Divorce and insolvency

The Court of Appeal has overturned the High Court judgment in Hill and Another v Haines.

The issue was whether or not an order in aniclliary relief proceedings was made for consideration. If not, the transfer of assets made under the order would represent a transfer at undervalue for the purposes of s.339 Insolvency Act 1986, leaving the transfer exposed to claims by creditors of the transferor in the five years next following. In turn, this presented the novel opportunity for an aggrieved ex-spouse to spend their way into bankruptcy as a way of depriving their ex-spouse of his, or her, divorce settlement.

The Court of Appeal has held that consideration is, indeed, given for the transfer, with that consideration being the release of rights to financial provision under the Matrimonal Causes Act 1973. Trustees of bankrupts will not, therefore, now be able to recover assets previously transferred by an ex-spouse who subsequently becomes insolvent.