Re Iskenderian; Ex parte Iskenderian Bros Pty Ltd

Re: AIDA ISKENDERIAN (A Bankrupt)
Ex Parte: ISKENDERIAN BROS PTY LIMITED; VAROUJAN ISKENDERIAN and HAGOP
ISKENDARIAN
And: AIDA ISKENDERIAN and OFFICIAL TRUSTEE IN BANKRUPTCY
No. W 890 of 1988
FED No. 270
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Neaves J.(1)

CATCHWORDS

Bankruptcy - property divisible amongst creditors - Damages recovered for personal injury - Damages invested in real property - Property sold and proceeds reinvested in other real property - Subsequent presentation of debtor's petition - Whether property held at time of bankruptcy property to which par.116(2)(n) of Bankruptcy Act 1966 (Cth) applies - Desirability of Parliamentary review of legislative provisions.

Bankruptcy Act 1966 (Cth), s.116

HEARING

CANBERRA

#DATE 24:5:1989

Counsel for the applicants : Mr S.D. Kalfas

Solicitors for the applicants : Windeyer Dibbs

Counsel for the first respondent : Mr B.J. Skinner

Solicitor for the first respondent : Marshall Marks

Mr G. Caddy, Assistant Official Receiver for the Bankruptcy District of the State of New South Wales and the Australian Capital Territory appeared on behalf of the second respondent.

ORDER

The Court:

1. Directs that the amended application herein dated 22 February 1989 be further amended by substituting as the second respondent the corporation sole known as the Official Trustee in Bankruptcy.

2. Declares that the beneficial interest of the first respondent in each of the parcels of land at Bonnells Bay in the State of New South Wales, being Lots 128 and 129 in Deposited Plan 749085, is property to which, by virtue of sub-s.116(3) of the Bankruptcy Act 1966 (Cth) par.116(2)(n) of that Act applies and is not property which is divisible amongst the creditors of the first respondent.

3. Orders that the applicants pay the first and second respondents' costs of the application.

Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

JUDGE1

By their amended application dated 22 February 1989, Iskenderian Bros Pty Limited, Varoujan Iskenderian and Hagop Iskenderian ("the applicants") seek a declaration that certain property is property divisible amongst the creditors of Aida Iskenderian, a bankrupt, and consequential orders. The bankrupt is named in the amended application as the first respondent. The amended application identifies the second respondent as "D.J.N. Bluett as Official Trustee in Bankruptcy". Mr Bluett holds office as the Official Receiver for the Bankruptcy District of the State of New South Wales and the Australian Capital Territory. He is not the Official Trustee in Bankruptcy, which is a corporation sole established by s.18 of the Bankruptcy Act 1966 (Cth) and constituted by the Secretary to the Attorney-General's Department. The trustee of the bankrupt's estate is the Official Trustee in Bankruptcy and the corporation sole should be named as the second respondent to the application. I direct that the amended application be further amended accordingly.

There was considerable discussion at the hearing as to the applicants' standing to seek the declaration and orders set out in the amended application and as to the provision of the Bankruptcy Act under which the application is made. The applicants finally took the position that the application is brought under s.178 of the Bankruptcy Act on the basis that the applicants are affected by a decision of the trustee, being a decision made by Mr Bluett on behalf of the Official Trustee in Bankruptcy, that the property in question is not property divisible amongst the creditors of the bankrupt. Section 178 provides:

"If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable."

The matter proceeded on this basis notwithstanding the form of the amended application.

