Jakimowicz v Jacks

The case of Jakimowicz v Jacks before the Federal Court of Australia involved a dispute over the standing of a discharged bankrupt to pursue a claim for breach of trust concerning a property purchased with a compensation payment received for a back injury. The matter was initially heard in the Supreme Court of New South Wales but was transferred to the Federal Court due to its federal jurisdiction. The primary legal issue before the court was whether a discharged bankrupt could maintain a claim for breach of trust where the property in question was acquired with money that was considered 'protected' under the Bankruptcy Act 1966 (Cth). This issue hinged on interpreting the provisions of the Bankruptcy Act, particularly sections 58(1), 116(1), 116(2)(g), (n), and 116(3), and determining if the bankrupt had standing to bring the action.

The Federal Court held that a discharged bankrupt has the standing to pursue a claim for breach of trust where the property was acquired with 'protected money', which includes compensation payments for personal injuries. The court reasoned that such money was not divisible property and thus remained protected even after the bankruptcy. This interpretation was consistent with the decision in Re Iskenderian; Ex parte Iskenderian Bros Pty Ltd, which established that a discharged bankrupt can claim damages for personal injury. The court also addressed the jurisdictional question, concluding that the State court had the authority to determine the respondent's standing without exercising jurisdiction 'in bankruptcy', as per sections 27 of the Bankruptcy Act 1966 (Cth) and the cases of Scott v Bagshaw and Meriton Apartments Pty Ltd v Industrial Court of New South Wales.

Ultimately, the court dismissed the application for leave to appeal, affirming that the discharged bankrupt had standing to pursue the claim for breach of trust. This decision underscores the importance of distinguishing between protected money and divisible property in the context of bankruptcy proceedings.