Posts

Personal insolvency verses matrimonial law

By Ian Defty, partner at Begbies Traynor and insolvency advisor at Legal Futures Associate  Integrated Dispute Resolution.

It is fair to say that there has, for many years, been a “difference of opinion” between the law governing personal insolvency and matrimonial law with each “side” believing that they are right and should take precedence.

The principal, sometimes conflicting, legislation is covered in the Insolvency Act 1986 and the Matrimonial Causes Act 1973. However, the differing courts can and will give wide discretion when determining whether and how a married couple’s assets are to be divided.

In accordance with the Matrimonial Causes Act 1973 there is an expectation that assets accrued during the marriage should be regarded as jointly owned between the spouses and normally be divided equally between the parties, whereas assets held by one spouse or the other before the marriage should be left to that party unless there is good reason to divide them. The matrimonial home is usually always considered as a matrimonial asset to which the sharing principle applies.

But, relationship breakdown has grave financial and legal consequences. Some people may find themselves in a position where they inherit debts from their partners or can’t pay off their debts because of poverty. Therefore, personal insolvency can be a result of separation or divorce.

Personal insolvency is a resolution strategy for people who can’t afford to pay their debts. Debt solutions are available for insolvent people and are legally binding. These give insolvents protection from their creditors and can help eliminate some or all of their debts.

In personal insolvency the overriding principle is to see that the creditors as a whole get dealt with fairly and in accordance with insolvency law which may often seem to go against matrimonial law which seeks to ensure that a spouse and maybe children are dealt with first and foremost.

In general terms, all property belonging to or vested in the bankrupt at the commencement of the bankruptcy forms part of the bankruptcy estate and will vest automatically in the trustee in bankruptcy immediately upon their appointment. On the face of it, this may appear unhelpful to the bankrupt’s spouse, especially if they are divorcing.

Divorce and bankruptcy are critical legal cases. When dealt with simultaneously, they can be complicated. Hence, seeking professional legal help is a must. Anyone planning to file a bankruptcy can get help from a bankruptcy lawyer. They can help spouses facing mortgage foreclosure, wage garnishment, and other bankruptcy-related problems navigate chapters 7 and 13 for children’s welfare.

Section 306 of the Insolvency Act 1986 sets out that the bankrupt’s estate shall vest in the trustee immediately on their appointment taking effect or, in the case of the official receiver, on his becoming trustee.

The Insolvency Act 1986 goes on to set out the relevant insolvency legislation regarding what defines a bankrupt’s affairs (S.283) and the restrictions on dispositions of property (S.284).

Section 283 defines a bankrupt’s estate as;-

  • all property belonging to or vested in the bankrupt at the commencement of the bankruptcy, and
  • any property which by virtue of any of the following provisions of this Part is comprised in that estate or is treated as falling with the preceding paragraph.

Section 284 sets out the restrictions on dispositions of property as follows; –

  • Where a person is made bankrupt, any disposition of property made by that person in the period to which this section applies is void except to the extent that it is or was made with the consent of the court or is or was subsequently ratified by the court.
  • Subsection (1) applies to a payment (whether in cash or otherwise) as it applies to a disposition of property and, accordingly, where any payment is void by virtue of that subsection, the person paid shall hold the sum paid for the bankrupt as part of his estate.
  • This section applies to the period beginning with the day of the making of the bankruptcy application or (as the case may be) the presentation of the bankruptcy petition] and ending with the vesting, under Chapter IV of this Part, of the bankrupt’s estate in a trustee.
  • The preceding provisions of this section do not give a remedy against any person –
  1. in respect of any property or payment which he received before the commencement of the bankruptcy in good faith, for value and without notice that the bankruptcy application had been made or (as the case may be) that the bankruptcy] petition had been presented, or
  2. in respect of any interest in property which derives from an interest in respect of which there is, by virtue of this subsection, no remedy.
  • Where after the commencement of his bankruptcy the bankrupt has incurred a debt to a banker or other person by reason of the making of a payment which is void under this section, that debt is deemed for the purposes of any of this Group of Parts to have been incurred before the commencement of the bankruptcy unless —
  1. that banker or person had notice of the bankruptcy before the debt was incurred, or
  2. it is not reasonably practicable for the amount of the payment to be recovered from the person to whom it was made.
  • A disposition of property is void under this section notwithstanding that the property is not or, as the case may be, would not be comprised in the bankrupt’s estate; but nothing in this section affects any disposition made by a person of property held by him on trust for any other person.

