Trustee of Deceased Bankrupt Cannot Claim Payment From Spouse

February 13, 2017

Trustee of Deceased Bankrupt Cannot Claim Payment From Spouse

Financial problems are frequently connected with marital problems, and the interplay between family law and insolvency law can produce legal complications.

In a recent instance, the court had to decide what to do about a claim from the receiver in bankruptcy of a man who had died.

The bankrupt man and his wife divorced in 2008 after nine years of marriage. The divorce settlement provided that the man should repay to his former wife £1.4 million that he had borrowed from her under an informal agreement and pay her £24,000 a year in maintenance. Between the consent order to that effect being made and its approval by the court, the man was made bankrupt, a fact of which the presiding judge was not aware.

In the bankruptcy proceedings, the man failed to include his wife in his list of creditors and the trustee in bankruptcy applied to the court for the consent order to be ruled to be void because of that failure. In addition, it was claimed that another transaction between the man and his wife was a transaction at an undervalue and also voidable. However, things by this time had become more complicated by virtue of the man's death, a factor that was to prove crucial.

Whilst rejecting the latter claim, the court accepted that the financial arrangements under the consent order should be voided. The trustee in bankruptcy claimed that the man's ex-wife should pay a lump sum to meet his debts.

However, the Matrimonial Causes Act 1973 specifies that certain rights can only be pursued by the spouse, and these 'do not extend beyond joint lives'. On that ground, the trustee's claim against the man's ex-wife could not proceed, even if the original order was voided.