Divorce – Bankruptcy and impact upon Divorce settlements
This blog sets out the outcome of the case of Re Singh Sands (as a trustee in bankruptcy of Singh) v. Singh and others.
In this case the Husband purchased a property in 2006 for £976,000.00, which was subject to a mortgage of £700,000.00.
The Husband subsequently married the Wife in February 2008 and they moved into the property in March 2008.
The parties had two children together.
In January 2010, a charge was placed on the property in favour of the Husband’s father as security for a loan of £506,000.00 which had been provided to him in 2006.
The Husband subsequently charged the property in April 2010 in favour of his sister in the sum of £70,000.00 plus interest (fixed at £30,000.00).
The parties subsequently separated, with the Wife vacating the property in August 2010.
A Divorce Petition was issued in September 2010.
The parties reached an agreement in respect of the finances and a Trust Deed and Consent Order was prepared and signed by the parties. The Court approved the Consent Order in January 2011.
The Trust Deed provided for the Husband to hold the property on trust for the children until the Wife remarried or died or the children attained the age of 21. It was confirmed that if the property was sold earlier, the sale proceeds would be invested in a different property and held on trust for the children.
The Wife moved back into the property in February 2011.
The Decree Absolute was pronounced in the same month.
In June 2011, the Wife was paid a lump sum in accordance with the Consent Order.
The Husband was subsequently made bankrupt in September 2011.
The Trustee in Bankruptcy issued an application challenging the Charges on the property, as well as the Trust and Consent Order.
The Trustee in Bankruptcy argued that the Charges were shams and the Trust and Consent Order should be set aside as they were created to defraud creditors.
The Court held that the Trustee in bankruptcy has successful proved his case in respect of the January Charge.
The Court states that it seemed the January Charge had been created to give the impression the Husband’s father had lent him money. However, the Husband had not been lent any money by his father and therefore the January Charge was a sham.
However, the Court did not feel that the April Charge was a sham. This is because the Husband’s sister had actually lent him money which he needed to repay.
In respect of the Trust Deed and Consent Order, the Court did not feel this was a product of collusion between the Husband and the Wife.
The Court considered that the debts charged against the property would have exhausted the equity in it.
Therefore, the Court ruled that the Trust Deed and the Consent Order should not be set aside.
It did not make a difference that the January Charge had been considered a sham.
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