By: Jassmine Girgis
PDF Version: Preservation of Human Dignity as the Justification for Excluding Personal Rights of Action in Bankruptcy
Case Commented On: Cooke (Re), 2018 ABQB 628
This case considers whether a contractual “critical illness” benefit forms part of the property of the bankrupt’s estate. Personal rights of action arising out of tort claims have traditionally not formed part of the bankrupt’s estate, meaning the bankrupt gets to keep the money from these claims. Prior to this case, however, courts do not appear to have addressed the bankrupt’s entitlement to personal rights arising from contract. In this case, the court drew an analogy between the two types of claims. It found that both compensate for the pain and suffering of the bankrupt and consequently concluded that a contractual critical illness claim should also be excluded from the distribution to creditors.
The bigger question raised by this case is why these types of claims are not included in the distribution to creditors. This is not a statutory exemption, but courts have been excluding personal rights of action in bankruptcy distributions for more than a century. This blog explores one possible reason for the exemption. Rather than seeing the debtor as a financial problem that must be solved without requiring state assistance, which has been the pattern of bankruptcy law, this may be the courts seeing and treating the debtor as a human being.