The Official Receiver for Northern Ireland v Julie Anne Urey

December 9, 2014

In the recent case of Official Receiver v Urey¹, the Official Receiver applied for inter alia sale in lieu of partition of a property, with the net proceeds of sale being divided in equal shares between the Respondent and her former husband (“the Bankrupt”) or in such other shares as the Court should see fit.

However, the Respondent argued that the Bankrupt had transferred his interest in the matrimonial home to her by a matrimonial agreement entered into and made the subject of a final order two days before the bankruptcy order was made.

Master Kelly examined two key issues before coming to a final decision. The first issue was whether the terms of the matrimonial order were effective to transfer an equitable interest in the Bankrupt’s share in the matrimonial home to the Respondent. The second issue was whether, if the order was effective, that disposition was void under Article 257 of the Insolvency (Northern Ireland) Order 1989 (“the 1989 Order”).

The making of financial provision orders in matrimonial cases is subject to Articles 25 and 26 of the Matrimonial Causes (Northern Ireland) Order 1978. Both of these provisions require that a decree absolute be issued before any settlement or order takes effect. Therefore, no property right could have been created by the matrimonial agreement as, until a decree absolute was granted, the order had no force or effect by itself. Master Kelly therefore found that a transfer in equity of the Bankrupt’s share in the matrimonial home had not been effected by the matrimonial order.

Article 257 of the 1989 Order provides that, where a person is adjudged bankrupt, any disposition of property made by that person from the day of the presentation of the petition for the bankruptcy order to the vesting of the bankrupt’s estate in a trustee is void unless made with the consent of, or ratified by, the High Court. In this case, the agreement between the Respondent and the Bankrupt was made after Article 257 had taken effect (the bankruptcy proceedings had already been commenced but the bankruptcy order had not yet been made). However, during this period the Respondent had not obtained both a final order and a decree absolute. Therefore, the Master held that no disposition of the Bankrupt’s interest in the matrimonial home had actually been made.

Master Kelly found that, since no disposition of the Bankrupt’s interest had taken place before his bankruptcy, that interest had vested in the Official Receiver by the making of the bankruptcy order. The Official Receiver was therefore entitled to the relief sought. It was found that the parties’ interests in the home were held in equal shares so the proceeds of sale were to be divided equally.

This case shows the potential difficulties which may befall those who wish to transfer an interest in a property before a bankruptcy order is made against them, even if such a transfer is made with the consent of the Court.

Jeanette Donohoe, Director, Cleaver Fulton Rankin

This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Insolvency team at Cleaver Fulton Rankin for further advice or information.

 


1 [2014] NIMaster 16