A husband and wife jointly owned their property. In matrimonial proceedings, the husband was ordered to transfer his interest in the property to the wife. Following his bankruptcy, the husband’s trustee applied to set aside the property transfer on the basis that it had been made at an undervalue, and the wife had given no consideration in money or money’s worth within the meaning of s339 of the Insolvency Act 1986. The wife contended that the fact that she had foregone ancillary relief claims was capable of amounting to consideration.

The court held that if a husband transfers his interest in property for a consideration that was less than its value in money or money’s worth to his wife and is then made bankrupt, such a transfer can be attacked by a trustee under s339. The position is exactly the same whether the husband agrees to such a course in the context of matrimonial breakdown, or where the husband is ordered to adopt such a course following contested ancillary relief proceedings. The matrimonial proceedings were concerned with the division of the matrimonial cake, whereas the size of the cake was liable to be diminished by an order of the Insolvency Court. Neither the receiving party gave, nor did the paying party receive, consideration in such a case which was therefore open to attack by a trustee. Here, the transaction had been at an undervalue and the trustee’s application should be allowed.

So any divorce settlement involving the matrimonial home, made within the relevant period before the bankruptcy of one of the spouses, is now vulnerable to reversal by a trustee.

Hill & anor v Haines