If bankruptcy precedes an order made under the Matrimonial Causes Act the legal and practical outcome is straightforward and the assets vest in the trustee. Difficulties arise when the order under the Matrimonial Causes Act 1973 precedes the bankruptcy. The impact of the making of a bankruptcy order on matrimonial proceedings will therefore depend on the point that the matrimonial proceedings have reached.

Where a person has been declared bankrupt (or a bankruptcy petition has been presented against the debtor) prior to the making of a financial remedy order under matrimonial law, the matrimonial court is restricted in the financial remedy order it can make. Generally speaking, the matrimonial court cannot make a property adjustment order as the bankrupt’s estate will have vested in the trustee under the Insolvency Act 1986.

In accordance with S.336 of the Insolvency Act 1986, where an application is made by the trustee to realise the matrimonial home after a year since the vesting of the bankrupt’s estate in the trustee, there is a presumption that the interests of creditors outweigh all other considerations that will include that of the spouse (and other family members such as children).

The transfer of an interest in the matrimonial home pursuant to a consent order made under s.24 of the Matrimonial Causes Act 1973 constitutes a “disposition” for these purposes and is therefore void (Re Flint [1993]). This was reinforced in 1994 with Woodley v Woodley (No. 2) [1993] 2 FLR 477 by where the Court of Appeal held that the presentation of a bankruptcy petition is not a disposition for the purposes of s.37 of the Matrimonial Causes Act 1973 and cannot be challenged as an attempt to avoid an order for matrimonial relief. Therefore, the correct way to attempt to challenge an allegation of a spouse using bankruptcy as a fraudulent device to defeat his/her divorcing spouse’s matrimonial claim ‘s claim is to seek for the bankruptcy order to be annulled under s 282(1)(a) by the court exercising insolvency jurisdiction. It is not open to a judge of the Family Court to use the Civil Procedure Rules to transfer insolvency proceedings to the Family Court be dealt with as part of the financial remedy proceedings, per Arif v Zar [2012] EWCA Civ 986.

A matrimonial property transfer order made after the presentation of the bankruptcy petition is a void disposition by the debtor for the purposes of s.284 of the Insolvency Act. In 2010 a matrimonial settlement by ex-spouses which had not been finalised by the time a creditor issued a bankruptcy petition against the husband was struck out by the court as it constituted a disposition of the spouse’s property, per Warwick v Yarwood [2010] EWHC 2272.

Greg Williams, a barrister at Coram Chambers, London, who specialises in matrimonial finance cases, said: “During the last decade, ultralow interest rates combined with a generally high rate of employment has meant that our day-to-day divorce cases rarely feature bankruptcy issues. That may be about to change: the impact of Covid 19 and Brexit is likely to be felt this year. If personal or household debts becomes unsustainable, practitioners and their clients need to be alert to potential insolvency issues. Assets which would otherwise form part of the matrimonial pot can be lost entirely to a successful bankruptcy petition. Or we may see an increase in applications from trustees in bankruptcy to sell family homes to the chagrin of the remaining spouse and children.”

Indeed, bankruptcy law and family law are directly related to each other, with several changes in the past few years. In addition, the courts are getting more stringent in scrutinizing bankruptcy cases raised by parties to determine if they’re taking advantage of family proceedings, like a plotted divorce, in an attempt to write off their debts.

For more information or to discuss an insolvency matter within matrimonial law please contact IDR on admin@integrated-dr.com or 0207 8465 600.

