Financial Order Set Aside Due to Husband's Bankruptcy

The High Court has ruled that a financial remedies order requiring a husband to transfer his half share of the former matrimonial home to his wife could not stand because he had been made bankrupt by the time it was made.

The couple had separated in 2017, and their two children lived with the wife in the former matrimonial home. The financial remedies order was made in March 2020. However, it transpired that the husband had been made bankrupt a week earlier.

The husband appealed against the order on the grounds that the division of assets unfairly favoured the wife. The appeal was not pursued, having been overtaken by the bankruptcy, but it was necessary for the Court to set aside the order and substitute a new decision, to ensure that the final financial remedies order was on a sound legal footing.

Under Section 283 of the Insolvency Act 1986, the husband's assets fell into his bankruptcy estate and could not be transferred to the wife. Thus, the financial remedies order could not take effect. The Court found it hard to resist the conclusion that the husband had deliberately concealed the bankruptcy so that the wife and the judge who made the order had no opportunity to prevent it.

The Court took into account a separate ruling which found that the wife and the husband's trustees in bankruptcy each held a 50 per cent share in the former matrimonial home. That ruling also concluded that, had the judge who made the financial remedies order been informed of the bankruptcy petition, he would likely have endeavoured to hand down judgment earlier, thus allowing the husband's share in the former matrimonial home to be transferred to the wife. In part due to the husband's conduct, there were 'exceptional circumstances' under Section 335A(3) of the Act whereby the interests of the creditors should not outweigh all other considerations. As such, the former matrimonial home should not be sold until 2032, when the younger child turns 18.

Allowing the appeal, the Court ruled that on the sale of the former matrimonial home, any surplus from the husband's share should be paid to the wife.