|Trustee in Bankruptcy claim against deceased's ex-wife dismissed in England and Wales court|
The trustee in bankruptcy of the late Jonathan Elichaoff has failed to establish a claim against Elichaoff's former wife, Sarah Woodall.
The pair were married in 1999. Sarah Woodall filed for divorce in November 2008, just two months before one of Elichaoff's creditors served a statutory demand on him. His inability to pay resulted in a bankruptcy petition being presented against him in March 2009.
In June 2009, the couple agreed a consent order stating that Elichaoff would pay his wife and daughter maintenance of GBP24,000 per annum each, and would repay GBP1.4 million he had borrowed from Woodall, although there was no written agreement to that effect. This consent order was approved by a district judge the following month.
However, between these two events, Elichaoff was formally made bankrupt – a fact that was not drawn to the judge's attention.
Six years later, Elichaoff's trustee in bankruptcy applied for a declaration that the 2009 consent order was void because it had not taken into account his bankruptcy (Elichaoff not having included his wife on his creditor list). The trustee asserted that Elichaoff's spousal claims under the Matrimonial Causes 1973 Act (MCA) vested in him as part of the bankrupt's estate, being property under s436 of the Insolvency Act 1986. He also alleged that a GBP40,000 payment made by Elichaoff to his wife was a transaction at an undervalue and thus voidable under the Insolvency Act. He therefore applied for an order requiring Sarah Woodall to pay a lump sum equivalent to Elichaoff's debts, under s23 and s24 of MCA 1973.
Sarah Woodall defended these demands in a hearing in February this year. The result of the hearing was that the registrar declared that all of Elichaoff's dispositions under the consent order were void. However, he also struck out the trustee's applications regarding the lump sum to pay Elichaoff's debts and the alleged GBP40,000 payment at an undervalue, and ordered the trustee to pay most of Woodall's costs.
The reason for this decision was that Elichaoff had died – having committed suicide in 2014. Registrar Jones considered the available legal authorities which implied that claims under ss23–24 of MCA 1973 can only be pursued by the spouses themselves, and the relevant rights 'do not extend beyond joint lives'.
The trustee, Ian Robert, appealed this order to the England & Wales High Court, which has now ruled against him. Mr Robin Dicker QC agreed with previous courts that the death of the bankrupt brought to an end his rights under MCA 1973, and the trustee could have no greater claim than that of the bankrupt (Robert v Woodall, 2016 EWHC 2987 Ch).
Robin Dicker QC cited the England & Wales Court of Appeal's decision in Harb v King Fahd Bin Abdul Aziz (2005 EWCA Civ 1324), confirming that matrimonial causes applications by spouses ceased when one of them died. However, he said, his judgment did not affect cases where an order for secured provision had been obtained before the death of a spouse, or where an order against a bankrupt results in assets being subsequently obtained as after-acquired property under s307 of the Insolvency Act 1986.
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Published on our website on Thursday, 1 December, 2016