Jacy Whittaker Joins Leaders in Law as the Exclusive Commercial Litigation Law Member in the Bahamas

Leaders in Law, the leading platform in its field, is delighted to welcome Jacy Whittaker as our exclusively recommended & endorsed Commercial Litigation Law expert in the Bahamas. Jacy’s office is located in Freeport.

For Jacy Whittaker, the key to winning cases is being abundantly overprepared. As an attorney, Jacy gears up for war on everything. The litigator never walks into a courtroom without more research, more evidence, and more potential angles than warranted. This over-preparation allows him to think on his feet, building confidence—and the court’s regard—through each winning application, writ, submission, and hearing. Rather than being exhausted by sheer volume, the youthful lawyer becomes even more invigorated. After all, he lives to argue—and win.

Jacy got his start in 2000, working as a legal assistant for Frederick R.M. Smith, QC, a legendary attorney in the Bahamas. Mr. Smith had been intrigued by a brand of intelligence that has since served Jacy well in the courtroom. Even then, a talent analysis showed Jacy’s strengths as a future litigator.

If you require any assistance in this area, please use the contact details provided in Jacy’s profile below or contact us at info@leaders-in-law.com & we will put you in touch.

Fotini Kardiopoulis joins Leaders in Law as the exclusive Anti-Counterfeiting Law member in Greece

Leaders in Law, the leading platform in its field, is delighted to welcome Fotini Kardiopoulis as our exclusively recommended & endorsed Anti-Counterfeiting Law expert in Greece. Fotini’s office is located in Athens.

Fotini Kardiopoulis, partner and co-founder of Dr Helen G Papaconstantinou and Partners (HP&P), heads the firm’s anti-counterfeiting and anti-piracy department. She holds a law degree from the University of Athens with first-class honours and an LLM from the London School of Economics and Political Science. She joined the Athens Bar in 1985 and has been admitted to practice before the Greek Supreme Court and the Council of State. She has also been a lecturer for 10 years at the Police Academy.

Since 1998 she has been dealing with a broad range of IP matters with an emphasis on trademarks, anti-counterfeiting/anti-piracy, plant breeder’s rights, contract drafting and reviewing and alternative dispute resolution. She has extensive experience in devising and implementing anti-counterfeiting programs, filing and administering customs actions, IP litigation, monitoring and enforcing IP rights online and advising on domain name disputes, consulting on license & franchise agreements and on copyright issues.  In addition, she has conducted numerous significant seizures/raids, including preparatory investigations concerning various sectors, such as apparel, electric/electronic goods, toys, watchmaking, alcohol and tobacco/cigarettes, often involving civil and criminal action in addition to customs procedures.

If you require any assistance in this area, please use the contact details provided in Fotini’s profile below or contact us at info@leaders-in-law.com & we will put you in touch.

Francis Xavier joins Leaders in Law as the exclusive International Arbitration Law member in Singapore

Leaders in Law, the leading platform in its field, is delighted to welcome Francis Xavier as our exclusively recommended & endorsed International Arbitration Law expert in Singapore. 

Francis is Regional Head, Disputes Practices of Rajah & Tann and was appointed Senior Counsel in January 2009. He practises in the areas of international and treaty arbitration and cross-border commercial litigation.

He specialises in corporate and commercial disputes especially in the areas of corporate, banking, property and financial and investment related claims. He also specialises in aviation law and advised in the class-action suit resulting from the crash of the SilkAir flight in Indonesia in 1997 and the Taiwan SIA crash.

If you require any assistance in this area, please use the contact details provided in Francis’ profile below or contact us at info@leaders-in-law.com & we will put you in touch.

Harikrishnan Ravindran joins Leaders in Law as the exclusive Commercial Law member in the UAE

Leaders in Law, the leading platform in its field, is delighted to welcome Harikrishnan Ravindran as our exclusively recommended & endorsed Commercial Law expert in the UAE. Harikrishnan’s office is located in Dubai.

