Test case for 'clean break' settlements when former spouses become bankrupt

The Court of Appeal on Tuesday and Wednesday heard a test case which could have far-reaching implications for 'clean break' divorce settlements.

The Court of Appeal heard the appeal of Hill v Haines in which the High Court ruled that a bankrupt ex-husband's creditors were entitled to half the proceeds from the sale of the ex-wife's £500,000 home which she was awarded in a 'clean break' divorce settlement. Mr Haine successfully petitioned for his own bankruptcy in May 2005 after divorce proceedings ended with his ex-wife being awarded with the matrimonial home and agreeing to a nominal maintenance of just 5p a year.

Rob Taylor, from Worcester-based Harrison Clark solicitors who are representing Mrs Haines together with barristers from St Philips Chambers in Birmingham, said: The case is hugely significant as, at present, the law is as such that all matrimonial clean break orders have been killed off.

"This is on the basis that, in the event of either a divorcing husband or wife becoming bankrupt within certainly two years, and potentially five years, of any ancillary relief property adjustment order, his or her trustee in bankruptcy can turn to the other divorcing party with a view to overturning the agreement as regards the distribution of former matrimonial assets.

"Therefore parties who previously thought a clean break order from the matrimonial courts was sacrosanct will have to think again, unless Mrs Haines is successful."

Judgment was reserved.

To read Newswatch's original case summary click here.