It was not in dispute that the applicants are creditors of the bankrupt, though their debt had not, at the date of the hearing, been proved. Their standing to bring the amended application, treating it as an application under s.178, is established by reason of the express reference in that section to the right of a creditor to apply to the Court.
The facts are not in dispute and may be shortly stated.
The first respondent, Aida Iskenderian, became a bankrupt on 7 June 1988 upon the acceptance and endorsement by a Deputy Registrar in Bankruptcy of a debtor's petition presented against herself on that date (s.55(3)).
Shortly before May 1983, the first respondent commenced proceedings in the Supreme Court of New South Wales against Eunice Jackson Pty Limited claiming damages in respect of an injury to her back alleged to have been suffered while in the employ of that company. Those proceedings were subsequently settled, the first respondent receiving the sum of $159,447.40 by way of damages.
Out of the settlement moneys the first respondent paid certain personal debts and purchased, under a contract of sale dated 24 May 1983, certain land being Lot 35 in Deposited Plan 226810 and being the whole of the land comprised in Certificate of Title Volume 10152, Folio 100 and known as 54 Prahran Avenue, Frenchs Forest, a suburb of Sydney. The purchase price of the property, which included a dwelling, was $124,000. Stamp duty on the contract amounting to $2,790 was paid by the first respondent, also out of the settlement moneys. The first respondent became registered under the Real Property Act, 1900 (NSW) as the proprietor of the land on 27 July 1983.
Shortly after purchasing the property, the first respondent expended an amount of approximately $30,000 for improvements, also paying that amount out of the moneys received by way of damages.
In 1984 certain moneys were loaned to the first respondent and her husband by the Commonwealth Bank of Australia. The repayment of these advances was subsequently secured by a mortgage dated 9 December 1985 taken by the bank over the property at Frenchs Forest. The mortgage was registered on the title on 17 February 1986.
On 16 July 1987 the first respondent entered into a contract for the sale of the property at Frenchs Forest, the sale price being $194,000.00. On settlement, an amount of $119,793.04 was paid to the Commonwealth Bank of Australia in discharge of the mortgage. After the payment of solicitor's costs and other disbursements, the first respondent received an amount of $61,073.16 less agent's commission of approximately $2,000.00.
Subsequently, the first respondent purchased from Tomar Pty Limited for $36,000.00 certain vacant land at Bonnells Bay, New South Wales, being lot 128 in Deposited Plan 749085. The contract of sale in respect of that land is not in evidence. The transfer under the Real Property Act, 1900 (NSW) is in evidence and is dated 13 November 1987. The purchase price of the land was paid out of the net proceeds of the sale of the property at Frenchs Forest, no moneys from any other source being used for that purpose.
On 12 September 1987 the first respondent and her daughter, Houry Iskenderian, entered into a contract with Tomar Pty Limited for the purchase by them as joint tenants of vacant land at Bonnells Bay, being Lot 129 in Deposited Plan 749085. Of the purchase price of that land the first respondent contributed $7,000.00, this amount being paid out of the net proceeds received by her from the sale of the Frenchs Forest property. The balance of the purchase price was provided by way of loan to the daughter from the State Bank of New South Wales and was secured by mortgage over the property. The transfer of Lot 129 to the first respondent and her daughter is dated 13 November 1987. On 12 January 1988, the first respondent and her daughter entered into an agreement in order to reduce to writing the verbal arrangements made between them at the time of the purchase of Lot 129. The terms of the agreement are as follows:

"1. Miss Iskenderian will make all payments due to the State Bank of New South Wales under the mortgage of $28,000.00 obtained from the said Bank and secured over the said property.

2. Miss Iskenderian will pay a further amount of seven thousand dollars

($7,000.00) to Mrs Iskenderian at such time or times as may be agreed.

3. Upon payment of the full amount of seven thousand dollars ($7,000.00) referred to in clause 2 hereof Mrs Iskenderian will hold her interest as joint tenant in the said property for Miss Iskenderian absolutely.

On 7 June 1988, when she became a bankrupt, the first respondent remained the registered proprietor under the Real Property Act, 1900 (NSW) of the land being Lot 128 in Deposited Plan 749085 and the registered proprietor under that Act with her daughter as joint tenants of the land being Lot 129 in Deposited Plan 749085. It is the first respondent's interest in those two parcels of land which the applicants contend is property divisible amongst the creditors of the bankrupt.
Sub-section 116(1) of the Bankruptcy Act provides that, subject to the Act, all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him, or has devolved or devolves on him, after the commencement of the bankruptcy and before his discharge is property divisible amongst the creditors of the bankrupt (s.116(1)(a)). The expression "the commencement of the bankruptcy", in relation to a bankrupt, is defined in sub-s.5(1) to mean "the time at which his bankruptcy is, by virtue of section 115, to be deemed to have commenced". The bankruptcy of a person who becomes a bankrupt on a creditor's petition or by virtue of a sequestration order made under Division 6 of Part IV or under Part X is to be deemed to have relation back to, and to have commenced at, the time of the commencement of the earliest act of bankruptcy committed by that person within the period of 6 months immediately preceding the date on which the creditor's petition was presented or the application for the making of the sequestration order was made, as the case may be (sub-s.115(1)). By virtue of sub-s.115(2), the bankruptcy of a person who becomes a bankrupt by virtue of the presentation of a debtor's petition is -

(a) if he has committed any act or acts of bankruptcy within the period of 6 months immediately preceding the date on which the petition was presented - to be deemed to have relation back to, and to have commenced at, the time of the commission of that act, or the first of those acts, as the case may be; or

(b) if he has not committed any such act of bankruptcy - to be deemed to have commenced at the time of the presentation of the petition.