Harikrishnan is a legal consultant with Lutfi & Co since June 2009.  His background prior to joining Lutfi & Co was in counsel practice. Harikrishnan’s expertise and practice focus are in the areas of corporate and commercial law as well as commercial dispute resolution.

He is a key member of both the transactional and the dispute resolution teams.  This experience has assisted him in developing a deeper understanding of the practical implications of specific contractual terms in the context of potential dispute resolution proceedings.  He has considerable expertise and experience in International Trade law particularly pertaining to dispute resolution proceedings.

If you require any assistance in this area, please use the contact details provided in Harikrishnan’s profile below or contact us at info@leaders-in-law.com & we will put you in touch.

Nils T. F. Schmid joins Leaders in Law as the exclusive Mechanical Engineering member in Germany

Leaders in Law, the leading platform in its field, is delighted to welcome Nils T. F. Schmid as our exclusively recommended & endorsed Mechanical Engineering expert in Germany. Nils’s office is located in Munich.

Nils T.F. Schmid specializes in traditional mechanical engineering, his particular interest being in the areas of motor vehicles, tool engineering, process engineering, textile technologies, and medical technology. For his clients, especially medium-sized companies in Germany/Europe and Asian and American big corporations, he develops both German and global patent strategies and sees to their implementation with regard to the building up and management of patent and design patent portfolios.

Other key areas of his work include infringement and nullity disputes regarding patents, utility models, and designs, and the establishment and counseling of in house IP departments, including advising on employee inventor law.

If you require any assistance in this area, please use the contact details provided in Nils’s profile below or contact us at info@leaders-in-law.com & we will put you in touch.

Treatment Of Gifts And Heirlooms In A Divorce

In financial proceedings on divorce, both spouses will be required to disclose their personal belongings, which may include items that they have received by way of gift, including family heirlooms. Such assets usually attach high sentimental value and have been given to the spouse with a general understanding that they will be kept ‘within the family’ and passed down through generations. Therefore, it is understandable that tensions often arise in respect of the treatment of gifts and heirlooms on divorce.

This article will highlight the Family Court’s approach in Hong Kong when dealing with assets such as gifts and heirlooms.

Recent case

Our firm was recently involved in the case of W,LT v GWH also known as HGW [2021] HKFC 142 concerning a dispute over a painting that had been in the family for over 120 years. It was directly acquired by the husband’s great grandfather, passed on to the husband’s grand aunt by inheritance, and then to the husband’s father by inheritance. The issue arose when the wife alleged that the family painting formed part of the marital assets that were subject to division.

The husband had entered into a family agreement with his father to purchase the painting as an advance inheritance to enable his parents to buy a home for retirement. Subsequently, they entered into another agreement where the husband transferred the painting back to his father.

In considering the wife’s application to set aside the subsequent transfer, the Judge held that the agreements between the husband and his father was entered into with very specific issues in mind, the central one being that the painting should be preserved and if possible, retained by the family for future generations.

The Judge declined to set aside the transfer and concluded that the painting was clearly an inherited property. It was initially acquired by the husband’s family by way of inheritance and from a source wholly external to the marriage. In reaching her conclusion, the Judge referred to LKW v DD (Ancillary Relief: Guidelines) [2011] HKFLR 106 where Mr Justice Ribeiro PJ said inter alia the following:

‘87. The source of an asset may provide a reason for excluding it from the sharing principle on the basis that it is not an item of matrimonial property. Of course, in many cases, no question of any distinction between matrimonial and non-matrimonial property will arise. But where there are assets which may be capable of being so differentiated, section 7(1)(a) implicitly requires the court to consider whether any part of such assets ought in fairness to be excluded from the sharing principle. Differentiation might also be seen as a requirement of section 7(1)(f) if the source of a particular asset suggests that it is an independent and unmatched contribution by one of the parties.

