Case Law Review on Pre-nuptial Agreements

Prior to 2010 the Courts deliberately ignored Pre-Nuptial Contracts as a matter of policy, believing them to undermine the sanctity of marriage. However, the Supreme Court stepped in and changed all this:

The starting point:

Radmacher (formerly Granatino) v Granatino [2010] UKSC 42

This game-changing case effectively ‘legalised’ pre-nuptial agreements, although always subject to the Court’s oversight and final approval. 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.”

“The reason why the court should give weight to a nuptial agreement is that there should be respect for individual autonomy.”

“If an Agreement is to carry full weight what is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.”

However: “The parties are unlikely to have intended that their ante-nuptial agreement should result, in the event of the marriage breaking up, in one partner being left in a predicament of real need, while the other enjoys a sufficiency or more, and such a result is likely to render it unfair to hold the parties to their agreement. Equally if the devotion of one partner to looking after the family and the home has left the other free to accumulate wealth, it is likely to be unfair to hold the parties to an agreement that entitles the latter to retain all that he or she has earned."

Therefore, previous case law on ante-nuptial agreements became relevant to Pre-Nups, and so, in summary, the circumstances which may make a Court conclude that it would be unfair to hold the parties to an Agreement were as follows:

Vitiating factors: [fraud, misrepresentation, duress, or undue influence].
Unconscionable or unworthy conduct [for example, undue pressure by one party – the exploitation of a dominant position to secure an unreasonable advantage].
Relevant circumstances of the parties contemporaneous to the agreement [for example would marriage have taken place if not agreed; did both have legal advice, was the marriage abroad].
Inadequate disclosure.
Change in circumstances since the Agreement was made, especially giving rise to needsfor the children of the family and/or the economically weaker party.

Developing case law post-Radmacher:

As Nuptial Agreements have been challenged in the Courts (by the party set to lose financially from their implementation), there seems to have developed a two-limb approach:

Firstly: (looking backwards) an attack on the Agreement itself – setting out various reasons why the Agreement itself should not actually bind the parties, and

Secondly: (looking forwards) an attack on the financial result of implementing the agreement, setting out reasons why the outcome would not be fair in all the circumstances.

This pattern can be seen within the following cases:

Kremen v Agrest [2012] EWHC 45 (Fam) – wealthy Russians, Pre-Nup given no weight at all. Its terms disadvantaged W, who was found not to have a full appreciation of its implications as she did not receive full disclosure or independent legal advice.

Luckwell v Limata [2014] EWHC 502 (Fam) – W net worth £6.7m whereas H net debts of £226,000. H signed Pre-Nup and two Post Nups agreeing not to claim against W. Weight was placed on Agreements, BUT overweighed by the unfairness of the proposed outcome as H’s relative penury would demean him as a father of the children of the family. Therefore Court implemented a (generous) needs-based award to house H, with 45% reversion to W when children’s dependency ended.

WW v HW (Pre-Nuptial Agreement: Needs: Conduct) [2015] EWHC 1844 (Fam) – W had inherited wealth protected by a Pre-Nup which was given much weight as H entered into it with full realisation following legal advice. H’s misconduct in other proceedings weighed against him and children were living with W. However, Court went further than the terms of the Pre-Nup and H was awarded more than set out in the agreement, although 45% would revert to W when H attained 69 years.

Brack v Brack [2018] EWCA Civ 2862 – Held that even where there is an effective Pre-Nup, the court remains under an obligation to take into account all S25 factors together with a proper consideration of all the circumstances, the first consideration being the welfare of any children. Such an approach may, albeit unusually, lead the court in its search for a fair outcome, to make an order which, contrary to the terms of the agreement, provides a settlement for the wife in excess of her needs.

Ipekci v McConnell [2019] EWFC 19 – Wealthy American heiress marries Hotel Concierge in New York. H signed Pre-Nup which would have given him an equal share of increase in value of three properties owned by W, but no actual increase in value so under Pre-Nup H stood to get nothing. H was not held to agreement because a) it was flawed in NY law; b) H’s legal advice at time of signing was given by W’s previous divorce solicitor so bias presumed, and c) H had reasonable needs which he could not meet from his own resources. (Generous) needs-based award for H £1.3M, of which £375k charged back to W.

Traharne v Limb [2022] EWFC 27 – Filmmaker and barrister, Post-Nup agreement, although reconciled afterwards so 8 year relationship in total. W alleged undue pressure from H’s controlling and coercive behaviour. Court did not make conduct findings sought by W against H, but found that Post-Nup did not meet W’s long term needs [predicament real need vs sufficiency of wealth] and so she was awarded more than under the Post-Nup.

