A recent court decision has finally clarified the law relating to bankruptcy after the conclusion of ancillary relief proceedings, after a significant period of uncertainty. The Court of Appeal in the case of Haines v Hill has decided that a property transferred to a wife in ancillary relief proceedings should, in the absence of fraud or collusion, remain safe even in the swift event of her former husband’s bankruptcy. The trustee in bankruptcy’s case was that Mrs Haines had not given “consideration” for the transfer of the property to her, and therefore it was a transaction at an undervalue and should be set aside. The Court of Appeal held that there had been good consideration: parties to a divorce have a right to apply under the Matrimonial Causes Act 1973 for financial relief (standard practice in divorce cases) and the compromise of this right can amount to consideration. The court made it clear that it could not have been Parliament’s intention for asset transfers on divorce to be overturned after the event on the basis of an ensuing bankruptcy, and it would run contrary to the Matrimonial Causes Act to allow it.
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Divorce and bankruptcy
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