89. The existing case-law identifies two classes of assets as possible candidates for exclusion on the basis of source. The first involves property acquired during the marriage by one of the parties from a source wholly external to the marriage, such as by gift or inheritance. The second involves assets derived from a business or an investment conducted solely by one party (sometimes called “unilateral assets”).’

Marital or non-marital assets?

When a gift is received as part of inheritance or a family heirloom is passed to a family member, unless there is an express intention that it should be passed on or returned, the Court may need to determine if such asset will form part of a spouse’s property and financial resources and taken into account when determining the division of assets.

In the UK case of White v White [2001] 1 AC 596, which was followed in Hong Kong in LKW v DD, Lord Nicholls explained that:

‘Property acquired before marriage and inherited property acquired during marriage come from a source wholly external to the marriage. In fairness, where this property still exists, the spouse to whom it was given should be allowed to keep it. Conversely, the other spouse has a weaker claim to such property than he or she may have regarding matrimonial property.’

The nature of the inheritance is also important. As Lord Justice Ward said in the UK Court of Appeal case of Robson v Robson [2010] EWCA Civ 1171:

‘the ancestral castle may (note that I say “may” not “must”) deserve different treatment from a farm inherited from the party’s father who had acquired it in his lifetime, just as a valuable heirloom intended to be retained in specie is of a different character from an inherited portfolio of stocks and shares. The nature and source of the asset may well be a good reason for departing from equality within the sharing principle.’

The circumstances of the case, the nature and the value of asset and how it was acquired are all factors that will be taken into account when deciding whether an asset falls into the category of marital or non-marital property.

How can you protect gifts and heirlooms?

Any assets including heirlooms, gifts or inheritance that are brought into a marriage by one party can be protected if there is evidence of intention to exclude such assets from the matrimonial pot. They should be kept separate and not be intermingled with the marital assets and a prenuptial or post-nuptial agreement can help safeguard such assets.

While pre-nuptial agreements are not binding on the courts in Hong Kong, the law in this area has developed following the Supreme Court of England and Wales decision of Radmacher v Granatino [2011] AC 534 where it was held that:

‘the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.’

This position was endorsed by the Hong Kong Court of Final Appeal in SPH v SA [2014] HKLRD 497.

Conclusion

The Family Courts have very wide discretion in matrimonial cases. However, there is a general view that gifts and heirlooms will be treated as ‘non-marital’ assets unless it would be unfair to exclude such assets from the matrimonial pot. While disputes over gifts and heirlooms are rare, these can be avoided if there is evidence of intention of the treatment of inherited gifts and heirlooms, including for instance a pre-nuptial or post-nuptial agreement.

New Management Board and Partners at RKKW

The new year brought promotions at RKKW – Kwasnicki, Wrobel & Partners – Jaroslaw Szewczyk and Karol Szymanski became new managing partners, and Marcin Jasinski and Piotr Letolc joined as partners.

As of December 1st 2021, Jaroslaw Szewczyk and Karol Szymanski have become the new managing partners of RKKW – Kwasnicki, Wrobel & Partners, while the founders of the firm, Radoslaw Kwasnicki and Krzysztof Wrobel, have taken up their newly-created positions as senior partners.

One of the first outcomes of these changes will be that the founders of the firm will focus on key projects, strategic planning and the firm’s most important clients. The senior partners will continue to exercise general supervision over the firm’s operations and will be actively involved in the development of the ongoing social and cultural projects for which RKKW is well known.

The new managing partners will perform duties related to the day-to-day management of the firm and its organic growth as an entity offering comprehensive legal advice to business and entrepreneurs, mainly in the areas of corporate law, corporate disputes, PE/VC transactions, mergers and acquisitions and private client matters. RKKW plans to continue the strategy of building a specialized law firm providing top-quality legal services based on an individual approach to the client, while systematically increasing the areas of support offered.

