Cork v Rawlins

The Court of Appeal held that contractual insurance proceeds payable on proof of permanent disablement form part of the bankrupt's estate when the right to payment vests on bankruptcy.

The common-law exception excluding causes of action that are purely personal (for example, damages measured directly by pain and suffering) does not extend to a contractual right to a specified sum payable on disablement where the sum is not assessed by reference to personal injury.

The trustee in bankruptcy sought declaration that sums payable under two life/disablement insurance policies vested in him pursuant to the Insolvency Act 1986. The insured had suffered a disabling accident before bankruptcy and, after the bankruptcy order, proved his disablement to the insurer which accepted liability to pay the contractual sums. The High Court held the proceeds vested in the trustee and were not held for the bankrupt. The bankrupt appealed. The central issue was whether the contractual right to the policy monies fell within the common-law exception for causes of action "personal to the bankrupt" or formed part of the bankrupt's estate distributable to creditors.

1. Disposition: The appeal was dismissed. The Court of Appeal ordered costs against the appellant and refused leave to appeal to the House of Lords.
2. Reasoning: The court treated the contractual right to receive a specified sum from the insurer as an asset of the bankrupt's estate which vested in the trustee under Insolvency Act 1986 s.306 and the statutory definition of "property" in s.436. The fact that payment was triggered by the bankrupt's disablement did not render the payment a form of damages measured by pain and suffering.
3. The common-law exception for causes of action personal to the bankrupt (damages assessed by reference to bodily or mental pain or personal injury) remains confined to cases where the remedy is essentially compensatory for personal harm. The court declined to extend the exception to include contractual entitlements to specified sums which merely accelerate payment on proof of disablement.
4. The court relied on prior authorities recognising the personal-action exception but emphasised their limited scope. It regarded the policies as purchased assets, acquired by payment of premiums that otherwise would have been available to creditors, and saw no principled basis to treat post-bankruptcy recognition of entitlement by the insurer as changing the asset's character.
5. Practical guidance: Where an insurance contract vests a fixed monetary benefit on proof of disablement, and that benefit is not itself computed by reference to pain and suffering, trustees may claim the proceeds as part of the bankrupt's estate. Any policy change expanding the exception is for Parliament.

• Court of Appeal (Civil Division): Appeal from the Chancery Division (His Honour Judge Weeks QC). Decision delivered by Peter Gibson LJ, Chadwick LJ and Keene LJ, appeal dismissed.
• Chancery Division (High Court): His Honour Judge Weeks QC declared the policy proceeds vested in the trustee (reported at [2000] BPIR 654).