When is a clean break not a clean break?
The recent case of Avis –v- Turner decided in the Court of Appeal gives rise to a cause for concern.
Mrs. Avis’ divorce settlement was concluded in 1985. By the terms of that settlement she had the right to remain in the matrimonial home for the rest of her life. Mr. Avis held a one third share in the property which was only realisable if Mrs. Avis should die, remarry or choose to sell. As it happened Mr. Avis became bankrupt in 1989 for a debt of just £5,000 and his share in the property became vested in the Trustee in Bankruptcy.
In 1992 the Trustee in Bankruptcy sought to force Mrs. Avis to sell the property in order to realise Mr. Avis’ share of the property. After taking legal advice Mrs. Avis resisted the claim and the Trustee in Bankruptcy did not pursue the matter any further. The case lay dormant for approximately ten years until the Trustee in Bankruptcy made a further attempt to pursue the matter in 2003. This ultimately led to the issue of proceedings and a hearing in the Liverpool County Court in May 2006.
The court ruled that as a matter of principle the Trustee in Bankruptcy did have the power to sell the property. Mrs. Avis appealed first to the High Court and then to the Court of Appeal.
The decision of the Court of Appeal is that the Trustees interest must prevail unless there are exceptional circumstances to postpone sale.
The ruling therefore makes unsafe any divorce settlement where the house is held in trust and one of the parties becomes bankrupt as the Trustee in Bankruptcy can force a sale of the property and thus overrule the divorce settlement.
The case is set to return to the High Court to consider the exceptional circumstances point.
Michael Pratt on behalf of
Maxwell Hodge
Solicitors for Mrs. Avis.
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