Peel J does his best to put into practice the intention of the original financial remedies order, despite H depriving W of 50% of the FMH by not informing the court that there was a bankruptcy order.

Background summary

W and H (both in their 50s), two children (10 and 14). Married in 2009 in Iceland. Permanent separation in 2017. Decree absolute in April 2020. Married for 8 years.

Final hearing for financial remedies on 4 March 2020. HHJ Meston KC found H’s presentation of his assets and liabilities to be opaque, and the complex and sophisticated trust and other financial arrangements of H were not designed to be transparent. The key part of HHJ Meston KC’s order was para 1 – which ordered H’s 50% interest to be transferred to W. There was a delay in the delivery of the judgment, as set out below. There were concurrent bankruptcy proceedings, which are set out below. H did not make HHJ Meston KC aware of the bankruptcy order until after HHJ Meston QC handed down judgment, this was despite having five opportunities to do so. The bankruptcy order was made six days before the financial remedies judgment was handed down.

Litigation chronology summary

• 18–20 February 2019: financial remedies final hearing.
• September 2019: judgment completed; shortly before it was delivered H drew the court’s attention to the fact there were a number of factors that affected H’s financial position. The judge allowed further written submissions and evidence.
• 27 January 2020: original date for the judgment to be delivered, delayed due to further developments.
• 4 March 2020: date of financial remedies judgment. At the hearing, but after judgment was handed down, H informed the judge he had been made bankrupt.
• 4 March 2020: financial remedies final order.
• After 4 March 2020: H provided a copy of the bankruptcy order dated 26 February 2020.
• After 4 March 2020: H appealed against the 4 March 2020 Order. H’s appeal was based on the ground that the Final Order was an unfair distribution of capital in W’s favour. H’s appeal made no mention of the fact H had been made bankrupt.
• Between March 2020 and June 2020: Knowles J granted permission to appeal on the basis of the bankruptcy order that had come to light and the potentially erroneous property adjustment order.
• 21 June 2024: appeal listed; H did not pursue his appeal. The court was compelled to hear the appeal to address the erroneous property adjustment order.

Bankruptcy chronology summary

• 18 November 2019: Statutory demand served on H.
• 22 December 2019: H served with the bankruptcy petition.
• 26 February 2020: bankruptcy order made.
• 23–24 March 2021: W’s annulment application.
• 6 April 2021: written judgment.
• 21 April 2021: order reflecting 6 April 2021 judgment. W’s application is dismissed, and the same order required the Trustees in Bankruptcy (TiB) to inquire into the alleged EFL debt of £2.31m.
• April 2021–April 2024: there was a dispute between the parties regarding W’s beneficial interest in the FMH and whether the FMH should be sold.
• 10 April 2024: judgment in the bankruptcy court.
• 15 April 2024: order reflecting 10 April 2024 judgment. Key points:

• FMH 50/50 between W and TiB.
• Exceptional circumstances were established therefore FMH not to be sold until the youngest child turned 18.

• TiB have lodged an appeal against the delayed sale.

Bankruptcy judgment key findings for the appeal

Peel J noted that in the 10 April 2024 bankruptcy judgment it was found that H had corresponded with HHJ Meston KC to ask him to postpone handing down the judgment on five occasions, between presentation of the bankruptcy petition on 22 December 2019 and the making of the bankruptcy order dated 26 February 2020, but did not inform the judge about the bankruptcy petition. Had H done so, it is likely that the judge would have endeavoured to hand down judgment earlier, and make an order earlier, such that W would have received 100% of the FMH prior to the bankruptcy order. (See [31]⁠(viii).)

Peel J recorded in his judgment the bankruptcy proceedings’ exceptional circumstances at [31]⁠(ix):

‘a)⁠ H’s conduct in not informing W and the court of the bankruptcy petition, thereby depriving W of the opportunity to receive 100% of the FMH;

b)⁠ Although the EFL debt of £2.31m has been admitted to proof, EFL is itself in liquidation. The creditors of EFL have secured judgment against EFL’s insurers. The insurers therefore have a subrogated right to pursue the said sum against H, but the judge expressed some doubt that they will in fact do so.

c)⁠ Other aspects of H’s general behaviour, and the impact on W and the children.’

Findings

HHJ Meston KC had no power to order a disposition of any of H’s assets, including, most significantly, his interest in the FMH:

• By s 283 of the Insolvency Act 1986, all of H’s assets fell into the bankruptcy estate. That included his interest in the FMH.
• By s 306 of the Insolvency Act 1986 the bankruptcy estate vests in the trustee in bankruptcy.
• A long line of authority in the family courts establishes that in such circumstances it is simply not open to the court to make orders disposing of assets formerly belonging to H, and now vesting in the trustee in bankruptcy: see for example Re Holliday (A Bankrupt) [1981] Ch 405, McGladdery v McGladdery [1999] 2 FLR 1102, Ram v Ram (No. 2) [2004] EWCA Civ 1684, [2005] 2 FLR 63.
• A property adjustment order cannot be made against a bankrupt: Ram v Ram (supra).
• A lump sum order can be made as it does not constitute an order disposing of property of the bankrupt.
• A lump sum order is provable in the bankruptcy. But ordinarily, a lump sum order will only be made when the court has a clear idea of the likely residue of the estate once the bankrupt is discharged: Hellyer v Hellyer [1996] 2 FLR 579.

Peel J concluded that it would be the just outcome given H’s conduct in concealing the fact of his bankruptcy from W, and depriving her of the opportunity to secure for herself the entirety of the FMH, that in the improbable event that there was any surplus after payment of (i) the Trustees’ costs and (ii) the creditors’ debts, then such surplus should be paid to W. Peel J stated that this would reflect the intentions of HHJ Meston KC, who provided for W to receive the entirety of the FMH.

Appeal decision

• Appeal allowed.
• Paragraph 1 of the order, providing transfer of H’s share of the FMH to W, discharged.
• The court recorded W owns 50% of the FMH beneficially.
• Upon sale of the FMH any surplus, after surplus from what was formerly H’s 50% (i.e. after payment of the Trustee’s costs and all sums paid to creditors under the bankruptcy) to be paid to W.