Mrs Haines wins appeal

Well, Mrs Haines has won her appeal. The Court of Appeal today overturned the earlier ruling in favour of the trustees in bankruptcy and ordered that she could keep the proceeds of the sale of the former matrimonial home. Interestingly, Lord Justice Rix said that it would be “unfortunate in the extreme” if a settlement approved in a divorce court could be undone for up to five years because the husband goes bankrupt - "that could even encourage such bankruptcy on the part of a disaffected husband”. Indeed it could.

The trustees are apparently intending to appeal to the House of Lords.

Update: The Court of Appeal judgment has now been published here, on Bailii (citation: Haines v Hill & Anor [2007] EWCA Civ 1284). In it, the Chancellor specifically agreed with the original order of District Judge Cooke, in that firstly, the husband did receive consideration, to the extent that the wife's claim had been extinguished or satisfied; and secondly that consideration could be valued in money or money's worth, and its value was not less than the value of the consideration provided by the husband. Accordingly, s.339(a) and (c) of the Insolvency Act 1986 were inapplicable, and the transaction could not therefore be set aside. Lord Justice Rix summarised (at paragraph 82):

Although a collusive agreement by a divorcing husband and wife to prefer the wife and children over creditors and thus dishonestly to transfer to her more than his estate can truly bear, if his debts were properly taken into account, and thus more than her ancillary relief claim could really and knowingly be worth, is no doubt susceptible to section 339 relief despite the existence of a court order in her favour ... : nevertheless, in the ordinary case, where there is no dishonest collusion, and where a court approves or determines the sum or property to be transferred, it would be entirely foreign to the concept of a "clean break" if the husband's creditors could thereafter seek to recover, in bankruptcy, the property transferred or its value.

I can hear the collective sigh of relief from divorce lawyers up and down the country. Now we must hope that the House of Lords doesn't reverse the decision...