Sub-section 116(2) provides that sub-s.(1) of that section does not extend to the property described in a series of lettered paragraphs. By par.(g), the property divisible amongst the creditors of a bankrupt does not extend to -

"any right of the bankrupt to recover damages or compensation -

(i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or

(ii) in respect of the death of the spouse of the bankrupt or a member of the family of the bankrupt,

and any damages or compensation recovered by the bankrupt (whether before or after he became a bankrupt) in respect of such an injury or wrong or the death of such a person."

Paragraph (n) excludes "property to which, by virtue of sub-section (3), this paragraph applies".

Sub-sections 116(2D), (3) and (4) provide:

"(2D) In subsections (3) and (4): 'exempt loan money', in relation to a particular time, means so much of the principal sum of a loan to the bankrupt, or to the bankrupt and another person or other persons, as was repaid, before that time, out of exempt money; 'exempt money' means money of any of the following kinds:

(a) proceeds of a kind referred to in paragraph (2)(d) or (e);

(b) damages or compensation of a kind referred to in paragraph (2)(g);

(c) amounts of a kind referred to in paragraph (2)(k), (m) or (ma); 'outlay', in relation to property, in relation to a particular time, means all of the following:

(a) the money paid for the purchase, or used in the acquisition, of the property;

(b) the money paid before that time in respect of the extensions, alterations and improvements, if any, of the property constructed or made since that purchase or acquisition; 'protected money', in relation to a particular time, means:

(a) exempt money; or

(b) exempt loan money in relation to that time.

(3) Where, as at the time when the bankrupt becomes a bankrupt, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money, paragraph (2)(n) applies to the property.

(4) Where, as at the time when the trustee realises particular property to which paragraph

(2)(n) does not apply, the outlay in relation to the property is in part protected money and in part other money, the trustee shall pay to the bankrupt so much of the proceeds of realising the property as can fairly be attributed to that protected money."

Paragraphs (2)(d) and (e) referred to in the definition of "exempt money" in sub-s.(2D) exclude from the property divisible amongst the creditors of a bankrupt certain policies of life assurance and endowment assurance and the proceeds of such policies received on or after the date of the bankruptcy or not earlier than one year before that date. Paragraphs (2)(k), (m) and (ma) referred to in that definition exclude from the property divisible amongst the creditors of a bankrupt amounts paid under certain governmental schemes to the bankrupt by way of grant or loan as assistance for the purpose of rehabilitation or household support. The expression "the date of the bankruptcy", in relation to a bankrupt, is defined in sub-s.5(1) to mean "the date on which a sequestration order was made against his estate or, if he became a bankrupt by virtue of the presentation of a debtor's petition, the date on which he became a bankrupt by force of section 55, 56 or 57, as the case requires".

