As the ink dries on your final order dealing with matrimonial assets at the end of a divorce, there is an audible sigh of relief. It’s finished, concluded, done with! But is it? As the law stood, if one spouse declared themselves bankrupt up to five years after the case was resolved, the whole order could be unpicked as the Trustee in Bankruptcy attempted to claw back monies to repay debts.
As Mrs Haines, in a recent landmark case, found out to her dismay in 2005. The parties divorced in February 2005 after an acrimonious divorce culminating in a 2-day contested hearing, after which Mrs Haines was awarded 100% of the jointly owned property. Mr Haines subsequently petitioned for his own bankruptcy with debts totalling £132,000 in March 2005 and his Trustee in Bankruptcy sought to claw back his interest in the former matrimonial home. The Trustee’s argument was that the property was transferred to Mrs Haines without any money having been paid and as such he sought to overturn the Judge’s order and recover Mr Haines’ 50% share in the property to pay his debts. Mrs Haines refused to sell and the District Judge agreed with her. This decision, however, had massive implications for the interaction of matrimonial and bankruptcy law and the Trustee appealed. The Trustee in Bankruptcy found a sympathetic ear in the High Court which determined that the Trustee could indeed demand a proportion of the equity, upsetting the delicate balancing act carried out by the matrimonial Judge. The High Court Judge determined that as there had been no money or moneys worth given for Mr Haines’ 50% share in the property, the Trustee could overturn the transfer to the wife and take a share of the property. In short, the rules on bankruptcy would trump a matrimonial order of the court.
Mrs Haines appealed and the case ultimately ended up at the door of the Court of Appeal. Here the Lord Justices found that a financial order made in matrimonial proceedings, either by agreement between spouses, or by an order imposed upon them by the Court, would normally be binding upon a Trustee. There needed to be a fair balance on the one hand protecting creditors against dishonest, colluding spouses trying to avoid repaying their debts, and on the other hand, fair orders made to protect a spouse and the children of the family.
So where does that leave us? At present, this case suggests that if an order is made by the Court adjusting matrimonial property then the Trustee in Bankruptcy has no rights to those assets if the respondent can demonstrate that he or she has given up property or rights which are equivalent to the value of the property he or she has gained. This is not the concluding chapter however, as the Trustee is taking this case to the House of Lords for a final determination. Only when the House of Lords has given its decision in the Haines case will we be sure where we stand.
