Divorce and Family Law

Pre-Nuptial Agreements

Ambrose Appelbe has recently seen a large increase in the number of Pre-nuptial Agreements that we have been asked to draw up or advise upon. There is an increasing demand from clients to help protect their assets with a pre-nuptial agreement. Ambrose Appelbe has the necessary experience and expertise to help clients protect their position as far as possible.

If you are engaged to be married, entering into a “Pre-nuptial agreement” may be unromantic and not at the top of your list in marriage preparation. However with 45% of marriages ending in divorce, perhaps it would be wise to think twice before ruling it out. Ambrose Appelbe have seen that the Courts are increasingly considering pre-nuptial agreements as an influential factor showing the intentions of the parties. Currently pre-nuptial agreements are not legally binding in this country. A recent survey, however, found that 47% of people in the UK would like prenuptial agreements to be legally binding. There have been a significant increase in the number of couples drawing up pre-nuptial agreements in this jurisdiction.

There are many arguments in favour of pre-nuptial agreements. They create more certainty, arguably they encourage marriage, in the event of divorce they could lead to lower costs, less argument and upset. They could also lead to increased fairness and bring the law in the UK more in line with other jurisdictions, particularly within the EU.

The Law Commission announced in June that it will start to look into the legal enforceability of pre-nuptial agreements within the next year. Ambrose Appelbe regards this as an important step towards giving pre-nuptial agreements the recognition that they deserve.

Following the case of White in 2000, with the courts willing to award up to a 50-50 split in all the assets on divorce, and the later cases of Macfarlane and Miller (in each case in favour of the wife of a rich man), there are many reasons why a party may want to enter into a pre-nuptial agreement. You may have been divorced before and want to take all possible steps to protect your assets. You may have inherited a substantial sum of money and think it would be unfair for this to be put into the pot of assets, especially if it were a short marriage. You may have children from a previous marriage and instead of your money passing to them, it could go to your ex-partner in a settlement. Another reason may be that your parents have worked extremely hard and have helped with your finances; they may not want to see their hard work and money be given to their child’s ex partner.

There are many wealthy married men who have had to relocate to England and are unaware of the implications of the English divorce system and the fact that the assets could be split 50:50. It can put people who are unaware in an extremely vulnerable position regarding their finances. This together with the above reasons, highlight the importance of seeking expert legal advice from a firm experienced in these matters, such as Ambrose Appelbe.

When determining the division of assets upon divorce the Court must have regard to all the circumstances of the case. The intentions of the parties as to how their finances should be divided may therefore be a factor to be taken into account by the Courts. The increasing use of pre-nuptial agreements may reduce the need to have recourse to the Courts where the intentions of the parties regarding the division of assets are made clear and the issues under dispute are narrowed. It will merely be necessary for a Consent Order to be endorsed by the Court.

There are various factors which must be considered before embarking on a pre-nuptial agreement. If these are followed the agreement is more likely to be taken into account in proceedings relating to the division of assets and other finances. They are:

1. Full financial disclosure from both parties so that each party is aware of the financial settlement which they may have been entitled to if they had not entered into a pre-nuptial agreement. If full disclosure is not provided by one party, the agreement may be void, if, for instance, an asset of significant value is discovered by the other party later in the marriage.

2. Both parties should obtain separate legal advice so that they understand the agreement, and are aware of its implications and enforceability (or lack of it) in the Courts.

3. The agreement must not contain terms that would mean the pre-nuptial agreement is void or voidable as a contract at common law. This means that it is vital that the meaning of the agreement must be clear enough to be enforceable as a contract.

4. It is important that both parties willingly sign the pre-nuptial agreement. There must not be any pressure put on either party by the other, or by any other person such as a parent. This includes the possibility that the more financially well-off party pressurises the other into signing the agreement with the threat that the marriage will not go ahead if they do not sign.

5. It is recommended that the pre-nuptial agreement be negotiated and concluded at least 6 weeks prior to the proposed dated of marriage. This time period provides an opportunity for reflection and avoids any suggestion of undue influence which may arise from the time constraints. This also allows everyone to concentrate on the most important subject, the wedding itself.

6. It must be borne in mind that any unforeseen circumstances that arise during the marriage may mean it is unjust for the parties to be held to the agreement.

Turning to some important case law decisions concerning pre-nuptial agreements, there were a number of reported cases concerning international couples with the issues of pre-nuptial agreements and competing jurisdictions. So in S v S (divorce: staying proceedings) [1997] 2FLR 100 Wilson Jay suggested that there would be cases where the pre-nuptial agreement “might prove influential or even crucial.” In N v N (foreign divorce: financial relief) [1997] 1FLR 900 both parties were Swedish and entered into a pre-nuptial agreement in Sweden. The wife later moved to London and the husband issued an application for financial relief. The Swedish Court was the appropriate Court to consider the effect of the pre-nuptial agreement but if the application had been heard here, the pre-nuptial agreement would have been a relevant circumstance, but it would not conclude the matter.

