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A Worcestershire housewife's appeal against the findings of the High Court as regards the divorce settlement awarded to her by the matrimonial court after the breakdown of her marriage prior to her former husband declaring himself a bankrupt is to be heard by the Court of Appeal on the 13th and 14th November 2007.

Rob Taylor a solicitor in the insolvency department of leading Worcestershire law firm Harrison Clark LLP and Mr Avtar Kangure QC and Mr Angus Burden, both of St Philips Chambers, Birmingham represent Mrs Wendy Haines in her appeal against the decision of the High Court made in May 2007 in relation to the Claim made against her by her ex-husband's trustees in bankruptcy.

Mrs Haines divorced her husband in early 2005. Prior the decree absolute being pronounced in February 2005, Mrs Haines and her ex-husband had endured acrimonious divorce proceedings culminating in a two day trial. The purpose of the trial, amongst other things, was to decide how the jointly owned matrimonial property should be divided. After a heavily contested hearing, District Judge Mackenzie awarded Mrs Haines a 100% interest in the former matrimonial home.

After many months of legal proceedings, Mrs Haines thought that matters had finally reached a conclusion.

However, just a few weeks after the pronouncement of the decree absolute, Mrs Haines' former husband petitioned for his own bankruptcy.

As a consequence of his bankruptcy, Mr Haines' entire estate then became vested in his trustees in bankruptcy, who held the responsibility of realising any assets so that his creditors might be paid at least part of what they were owed.

It should be noted that as well as having the power to realise any assets clearly owned by a bankrupt at the time of his bankruptcy, a trustee in bankruptcy also has the responsibility and power to seek to challenge any transactions which took place shortly prior to an individual entering that bankruptcy where it is felt they were designed to dispose of assets and put them beyond the reach of creditors.

Such a challenge was initially raised by Mr Haines's Trustees in a trial before District Judge Cooke on 14th December 2006.

The crux of the matter was to decide whether Mrs Haines had provided true value to be entitled to recover more than a half interest in the former matrimonial home, given that her ex-husband had been declared bankrupt. District Judge Cooke favoured Mrs Haines argument that she had given proper value for the additional share in the property. It was argued that as Mrs Haines could not revert back to the divorce courts to ask them to reconsider their decision, because she had already used this claim and had been successful. Therefore Mrs Haines' claim in the matrimonial court had a value to her and this was the value she gave up in return for the additional share in the property.

This was a previously untested area of law and potentially, the decision to allow Mrs Haines to keep the additional share in the property had wide ranging ramifications for the insolvency profession as a whole as transactions concerning transfer of property shortly prior to a bankruptcy are often investigated by trustees as a potential source of recovering assets to the benefit of creditors.

Accordingly, shortly after the hearing in Birmingham on 14th December 2006, Mr Haines' trustees appealed the decision.

The appeal was heard in the Royal Courts of Justice, London on 26th April 2007 before His Honour Judge Pelling QC, who overturned the decision of District Judge Cooke.

Therefore, it was ordered that Mrs Haines has to hand over to the trustee half of the proceeds of sale of the Property which she had to sell to fund this litigation.

Mrs Haines immediately sought permission to appeal the judgment of His Honour Judge Pelling QC to the Court of Appeal and such permission was granted, with the hearing set to take place on the 13th and 14th November 2007.

The case is hugely significant as, at present, the law is as such that all Matrimonial Clean Break Orders have been killed off.

This is on the basis that in the event of either a divorcing husband or wife becoming bankrupt within certainly 2 years (and potentially 5 years) of any ancillary relief property adjustment order (that is to say a Court Order dealing with the distribution of former matrimonial assets), his or her trustee in bankruptcy can turn to the other divorcing party with a view to overturning the agreement as regards the distribution of former matrimonial assets.

Therefore parties who previously thought a clean break order from the Matrimonial Courts was sacrosanct will have to think again unless Mrs Haines is successful in her appeal, as, on the basis of the present law, a nasty letter could always drop through the letter box of a divorcee …..

Notes to editors:

For further information on this press story please speak to Rob Taylor at Harrison Clark:
Tel: 01905 612001 or E-mail: rtaylor@harrison-clark.co.uk

Alternatively you can speak to Angela Baker at Marketing IQ Ltd. on Tel: 01905 359475 or e-mail angela.baker@marketing-iq.co.uk




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