Counsel for the applicants conceded that the amount of $159,447.40 received by the first respondent by way of damages upon the settlement of the proceedings in the Supreme Court of New South Wales, if it had remained in her hands as such at the time when she became a bankrupt, would not have answered the description of property divisible amongst her creditors. That would have been so because of the provisions of s.116(2)(g). Counsel further conceded that, had the first respondent remained the beneficial owner of the property known as 54 Prahran Street, Frenchs Forest up to the time when she became a bankrupt, that property would not have had the character of property divisible amongst her creditors. That would have been so because of the provisions of s.116(2)(n) and s.116(3). He submitted, however, that it cannot properly be said that the proceeds of the sale of the Frenchs Forest property answer the description of damages or compensation recovered by the bankrupt in respect of personal injury or wrong done to her so as to fall within par.(g) of sub-s.116(2). It followed, so it was submitted, that, as it was those proceeds, and those proceeds alone, which were used by the first respondent to acquire her interests in the land at Bonnells Bay, it cannot properly be said that the whole, or substantially the whole, of the money paid for the purchase of those interests was money of a kind referred to in that paragraph, with the consequence that those interests are not property to which, by virtue of sub-s.116(3), par.(n) of sub-s.116(2) applies.
Before considering the specific question which has been raised for decision in the present case, some general examination of the provisions of s.116, and in particular of sub-s.116(3), seems desirable. In this regard, it may be instructive to refer to the development in the bankruptcy legislation of express provisions giving protection from distribution amongst a bankrupt's creditors of money recovered by the bankrupt by way of damages or compensation in certain circumstances and of property purchased or acquired with such money.
Under the Bankruptcy Act 1924-1965 (Cth), a bankrupt might continue, in his own name and for his own benefit, any action or proceedings commenced by him previous to his bankruptcy for any personal injury or wrong done to himself or to any member of his family (sub-s.63(3)). However, there was no provision excluding from the property made divisible amongst his creditors by s.91 of that Act any amount recovered by a bankrupt by way of damages in such an action or proceeding. The result was that any money so received by a bankrupt prior to the bankruptcy, even if the money remained identifiable as such, formed part of the property divisible amongst his creditors: Union Fidelity Trustee Company of Australia Ltd v. Dodds (1967) 10 FLR 111.
The matter was considered by the Committee appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth (the Clyne Committee). In its report dated 14 December 1962, the Committee made a recommendation in the following terms:

"164. The Committee considers that it should be expressly provided in the new Act that the divisible property of the bankrupt does not include any right of the bankrupt to recover damages or compensation -

(a) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or

(b) in respect of the death of the spouse of the bankrupt or a member of the family of the bankrupt,

or any damages or compensation recovered by the bankrupt (whether before or after he became a bankrupt) in respect of such an injury or wrong or the death of such a person. Such a provision appears to the Committee to be a necessary corollary to clause 60(4.) of the Bill, which authorizes a bankrupt to continue, in his own name and for his own benefit, any action or proceeding commenced by him before his bankruptcy for any personal injury or wrong done to himself or to any member of his family. The proposed provision will also make it clear that damages or compensation recovered in respect of such an injury or wrong are equally protected."

The reference in the report to the Bill is a reference to the Bill which became the Bankruptcy Act 1966 (Cth).

As enacted in 1966, par.116(2)(g) of that Act provided that the property divisible amongst the creditors of a bankrupt was not to include -

"(g) any right of the bankrupt to recover damages or compensation -

(i) for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or

(ii) in respect of the death of the spouse of the bankrupt or a member of the family of the bankrupt,

and any damages or compensation recovered by the bankrupt (whether before or after he became a bankrupt) in respect of such an injury or wrong or the death or such a person."

Sub-s.60(4) provided:

"(4.) Notwithstanding anything contained in this section, a bankrupt may continue, in his own name, an action commenced by him before he became a bankrupt in respect of -

(a) any personal injury or wrong done to the bankrupt, his spouse or a member of his family; or

(b) the death of his spouse or of a member of his family."

By the Bankruptcy Amendment Act 1980 (Cth), s.116 of the Act of 1966 was relevantly amended in a number of respects. In sub-s.(2), a paragraph (n) was inserted reading:

"(n) property to which, by virtue of sub-section (3), this paragraph applies."

Two new sub-sections, sub-ss.(3) and (4), were inserted. Those sub-sections provided:

"(3) Where the whole, or substantially the whole, of the moneys paid for the purchase, or used in the acquisition, of property were moneys of all or any of the following kinds, namely:

(i) proceeds referred to in paragraph (2)(d) or (e);

(ii) damages or compensation referred to in paragraph (2)(g); or

(iii) amounts referred to in paragraph (2)(k) or (m),

that property is, by virtue of this sub-section, property to which paragraph (2)(n) applies.

(4) Where -

(a) property (not being property to which paragraph (2)(n) applies) is realized by the trustee; and

(b) the moneys paid for the purchase, or used in the acquisition, of the property were in part moneys of all or any of the following kinds, namely:

(i) proceeds referred to in paragraph

(2)(d) or (e);

(ii) damages or compensation referred to in paragraph (2)(g); or

(iii) amounts referred to in paragraph

(2)(k) or (m), and in part moneys of another kind or other kinds,

the trustee shall pay to the bankrupt an amount equal to the amount that bears to the proceeds of the realization of the property the same proportion as the amount of those first-mentioned moneys bears to the total amount paid for the purchase, or used in the acquisition, of the property."