Other international pre-nuptial agreement cases were N v N (jurisdiction pre-nuptial agreement) [1999] to FLR 745, C v C (divorce: stay of English proceedings) [2001] 1FLR 624, and M v M (pre-nuptial agreement) [2002] 1FLR 654. In M v M it was held that it would have been unjust to the husband to ignore the terms of the agreement and unjust to the wife to hold her strictly to its terms. Taking into account the Section 25 criteria the award was more modest than it would have been without the pre-nuptial agreement.

There then followed K v K (ancillary relief: pre-nuptial agreement) [2003] 1FLR 120 which was a very short marriage with one child. The wife on realising she was pregnant put pressure on the husband to marry. They both signed the agreement following independent legal advice. The wife had assets of £1 million and the husband had assets of at least £25 million. The agreement provided for £100,000 to be paid to her and the judge held there was no injustice to the parties by holding them to the agreement with respect to capital. The judge in this case provided a very useful checklist of questions as to whether an agreement is binding /influential.

The widely reported case of Crossley v Crossley (December 2007) is an example of the current trend in family law that pre-nuptial agreements are becoming increasingly persuasive when judges decide how to settle parties’ claims on divorce. In Crossley, the parties signed pre-nuptial agreements saying that they would not make financial claims against each other if their marriage failed. The parties were married for less than 2 years. They had no children and both had independent wealth. Mr Crossley had £45 million (£60 million according to his wife). Susan Crossley had £18 million.

At the Court of Appeal hearing on 19th December 2007, Lord Justice Thorpe ruled that it is possible to short-circuit normal court procedures when a financial claim in a divorce appears to be hopeless and there is a pre-nuptial agreement. The court dismissed Mrs Crossley’s appeal and upheld the High Court decision which had ruled that the facts of the case could be heard in one day, rather than following the usual procedures which entailed three Court hearings and a delay of up to 18 months. It was argued on Mr Crossley’s behalf that this was not necessary where the marriage was short and childless, where each party was wealthy and, most importantly, where there was a pre-nuptial agreement.

Lord Justice Thorpe stressed the “magnetic importance” of a pre-nuptial agreement. He said “if ever there is to be a paradigm case in which the Court will look to the pre-nuptial agreement as not simply one of the peripheral factors in this case but as a factor of magnetic importance, it seems to me that this is just such a case.”

Mr Crossley must have been pleased that he had secured a pre-nuptial agreement in which Mrs Crossley promised that she would not pursue his fortune. After all, their union only lasted 14 months and much of this time had been spent apart.

Lord Justice Thorpe, giving the ruling, also called for legislation to clarify the status of pre-nuptial agreements. There was a “strong argument” for legislation, he added, given that the European Union considered it important to tackle the differences that existed on a property sharing between member states.

In February 2008 Mrs Crossley dropped her claim to her ex-husband’s fortune. The keenly awaited case was due to be heard on 13th February 2008. The hearing had been keenly awaited by divorce lawyers as a precedent for all other big money cases where a pre-nuptial agreement was signed.

In a decision which is yet to be reported NG v KR (Pre-Nuptial Contact) (2008) EWHC 1532 (Fam) the pre-nuptial agreement stated that assets should be kept separate on marriage and it provided for neither party on divorce. The pre-nuptial agreement was not upheld (although it was taken into account) because there was no financial provision in the agreement even in the event of real need, the husband had not had legal advice, there had not been full and frank financial disclosure and there was no provision for children. This case highlights the importance of both parties receiving independent legal advice prior to entering into a pre-nuptial agreement and ensuring it is drawn up correctly, following the necessary procedures.

To conclude, Ambrose Appelbe has seen a large increase in the number of clients asking us to draw up or advise upon pre-nuptial agreements. Ambrose Appelbe has the necessary experience and expertise to help clients protect their position as far as possible. Senior judges have made it clear in recent cases of the need for reform to the law of pre-nuptial agreements. For example the President of the Family Division said in Charman (2007): “if, unlike the rest of Europe, the property consequences of divorce are to be regulated by the principles of needs, compensation and sharing, should not the parties to the marriage, or the projected marriage, have at least the opportunity to order their own affairs otherwise by a nuptial agreement?”.

The Law Commission is going to be looking into the legal enforceability of pre-nuptial agreements in the next year. This is an area where there may be a change to the law in the not too distant future.
 

To discuss your own situation or to make an appointment, contact Lisa Bolgar Smith on 020 7242 7000 or use the Contact Request Form.

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