9 May 2024 by

Disclosure and disposal of property interests

Civil proceedings in England and Wales rely on full and frank disclosure from all parties in order to run fairly and effectively. The benefit is that all parties know of any information that may have a bearing on the case. However, there are instances where the information in one case may affect the outcome of an otherwise unrelated claim.

In Maxine Reid-Roberts and another (the joint trustees in bankruptcy of the Insolvent Estate of Audun Mar Gudmundsson) v Mei-Lin and another [2024], trustees in bankruptcy had applied to Court for the immediate possession and sale of a bankrupt man’s former matrimonial home. The respondents were the bankrupt man and his ex-wife (who now lived in the property with their son). The ex-wife opposed the application on the following grounds.

Firstly, the ex-wife argued that the bankrupt man transferred his beneficial interest in the matrimonial home to her, before the bankruptcy proceedings began, via WhatsApp and email. The Court rejected this argument, citing that the release of property interests must comply with the relevant legislation, which requires such an intention to be in writing and signed. As the bankrupt was in the middle of divorce proceedings at that time, the intention also needed approval from the divorce court judge, which was not obtained.

Secondly, the ex-wife argued that the bankrupt man failed to disclose the existence of the statutory demand when the opportunity arose during the earlier divorce proceedings. The effect was that potential bankruptcy proceedings were hidden from the ex-wife while the court divided the matrimonial assets, which meant the ex-wife was left unable to protect her position.

Thirdly, the ex-wife argued that her mental health would deteriorate if she and her children were forced to move home. This, too, was accepted. The test under section 335A of the Insolvency Act 1986 was satisfied, and the consequences of the divorce proceedings clearly took the bankruptcy and possession matter “out of the ordinary.”

As a result of the above, the Business and Property Court found that it would not be just and reasonable to make a possession order against the ex-wife, or to remove her from the former matrimonial home.

The ruling reinforces the need for full and frank disclosure in Court proceedings, as well as the need to record any property dispositions in writing. We would be more than happy to assist you by providing advice on bankruptcy and insolvency matters relating to property or, equally, on disposal of beneficial interests in property. If you require assistance in this regard or would like to make an enquiry with one of our expert solicitors, then please do not hesitate to contact our Real Estate Disputes team.

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