Pre-nups: not worth the paper they’re written on?

18th April ‘19

Well the hype surrounding the hotel porter awarded a £1.3m divorce settlement from his Avon heiress ex-wife would certainly suggest so, but as is often the case there is more to it than that.

The parties met in 2003, started living together in January 2005 and were married the following November. They separated in November 2016. They had two children together; aged 11 and 7 at the time of the order.

The Husband was head concierge at a London hotel earning £35,000. He had no other property or assets other than a share in his mother’s house in Turkey worth less than £50,000.

By contrast the Wife was found to be entitled to the income from various trusts and to be solely entitled to a trust fund of $4.45m. The former matrimonial home with equity of £1m was also held in her sole name. Moreover, it was clear that in the foreseeable future the Wife would receive a substantial benefit from a further trust.

On the 11 November 2005, just 15 days prior to the marriage, the parties signed a pre-nuptial agreement. The Husband received advice from an English solicitor who had acted for the Wife in her first divorce. The solicitor took the Husband through the agreement that provided for the following:

– that it was deemed to have been made under the laws of the State of New York and that its validity and effect and construction should be determined in accordance with those laws regardless of where either party resided or was domiciled at the time of the divorce;

– that the parties wished any proceedings relating to the marriage to be determined in accordance with the laws of the State of New York and that they submitted to the exclusive jurisdiction of the Courts of that State;

– the substantive provision to be made to the Husband in the event of a divorce was that any increase in the value of three properties in the name of the Wife would be divided equally between by the parties.

The Husband was advised that the agreement was slanted heavily in the Wife’s favour, but nonetheless agreed to sign it. Needless to say, upon the parties’ separation some 11 years later, there had been no increase in the value of the properties and the Husband was therefore entitled to absolutely nothing.

Although pre-nuptial agreements are not contractually enforceable in their own right in England and Wales, because only the Court can dismiss the parties’ financial claims on divorce, the decision in the case of Radmacher v Granatino [2010] sets out the guiding principles to be followed by the Court where there is a pre-nuptial agreement:

“The Court should give effect to a nuptial agreement that is [i] freely entered into by each party [ii] with a full appreciation of its implications [iii] unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.”

In this case the Judge found that it would be ‘wholly unfair’ to hold the husband to the agreement and that he would attribute no weight to it.

freely entered into by each party;

Many would argue that the Husband did “freely” enter into the agreement – he could of course have refused to sign it if he wished. This point was not specifically addressed by the Judge but the Supporting Family consultation paper suggests that where the agreement is entered into less than 21 days prior to the date of the marriage there shall be a presumption ‘undue pressure’. As the agreement was signed only 11 days prior to the wedding the presumption would certainly apply. That must be the correct approach in my mind in circumstances where the financially weaker party to the agreement is being put under unnecessary time constraints and pressure by the financially stronger party.

with a full appreciation of its implication;

On this point the Judge said that the Husband could not be said to have had a full appreciation of the implications of the agreement because:

– he had no legal advice at all about the impact of New York Law – the Husband’s English solicitor had no competence to advise on New York law relating to the enforceability of pre-nuptial agreements; and

– the Husband’s solicitor was compromised by virtue of the fact that he had acted previously for the Wife in her first divorce. This was a clear situation of apparent bias.

unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.

Lastly, and probably most importantly, the financial provision that was made for the Husband was ‘wholly’ unfair – he got absolutely nothing.

It therefore seems that the agreement was doomed from its initial conception, but what about the jurisdiction point. Would the agreement have fared any better under New York law? According to the evidence of the expert jointly instructed by the parties the agreement would have carried “minimal weight, if any” in New York.

If the agreement doesn’t carry weight in a country where they are common place and routinely enforceable then what chance did the agreement stand here? The outcome in this case is therefore not representative of the Courts’ general approach to these agreements; it was a bad agreement.

It certainly remains the case that if you have significant wealth that you want to protect in the event of a divorce, a pre- or post-nuptial agreement is the only way to achieve that. I also think it is fair to say that for what is a relatively negligible cost, it would be foolish not to have one if you are bringing substantial wealth to the marriage or are likely to receive a significant gift or inheritance during the marriage.

It is, however important to ensure that the agreement meets the procedural requirements and would be upheld and/or be enforceable in the jurisdiction where the parties intend to live or where the divorce is likely to be heard, which may require advice to be obtained in multiple jurisdictions and for multiple agreements to be prepared.

If the divorce is likely to be heard in England and Wales then it is unlikely that an agreement that provides for the financially weaker party to get absolutely nothing will be considered fair. If you are an heir worth £millions then it is advisable to be generous in the financial provision made to your financially weaker spouse, as it could save you a small fortune in the long run. At the very least you should be ensuring that your spouse’s basic financial needs can be met in the event of a divorce.

And most importantly don’t leave it to the last minute. The last thing you want to be doing in the weeks before the big day is negotiating the terms of a pre-nuptial agreement. Do it at least 6 months in advance so you’ve got plenty of time to forget about it and enjoy the wedding.

If you would like to discuss having a pre- or post-nuptial agreement contact Darrell Webb on 020 3988 2028 or dw@calibrate-law.com.

This paper is intended to be a brief note for clients and other interested parties. The information is believed to be correct at the date of publication but should not be relied upon as a substitute for professional advice. Please speak to a member of our team.

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