Bankruptcy – property adjustment orders in divorce proceedings – dispositions made by consent order in ancillary relief proceedings – trustees’ right to seek property adjustment orders
A trustee in bankruptcy of a deceased man applied for (i) an order declaring void a consent order made under the provisions of the Matrimonial Causes Act 1973; (ii) relief under the 1973 Act in his own right (as successor to the deceased) and (iii) orders that the respondent repay money she received from her late husband, which payments the trustee said were made for no consideration or which amounted to preferences (under sections 339 or 340 of the Insolvency Act 1986). The respondent ex-wife applied for the trustee’s applications to be struck out.
The MCA consent order had given effect to an agreement between the deceased and the respondent which had been signed after the bankruptcy petition had been presented but before the bankruptcy order made. The consent order itself was made, approving the agreement, nine days after the deceased was made bankrupt.
The Registrar considered the case law relying upon Re Flint [1993] Ch 319, Treharne v Forrester [2004] BPIR 338 and Hill v Haines [2008] Ch 428, and concluded that the dispositions effected by the consent order were void under section 281 of the Insolvency Act. He accordingly declined to strike out the trustee’s application but rather gave judgment upon it, declaring the dispositions void as he considered he was required to do.
However the Registrar did strike out the trustee’s claim for relief under the MCA which he said had died with the deceased. It is unclear from the judgment how the trustee framed this claim which it would be thought could only be brought (if at all) in the family courts. But in any event, the Registrar held the claim was a impossible, as the rights under the MCA were personal to the parties to the marriage.
On the facts, the Registrar held that the undervalue claim was bad and that the preference claim could not be resolved before a trial. He encouraged the trustee to take steps to adjudicate the respondent’s proof of debt rather than continuing to leave it unresolved whilst he had no funds available for distribution. He said that the trustee’s refusal to consider the proof was contrary to the overriding objective and good practice.
This case makes clear that dispositions, even when made pursuant to a court order in ancillary relief proceedings, are void if made after the presentation of a bankruptcy petition. It also sets out why the right to make a claim for a property adjustment order does not vest in a trustee in bankruptcy.
