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Hill v Haines: 'clean break' principle intact

Date:6 DEC 2007

In November Newswatch reported on the case of Hill v Haines (Test case for 'clean break' settlements when former spouses become bankrupt, Nov 15). On Wednesday the judgment was handed down, in which their Lord Justices found unanimously in favour of Mrs Haines.

In winning her appeal against the trustees of her bankrupt husband's creditors, Mrs Haines will now be able to keep the proceeds of the sale of their matrimonial home. In his ruling, Lord Justice Rix said it would be "unfortunate in the extreme" if a divorce settlement could be undone for up to five years because a spouse goes bankrupt. He added: "That could even encourage such bankruptcy on the part of a disaffected husband".

Rob Taylor, from Worcester-based Harrison Clark solicitors who are representing Mrs Haines said: "This verdict represents a victory for common sense. It restores the position whereby, a properly considered order of the family court, whether as a consequence of contested divorce proceedings or an agreed order properly approved by the court, awarding a spouse a financial settlement cannot subsequently be automatically undermined by the trustee in bankruptcy of the other spouse. Statutory protection for the trustee (and therefore creditors of the bankrupt) remains where it can be shown there is an element of fraud, mistake or misrepresentation. This can occur where there has been collusion between the divorcing parties to deliberately engineer a divorce settlement to put assets beyond the reach of creditors or alternatively where they have hidden assets from the family court. A fair balance is now struck between the rights of a divorcing party to obtain a clean break settlement that properly reflects their needs and entitlements and the rights of creditors not to be defrauded of monies which have been deliberately and consciously put beyond their reach".

However, the trustees have indicated that they intend to seek leave to appeal the decision to the House of Lords.