Bankruptcy & Divorce

My ex is doing the same.

There is currently a case which has failed at the high court but is like ly to go to appeal that you need to keep an eye on. Haynes ir something similar I think.

In this case there was a large amoount of equity in the home which had been awarded to the wife.

The husband then went bankrupt and his trustees have come back for 50% of the house. Intially the divorce settlement was over turned in favour of the 50:50 split for bankruptcy. It then wen tto high court where the divorce agreement over ruled and now looks to be going to appeal to see if the trustees can get the bankruptcy to over rule the divorce again.

In essence it means this is in a state of flux. The judge at my Decree Nisi awarded 50:50 costs for an adultery case because of this unknown situation.

In my ancillary as there are so few assets (masses of debt) I am going 50:50 to ensure I never hear from him again. But does mean when he goes bankrupts I get a joint debt of 4k to a bank and £150k to our joint company from a driectors loan he took!

Good luck - mine should be over in the next few months - so if youy want to know how it goes give me a shout!

Unfortunately the trustees are going after 50% of the property. They then take what is owing to them, plus interest, legal fees and their fees and give what is left to my ex. I am then extremely unlikely to ever see that money again as he will make it his mission to spend it all rather than give me and my son a penny.

I believ there is not a Family Court Judge in the country who would award a settlement of 50/50 where there is a child involved so I am desperately trying to push a settlement through them first.

If anyone has and ideas they would be gladly received!

Yes - I would be very interested to hear your outcome. Do you have young children?

I read about that case - yes very interesting - I believe the KPMG are appealing the decision. However, surely in the interim your judge should have taken the Appeal decision as the current decision?

I am trying to find out how much is owed - any ideas?

I am sorry to tell you but this is exactly what is possible.

There are children involved in my case (ages 7 & 14).

The worst case is 50:50. And until the appeal has been finalised there is an ongoing arguement as to whether the bankruptcy courts can over rule a family court or not.

At christmas the situation was they could - that means that if you are awarded say a split of 85:15 because you hae the children by the family court and your ex at a latter date goes bankrupt the bankruptcy court can over turn the family court and reinvestigate for a 50:50 split. This has recently been overturned in the high court so for now the family court wins. But the trustees in the trial case are going to appeal.

This means that no solicitor or judge can definately say what would or would not happen.

I was in court on Wednesday hoping to be awarded divorce costs becasue my ex has committed adultery but because of this exact situation got 50:50.

I have been advised to ensure that I can demonstrate that my ex has a 50:50 split of all assets so that it cannot be over turned. So I have to forget my kids and take on his share of joint debt, hand him half the house, half the company and watch him walk away. But it will be worth it to be able to hold my head up in front of my 14yr old and say I did the "right thing". (just)

I feel for you - I am in the same boat. But prepare for the worst - and it can't get worse!!

Court of Appeal

Published December 12, 2007

Hill and Another v Haines

Before Sir Andrew Morritt, Chancellor, Lord Justice Thorpe and Lord Justice Rix

Judgment December 5, 2007

An order made in matrimonial ancillary relief proceedings to convey property was not a transaction made without consideration, whether following a contested hearing or a compromise agreement.

The transfer did not therefore fall within section 339 of the Insolvency Act 1986 which made transactions at an undervalue capable of nullification on the application of the trustee in bankruptcy of a spouse against whom a bankruptcy order had subsequently made on his or her own petition.

The Court of Appeal so held allowing the appeal of Wendy Pearl Haines, the former wife, from the decision of Judge Pelling, QC (The Times May 14, 2007) who, sitting as Chancery Division judge, allowed the appeal of Richard John Hill and John Ivor Bangham, joint trustees in bankruptcy of David Haines, the former husband, from the dismissal by District Judge Cooke of their application under section 339 for an order setting aside a transfer of property made in ancillary relief proceedings between the husband and the wife.

The order, that the husband transfer his interest in Strudges Farm, Dunhampton, Worcestershire, to the wife became effective on February 28, 2005. On March 31, 2005, a bankruptcy order was made against the husband on his own petition.

Mr Avtar Khangure, QC and Mr Angus Burden for the wife; Mr Peter Arden, QC and Mr Niall McCulloch for the trustees in bankruptcy.

THE CHANCELLOR said that counsel for the wife submitted that the judge was wrong: (i) to hold that only the release of a preexisting legal right or cause of action was capable of constituting consideration for the purposes of section 339; (ii) to focus his attention on a compromise agreement rather than the relevant transaction, namely the order of the matrimonial court.

The starting point was a consideration of the rights of spouses for financial provision and property adjustment orders under sections 23 to 26 of the Matrimonial Causes Act 1973.

It was self-evident that the ability of one spouse to apply to the court for one or more of the orders referred to in sections 23 to 24D of that Act was a right conferred and recognised by law.

Its exercise could, and commonly did lead to court orders entitling one spouse to property or money from, or at the expense of the other. That money and property was, prima facie, the measure of the value of the right.

The judge was wrong in law when he concluded that parties to an order of the court granting some form of ancillary relief did not give consideration at all for the purposes of section 339(3)(a) of the 1986 Act.

Section 339(3)(a) was inapplicable because the wife did give consideration. Section 339(3)(c) was inapplicable because the consideration provided by the wife was in money or money’s worth and its value was not less than the value of the consideration provided by the bankrupt.

In the light of those conclusions, no question of exercising any discretion allowed by section 339 could arise and the appeal would be allowed.

LORD JUSTICE THORPE, agreeing, said that between the systems of insolvency and ancillary relief law there needed to be a fair balance which on the one hand protected creditors against collusive orders in ancillary relief and on the other protected orders justly made at arms’ length to protect the applicant and children of the family. The approach adopted by the judge would destroy that balance.

LORD JUSTICE RIX, agreeing, said that there was nothing in the concept of consideration as a whole to suggest that the compromise or release of a statutory right such as that provided by section 24 of the 1973 Act could not amount to consideration.

As to policy, it would be unfortunate in the extreme if a court-approved, or even a court-determined property adjustment order would be liable, in practice, to be undone for up to five years later because the husband went bankrupt within that period. That could even encourage bankruptcy on the part of a disaffected husband.

In the ordinary case, where there was no dishonest collusion, between the husband and wife, and where a court approved or determined the sum or property to be transferred, it would be entirely foreign to the concept of a Clean Break if the husband’s creditors could thereafter seek to recover, in bankruptcy, the property transferred or its value.

It would require the overthrow of long established jurisprudence, the reinterpretation of section 339, the misunderstaning of the doctrine of consideration, and an assault on current views of the statutory entitlement to ancillary relief, to arrive at that unhappy and unnecessary situation.

Thanks for putting the extract in. I hope the appeal fails. And then all divorcees can rest. Pity the woman who is being pursued.

But in my eyes until the appeal is done - there is a risk and my divorce costs show what some judges choose to do!

What sort of legal team did you have? Did you have a Barrister?