Jaroslaw Szewczyk is a PhD in law and an advocate. He specializes in mergers and acquisitions (M&A), private equity transactions, competition law, restructuring law, financial regulations, and capital market law, including services for entities in the FinTech sector. He has worked for private equity funds, public and private companies, including the information technology (IT), telecommunications, finance, media and biotechnology sectors. Within the law firm, he is responsible for developing transactional (M&A, PE/VC), regulatory and criminal (White Collar & Compliance) practices.

Karol Szymanski specializes in litigation proceedings, including corporate disputes, advisory services for private clients, services for public companies and other capital market entities. He represents parties in civil and commercial litigation. He deals with mediation and negotiation of complex business settlements. He has worked for companies with State Treasury shareholding, investment funds, individuals and private companies. He advises on public market transactions, both hostile and friendly takeovers. He has participated in several restructuring projects related to changing the functioning patterns of complex capital groups in which public companies held significant positions. Within the law firm, he is responsible for the development of the litigation practice (corporate, infrastructure and investment disputes), corporate law, support for capital market entities and the private client area.

In addition, as of January 1st 2022, Marcin Jasinski, attorney-at-law, and Piotr Letolc, advocate, have joined RKKW as new partners. The internal promotion of these lawyers crowns their long-standing cooperation with RKKW and underlines the importance of the departments they directly supervise.

Marcin Jasinski is responsible for all real estate projects, both in the transactional (M&A) and project areas, including extensive infrastructure investments. He also deals with the service of French-speaking clients as a head of the law firm’s French Desk.

Piotr Letolc, on the other hand, is responsible for reorganization processes related to changes in the structures of commercial companies and capital groups formed by them and also manages corporate services for the firm’s clients.

RKKW is a Polish law firm cooperating permanently with nearly 70 lawyers, specializing in widely understood commercial law. RKKW’s clients include some of the largest domestic companies, including those with capital commitment from the State Treasury, as well as affluent individuals and institutional investors.

Shareholder Stan Thompson Appointed Executive Director of the Iowa Civil Rights Commission

Litigation shareholder Stan Thompson was recently appointed Executive Director of the Iowa Civil Rights Commission by Governor Kim Reynolds.

“Protecting the civil rights of Iowans is one of the most important functions of state government,” said Gov. Reynolds in a recent press release. “Stan’s extensive experience in business litigation, practicing for the past 36 years, coupled with his knowledge in ethics and professional conduct will make him a valued leader for the commission.”

Over the last 36 years, Stan was a preeminent Iowa commercial litigator tackling complex issues. He tried approximately 40 cases to juries across Iowa. Stan’s clients – Iowa banks, businesses, medical practices, and construction companies – depended on his ability to efficiently process often complicated information as he worked toward a solution in their case.

During his time at Dentons Davis Brown, Stan served in several roles, including the Board of Directors, Litigation Division Chair and as a mentor to countless litigators over his three decades of service.

“Stan’s impact on our firm has been immeasurable. We appreciate his contributions as an advocate, colleague, and leader in the legal profession, in Iowa and nationally. We wish him the best and take great pride in his service to the State,” said Dentons Davis Brown President John Pietila.

In addition to his law practice, in 2002 and 2004 Stan competed in two highly competitive US House of Representatives campaigns that gained national recognition.

We appreciate Stan’s great service he provided clients and wish him the best as he moves into his role.

Environmental Laws and Regulations Affecting US Offshore Wind

In a new edition of Pratt’s Energy Law Report, White & Case global environment & climate change partner Seth Kerschner and associate Brittany Curcuru provide an overview of the federal environmental regulations that proponents of offshore wind may have to navigate to get projects approved, built, launched—and eventually, decommissioned.

The team said, “The Biden administration has signaled strong support for renewables, including wind. The Interior, Energy and Commerce departments announced a shared goal to deploy at least 30 gigawatts (GWs) of offshore wind in the United States by 2030. As part of that resolution, BOEM intends to hold new lease sales and finalize the review of at least 16 Construction and Operations Plans for wind development, which could bring more than 19 GWs of wind capacity online by 2025.”

See the full article here

Press contact
For more information please speak to your local media contact.