It's Now Even Harder For A Trustee To Get Relief From Ancillary Relief

The case of Sands v Singh has recently clarified but narrowed the circumstances in which a trustee in bankruptcy can challenge an order or financial settlement made in divorce and ancillary relief proceedings. Such a challenge is usually made on the basis that the transfer of the assets was for nil consideration or consideration that was less than the value of the assets transferred (contrary to section 339 of the Insolvency Act).

Hill v Haines has already evidenced the uneasy relationship between the family court and the Bankruptcy court and the judgment in Sands goes even further to protect ancillary relief orders from challenge when the transferring party is made bankrupt.

Whilst it was helpfully clarified that the Trustee does not need to intervene in the ancillary relief proceedings in order to challenge a settlement or order, the judgment further reduced the scope for a Trustee to seek to challenge the order as an undervalue. In many cases of course, the assets transferred to the former spouse will be the most significant assets in the bankrupt's estate.

The judgment essentially reinforced the family court's ability to approve financial settlements of this nature and ruled that a transferee of assets in the context of ancillary relief proceedings is giving proper consideration. The difficulty for Trustees is that this case narrows the scope for challenge to only those situations where there has been a...

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