims in the trustee in bankruptcy was to ensure that a bankrupt’s creditors did not profit from his or her pain and suffering. Viewing the plaintiff’s action against the solicitor in the context of the specific allegations in the statement of claim and the nature of the damages claimed, success required consideration of the merits of the underlying personal injury action. To the degree the plaintiff was successful in the professional negligence in proving an improvident settlement, any award would effectively compensate him for the personal injuries in the underlying action. To attain the objective of ensuring the plaintiff’s creditors did not benefit from his pain and suffering, the solicitor’s negligence claim must therefore be exempt from vesting in the trustee. The motion judge’s conclusion to the contrary was erroneous.

Wong v. Dyker Law Corp., [2020] M.J. No. 52, Manitoba Court of Appeal, H.C. Beard, M.M. Monnin and K.I. Simonsen JJ.A., February 12, 2020. Digest No. TLD-April62020004