Paragraphs (2)(d) and (e) referred to certain policies of life assurance and endowment assurance and the proceeds thereof. Paragraphs (2)(k) and (m) referred to amounts paid to the bankrupt under certain governmental schemes.

The Bankruptcy Amendment Act 1987 (Cth) again amended s.116. The section then assumed its present form. The new sub-ss.116(2D), (3) and (4) were to apply in relation to a bankrupt in respect of a bankruptcy if, and only if, the date of the bankruptcy occurred on or after 1 March 1988 (see sub-s.106(1) of the amending Act and Commonwealth of Australia Gazette No.S49 of 1988).
That history indicates an intention on the part of the legislature progressively to limit, in the event of supervening bankruptcy, the property available for distribution amongst the bankrupt's creditors with a consequential expansion of the property which a bankrupt may retain for his own benefit. The relevant provisions, therefore, are to be construed, within the limits which the language used will allow, so as to give effect to that evident intention. The language of sub-s.116(3), however, when read with the definitions set out in sub-s.116(2D), gives rise to some difficulties stemming, perhaps, from the desire of the draftsman to deal in the one short sub-section with a number of diverse situations.
Sub-section 116(3), in its present form, poses the question whether, as at the nominated time, the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is "protected money". Money is "protected money" if it is either "exempt money" or "exempt loan money". It is convenient to consider, first, a case, such as the present, where there is no relevant loan to the bankrupt or to the bankrupt and another person or other persons (see the definition of "exempt loan money") but where the purchase or acquisition of the relevant property is made with funds belonging to the person who subsequently becomes bankrupt. In such a case, the property will not form part of the property divisible amongst the bankrupt's creditors if it can properly be said, as at the nominated time, that the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of that property is money of any of the kinds referred to in pars (a), (b) and (c) of the definition of "exempt money" - relevantly for present purposes damages or compensation of a kind referred to in par.116(2)(g). It is, of course, obvious that sub-s.116(3), in speaking of money paid for the purchase, or used in the acquisition, of property is not referring to paper money or coins - the payment will commonly have been made by cheque - but simply to an amount expressed in dollars. Similarly, the definition of "exempt money" is referring to the amount expressed in dollar terms which the bankrupt received by way of damages or compensation of the requisite kind.
The next matter to notice is that sub-s.116(3), in its present form, requires the question whether "the whole, or substantially the whole, of the money paid for the purchase, or used in the acquisition, of particular property is protected money" to be answered "as at the time when the bankrupt becomes a bankrupt". Unlike the expressions "the commencement of the bankruptcy" and "the date of the bankruptcy", both of which expressions are defined in sub-s.5(1), there is no general definition of the time when a bankrupt becomes an bankrupt. Section 57A, however, provides that, where a person becomes a bankrupt by virtue of the presentation of a debtor's petition, the person is, for the purpose of the Act, to be deemed to become a bankrupt at the first instant of the day on which the petition is accepted by the Registrar in Bankruptcy pursuant to s.55, 56 or 57. No similar provision is made in respect of a person becoming a bankrupt by virtue of the making of a sequestration order but it may be accepted that no such provision is necessary as the making of a sequestration order, whether by a Registrar of the Court acting under s.31A or by a Judge, is a judicial act which operates from the first instant of the day on which the order is made. The reference in sub-s.116(3) to the time when the bankrupt becomes a bankrupt may, therefore, be taken to be the first instant of the day on which the sequestration order is made against the bankrupt's estate or, if he becomes a bankrupt by virtue of the presentation of a debtor's petition, the first instant of the day on which the Registrar in Bankruptcy endorses the petition as having been accepted pursuant to s.55, 56 or 57.
The requirement in sub-s.116(3) that the character of the money paid for the purchase, or used in the acquisition, of the property be determined as at the time when the bankrupt becomes a bankrupt was introduced by the amending Act of 1987. The provision as enacted by the amending Act of 1980 made no reference to time. The sub-section in its then form seemed to require no more than that a particular property be identified and the question asked whether the whole, or substantially the whole, of the moneys paid for the purchase, or used in the acquisition of, the property were, at the time they were paid or used, moneys of all or any of the kinds mentioned in the sub-section. The notion that the money which ex hypothesi has at some prior time passed out of the ownership and control of the bankrupt, having been used to purchase or acquire the property, can be characterised as at the time when the bankrupt becomes a bankrupt has its difficulties. However, it seems clearly to be implicit in the sub-section in its present form that circumstances may exist in which the question which the sub-section poses will admit of a different answer depending upon whether it is asked as at the date of purchase or acquisition of the property or as at the time when the bankrupt becomes a bankrupt. Perhaps such circumstances may exist where the damages or compensation recovered by the bankrupt prior to his bankruptcy include an amount for future medical and hospital treatment, the bankrupt uses the damages to purchase property and, when the medical or hospital treatment is subsequently received, it is paid for, not by realization of the property and paying the expenses from the proceeds, but out of funds which do not have the character of damages or compensation. I need not, however, consider that aspect further.
