Court victory strikes a blow for ex-spouses in family home

A Court of Appeal decision has upheld the rights of ex-spouses to keep property they have been granted in the divorce settlement even though their former partners have since been made bankrupt, says law firm DWF.

The decision relates to the case of David and Wendy Haines, a married couple who bought a farmhouse in Dunhampton, Worcestershire in 2002. They later separated and in 2004 Mr Haines was ordered to transfer his share of the property to his wife as part of the divorce settlement. The following year he declared himself bankrupt.

The trustees administering the bankruptcy case applied to the courts to have Mr Haines’ share of the farmhouse returned to help pay off his debts. This was in line with insolvency rules which allow property transferred to another person before the bankruptcy to be clawed back up to five years later if it could be shown that the transaction was at an undervalue.

Although a district judge initially turned down the trustees request, the High Court agreed with the trustees. Now the Court of Appeal has backed the decision of the original judge and ruled that Mrs Haines can keep the property.

Michelle Ashworth, solicitor with DWF says: “The Court of Appeal felt the High Court judge had misunderstood the matrimonial case law. When a spouse agrees to a divorce settlement or an order is made after a contested hearing they give up the right to any future financial claims (capital).

"It would not be fair for them to lose their home at a later stage because their ex-spouse had been declared bankrupt. It would also be alien to the concept of a clean break if a husband’s creditors could come and take the wife’s property away.

“The transfer of property, normally the family home, is one of the most common orders in divorce settlements. This decision is good news for thousands of divorced people who are living in the matrimonial home and will ensure greater financial security for them and their children.”

North West England-based DWF LLP is one of the fastest growing regional law firms in the UK. resourcing. Further information on DWF is available via www.dwf.co.uk