SC v TC [2022] EWFC 67 – Long marriage, H developing Parkinson’s Disease, visited a sex worker, W wanted to end marriage, instead drafted Post-Nup for 80% assets. H agreed at time of signing to rely on state care. Six years later marriage ended. H sought to resile. Despite no vitiating factors and independent legal advice, by virtue of his vulnerability at time of signing and W taking financial advantage of that, Post-Nup was effectively ignored and assets divided equally [Court accepted H needed more than 50% to meet his health needs].

CMX v EJX (French Marriage Contract) [2022] EWFC 136 – W had signed a Pre-Nup in France without disclosure or independent legal advice, but was held to it because Court found that this intelligent businesswoman had a full appreciation of the implication of signing.

TRNS v TRNK [2023] EWFC 133 – H’s Notice to Show Cause application as to why the parties’ Post-Nup should not be made an order of the Court. W resisted his application alleging material non-disclosure. After four day’s of evidence merely on this preliminary application, Cohen J found that there was material non-disclosure.

Recent developments:

It appears that there is an attempt over the last year on the part of senior Judges in the Financial Remedies Court to give specific guidance on how a Nuptial Agreement will impact the Court’s determination of any application [see emboldened text below], which can be a useful reference point for our clients:

HD v WB [2023] EWFC 2 – W with £43M prayed in aid of Pre-Nup and offered H £365k. H said a) he signed the Pre-Nup with undue haste, no legal advice, insufficient disclosure and only partial understanding and b) in any event he ‘needed’ £8M. The Court after hearing extensive evidence concluded: ‘this was a PNA freely entered into by each of them, with a full appreciation of its meaning and consequences. There are no vitiating factors.’

HOWEVER – the Court also concluded that Pre-Nup did not meet H’s needs so that the Judge stated: ‘I am satisfied that this is one of those cases where I can, and should, depart from the PNA so as to meet H's needs fairly. In so doing, I take into account all the circumstances, including the resources of W, the resources of H, H's earning capacity, the needs of the children, the marital lifestyle, the duration of cohabitation, H's full contribution to the welfare of the family during the relationship, his future contribution to the welfare of the children, and the terms of the PNA which, to my mind, operate as a limiting factor upon considering H's requirements’. H was awarded £2m plus £2.5M house reverting to W on death.

MN v AN [2023] EWHC 613 (Fam) – Pre-Nup protected H’s Pre-marital assets of £32M, but its implementation upon divorce gave almost £12M to W after 14 year marriage. W wanted more – Court said ‘No’. It found that ‘the deal was a reasonable deal’ and after S25 factors fully analysed the outcome was fair. With reference to Brack above, Moor J, stated: ‘The watchword in financial remedy litigation is fairness. The test therefore is whether it is still fair to hold this Wife to this PNA given the passage of time and the circumstances today, whilst always remembering the significance of the fact that I have found no vitiating factor in relation to the agreement itself. One possible way of characterising this would be to perform the test undertaken when a court hears an appeal. In other words, is the provision that the PNA provides for the Wife and children outside the bracket of reasonable awards that a court might have made, such as to make it unfair.’

[In a link to the developing case law on Conduct (Tsektov v Kharova [2023] EWFC 130 refers) note that W was roundly criticised by the Court for raising allegations of gas-lighting and coercive control against H with respect to the PNA merely as a background ‘circumstance of the case’ without a ‘shred of evidence’ in respect to the gas-lighting allegations and where her pleadings, including her S25 statement, stated clearly that W did not seek to rely on conduct.]

Cummings v Fawn [2023] EWHC 830 (Fam) – referring back to his Judgment in Ipekci v McConnell, characteristically Mostyn J has ‘reinvented’ his take on the Court’s discretion with respect to identifying and meeting reasonable needs and given us an imaginative and memorable analogy as follows:

“In every needs case there is a range of possible future standards of living of the applicant within which the court can alight in a pure exercise of discretion immune from appellate review.”

“Imagine that the discretionary range is a line of books on a shelf bracketed left and right by book-ends. The book-ends may be quite far apart. The right book-end represents a comfortable, perhaps even luxurious, life-style. The left book-end represents a spartan lifestyle catering for not much more than essentials. The space in between is the discretionary range. When the Supreme Court says that it may not be fair to uphold an agreement which leaves the applicant in a predicament of real need, it is clearly saying that if the result of the agreement would place the applicant in a standard of living to the left of the left-hand bookend, then that would be unfair. It is also saying that to make the agreement fair it should be augmented by no more than is necessary to move the applicant’s lifestyle just to the right of that left-hand bookend.”

Conclusion:

So where does all this leave our clients? Dealing with an application for Financial Remedy which involves a Pre-Nup or any Nuptial Agreement will likely raise complex factual and legal issues and need case-specific advice. Contact our family clerks to arrange a Conference with one of our experienced and specialist barristers, who will provide full advice on the impact of the Agreement and all other issues arising.