The requirement that the character of the money be determined as at the time when the bankrupt becomes a bankrupt may, however, have one, perhaps unintended, consequence. It was immaterial to the operation of the sub-section in the form which it took prior to the amendments made in 1987 whether the property had been purchased or acquired before or after the time when the bankrupt became a bankrupt. Under the sub-section in its present form, the reference to the time when the bankrupt becomes a bankrupt appears to limit the operation of the sub-section to property purchased or acquired prior to that time so that the sub-section has no operation in respect of property purchased or acquired after that time. By contrast, no such limitation appears to apply to sub-s. 116(4).
Further difficulties would seem to emerge where it is necessary to apply the definition of "exempt loan money". It is not simply that it is difficult, if not impossible, to substitute in sub-s.116(3) for the expression "protected money" the relevant part of the definition of that expression and the definition of "exempt loan money". There is the further difficulty that, while sub-s.116(3) poses the question whether the money paid for the purchase, or used in the acquisition, of particular property has a particular character, what results from the application of the definition of "exempt loan money" to a particular set of facts is simply the identification of a sum of money, being so much of the principal sum of the loan as was repaid before the relevant date. This is in contrast to the definition of "exempt money" which specifies particular kinds of money. The difficulties are compounded when one endeavours to apply sub-s.116(4) to a situation in which loan money is involved.
The matters to which reference has been made suggest that the provisions require the further attention of the Parliament.
I turn now to the particular issue which arises in the present case. The argument presented on behalf of the applicants requires the language of sub-s.116(3) to be read as fastening upon, to the exclusion of all other considerations, the immediate source of the money used in the purchase or acquisition of the property in question. I am unable to accept that approach. Notwithstanding the difficulties to which the language of the provision gives rise, I am of opinion that pars 116(2)(g) and (n) and sub-s.116(3) sufficiently reflect a legislative intention that a bankrupt, notwithstanding his bankruptcy, is to continue to have the benefit not only of any damages or compensation of the kind referred to in sub-s.116(2)(g) recovered by him, but also of any property which can, as at the time when he becomes a bankrupt, properly be described as representing such damages or compensation. Those provisions are, therefore, to be construed accordingly. In the light of that evident legislative intention, I can see no basis for concluding that the protection is to extend only to the damages or compensation and to property initially purchased or acquired with the money recovered by way of damages or compensation: see Leach v. Official Assignee (1975) 1 NZLR 83 at pp 87-8. In my opinion, sub-s.116(3) requires that the totality of the circumstances be considered and the question asked whether the property, in truth, represents such damages or compensation. In the circumstances of a particular case, where properties have been bought and sold, it may well be difficult for a bankrupt to establish that property of which he is the beneficial owner as at the time when he becomes a bankrupt does, in truth, represent damages or compensation of the kind referred to in sub-s.116(2)(g) which he recovered at some earlier time. That circumstance, however, provides no reason for reading the provisions in the limited way contended for by the applicants and as protecting only the money received by way of damages or compensation and the property first purchased therewith. The question is ultimately one of fact.
On the evidence before the Court, I am satisfied that the beneficial interest which the first respondent has, and as at the time when she became a bankrupt had, in each of the parcels of land at Bonnells Bay is property which represents the balance of the damages which the first respondent recovered in respect of the personal injuries suffered by her and, as such, is property to which, by virtue of sub-s.116(3), par.116(2)(n) applies. I am, therefore, of opinion that the first respondent's interest in each of those parcels of land is not property divisible amongst the creditors of the first respondent and I so declare.
The applicants must pay the first and second respondents' costs of the application.

[1989] FCA 270

24 MAY 1989