The Court of Appeal decided in Hill v Haines that a court order made after contested proceedings and in good faith prior to the husband’s bankruptcy could not be set aside subsequently by his Trustee. This reversed an earlier decision by the High Court.
This decision provides some protection for wives who gain the family home in contested proceedings – only for their ex-husband to go bankrupt shortly afterwards.
Provided the transaction is completely above board and part of a court order settling all the wife’s claims, it seems the Trustee in Bankruptcy will not now be able to claw back all the assets transferred to the wife in order to satisfy the husband’s creditors.
Where there is a question mark over the transaction, however, the outcome may be different.
In some cases there may be a race to obtain a court order before bankruptcy occurs. There will be a tension in these cases between a number of different competing legal considerations.
“Unfortunately, challenges may continue to court orders for the time being, because the possibility of an order being set aside has not been completely ruled out,” says Rachel Hepworth.
“ Careful drafting may help, as may evidence that the transaction is at arms length and in good faith.
“Permission to appeal to the House of Lords has been refused in this case, but it seems very possible that further cases will come before the courts testing the implications and limits of this decision, and in the meantime clients must take such sensible precautions as they can.
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