Court finds that wife owes debt to brother, potentially leaving the husband with nothing

It is of course not unusual in divorce finances cases for a third party, often a family member, to have an interest in the matrimonial assets.

Obviously, if they do have an interest then that could reduce the size of the matrimonial ‘pot’, available for distribution between the husband and wife.

It is therefore essential that the question of whether they have an interest, and if so, how much, is determined before the court makes its final decision as to how the matrimonial assets are divided between the husband and the wife.

The way that this normally happens is by the court fixing a preliminary hearing, to determine the issue.

And this is what happened in a recent case that took place in the Family Court in London.

In the case the wife’s brother claimed that the wife owed him the sum of £3.5 million, and that that debt was secured against the former matrimonial home, which was in the wife’s sole name.

The wife accepted her brother’s claim, but the husband did not. The court therefore fixed a preliminary hearing, to determine the issue.

And the outcome was certainly going to have a huge bearing upon the final settlement between the husband and the wife.

As it was a preliminary hearing, the total value of the matrimonial assets had not been calculated, but they were estimated by the parties to be worth between two and three million pounds, mostly held by the wife (in fact, the husband’s claimed assets largely consisted of a claimed half share in the former matrimonial home). The husband was hoping to receive a lump sum from the wife, but obviously this would be extremely unlikely if the court found that she owed her brother £3.5 million.

And that is exactly what the court found.

Briefly, the £3.5 million debt originated from money that the wife had borrowed from her parents in order to buy some properties including, in due course, the former matrimonial home. That money was never fully repaid.

Meanwhile, the family owed money to the wife’s brother. In settlement of that debt the wife’s mother assigned to the brother the debt that the wife still owed to her parents.

The brother then demanded payment from the wife, and agreed to accept a charge against the former matrimonial home.

The husband raised various arguments against the brother’s claim, including that he had exerted undue influence upon the mother, to persuade her to agree to assign the wife’s debt to him.

The court did not accept the husband’s arguments, and declared that the wife did indeed owe her brother £3.5 million, and that that debt was secured against the former matrimonial home.

Quite where this leaves the husband’s claims against the wife is not considered by the court – he may even decide not to pursue them.

You can read the full report of the case here.

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