Insolvency

Husband and wife bought a farm as joint tenants.  In ancillary relief proceedings following a divorce petition, the court ordered the husband to transfer his interest in the farm to his wife. After the order for transfer became effective, a bankruptcy order was made against the husband on his own petition.

The trustees in bankruptcy applied to the court for a declaration that the transfer of the beneficial interest of the husband in the farm was a transaction at undervalue pursuant to the Insolvency Act 1986, s 339 (IA 1986) and so was void as against the trustees.

HELD The ability of one spouse to apply to the court for an order under the Matrimonial Causes Act 1973 (MCA 1973) is a right conferred by law. It has value in that its exercise might lead to court orders entitling one spouse to property or money from, or at the expense of, the other, and the value of that right is the value of the money or property.

There is no reason why some dealing with a pre-existing statutory right cannot constitute consideration.

An ancillary relief order might be susceptible to relief under IA 1986, s 339 despite the existence of a court order if there has been collusion between the parties to prejudice the bankrupt’s creditors, or some other vitiating factor such as fraud, mistake or misrepresentation, but it would be contrary to Parliament’s intention and the objectives of MCA 1973 if every ancillary relief order were automatically subject to nullification at the suit of the trustee in bankruptcy of a party who had become bankrupt after the order had been made.