Prenups are binding – be warned

Divorce|January 26th 2017

Health warning! Do not sign a prenuptial agreement unless you are prepared to be bound by it.

I read with a real sense of foreboding the recent decision of Mr Justice Francis in the case of DB v PB. It is a tale of woe for a wife who signed a prenuptial agreement (in fact she signed three), probably never expecting to be bound by them, but as you will read she has been bound and to devastating effect. I read it and reflected on how avoidable it all might have been.

The case is a timely reminder of the current applicability of the EU Maintenance Regulations to which the courts of England and Wales are presently bound – and especially in this case, a reminder of how they can confer exclusive jurisdiction on a particular country. It also demonstrates the courts’ strengthening commitment to upholding prenuptial agreements if they cannot show that they are void.

The parties, Swedish nationals now residing in England, signed up to two Swedish prenuptial agreements and a US one. The wife sought advice in relation to the US prenup and was advised not to sign it as it was considered wholly unfair to her. The terms were almost identical to the terms of the Swedish agreement.

The prenups included a separate clause so that each party would retain his or her respective property on divorce. By the time this case came to trial, the husband had an investment portfolio in his sole name worth over £9 million. The separate property clause meant the wife would be unable to make any claim against this.

The agreements also included a ‘prorogation’ clause giving exclusive jurisdiction in any matters concerning the distribution of their property to the Court in Stockholm.

The wife managed to issue her divorce proceedings in England before the husband issued in Sweden and the final hearing of the financial proceedings consequently went before Mr Justice Francis. He found that the prorogation clause invoked Article 4(1) and (2) of the Maintenance Regulations (EC No. 4/2009). This states that the parties may agree in writing that a court of a particular member state shall have exclusive jurisdiction over any disputes concerning maintenance. The Judge was satisfied in this case that the parties both consented to this and that therefore issues relating to “maintenance” in this case must be dealt with in Stockholm in the first instance.

Having made this finding, the Judge’s ability to distribute the assets within the English financial remedy proceedings was limited to considering the wife’s entitlement to “share” in the assets. Any award which reflected her needs, whether that was in the form of income, capital or property was not permitted under the Maintenance Regulations.

The Judge found that whilst the husband was mean-spirited he was not dishonest, had never wanted to marry and so made the prenup a condition of marriage. He found no circumstances which would render the prenup void and so his only option was to consider the fairness of the agreement and whether he could order an enhanced award to make the wife’s settlement fairer. However any enhanced award could only be based on meeting the wife’s needs, something which, as already discussed, was not permitted.

The couple had children and the wife also made an application under schedule 1 of the Children Act 1989 for financial provision (probably anticipating that she might have difficulties with the prenuptial agreement limiting her financial claims). This has proved to be her small saving grace in that provision has been made for her to have a housing fund of £2 million, but of course the husband’s share of this is to be paid back to him when the children have finished their education in the usual way.

The husband’s total wealth was over £10 million. It was a marriage of over 20 years in length and both parties accepted that when they first met the husband had nothing.

As a result of this case the house is to be sold and the wife will receive only half of the net proceeds of sale. This will only give her about £650,000. The schedule 1 application orders the husband to make a further £2 million available to fund a house but of course this is not a lifelong provision for the wife.

Notwithstanding the unfairness of the agreement, the Judge’s hands have been tied by his inability to make enhanced provision over that provided by the prenup because to do so would give the wife more than she was entitled to “share” in. The Judge has therefore stayed the applications for lump sum and maintenance and the wife has been forced to make an application now to the court in Stockholm for her needs to be met, where according to the judgment prenups are common place. This will also of course involve more risk and more costs to her.

The immediate points to note from this are:-

  1. Anybody who signs a nuptial agreement has to expect that they will be bound by it no matter how unfair it may see
  1. The Maintenance Regulations, if applicable and as happened in this case, can designate by written agreement between the parties a court of a foreign jurisdiction and prevent the English court from determining not only issues of maintenance but also other financial provisions which go towards meeting of the party’s property and capital needs.

Practitioners and clients alike beware.

Read the ruling here.

Photo by Marc Roberts via Flickr

Author: Julian Hawkhead

Julian is Stowe Family Law’s Senior Partner and is based in our Leeds office.

Comments(4)

  1. spinner says:

    She will receive housing and school fees through the children’s act and on going support either through the CSA or through that same act so the children are cared for.
    If the prenup had been ignored it’s basically saying she was not mentally capable at the time she signed the prenup. Isn’t this what women have been fighting against as in being called the “weaker sex” that do “silly” things like sign a prenup and so have to be treated like children in family courts and a prenup they freely signed can therefore be ignored.

  2. D says:

    The commentary on this ruling is in a style that it makes it click and comment bait.. so it’s probably not worth getting to excited about it.
    .
    I don’t subscribe to the idea of marriage and divorce being unfair on any group. But it does follow a very clearly laid out pre-set of rules, expectations and legalities, which parties sign up to and expect to be used to make judgements if they separate. Anyone questioning these rules no doubt will be accused of being in a bubble or such like.
    .
    A point being the husband ‘ had never wanted to marry and so made the prenup a condition of marriage’, which is a slightly strange situation to start with anyway. No doubt the accusation will be made that of coercion by the stronger financial party because the agreement was never revised.
    .
    “The Judge found that whilst the husband was mean-spirited he was not dishonest”. The first statement subjective, in the absence of not being able to find (and evidently thoroughly looking for) dishonesty.
    .
    “By the time this case came to trial, the husband had an investment portfolio in his sole name worth over £9 million. The separate property clause meant the wife would be unable to make any claim against this.”
    A portfolio is a business venture isn’t directly personal wealth. If someone doesn’t want to have to break up a business or portfolio they have built up in isolation on separation why are we so inflexible with morality? That on separation, any diversion from acceptance of near 50%/50% division puts the subject into a category along with rapists and murderers.
    .
    “Anybody who signs a nuptial agreement has to expect that they will be bound by it no matter how unfair it may see”
    .
    Exactly. Fairness is subjective here.
    .
    Crudely, the agreement wasn’t “if you get rich you can’t have any, but if you get rich I get a share of it”. It sounded symmetric, even with the way it is presented here.
    .
    Cry foul when you lose many millions at the Casino but the odds were you stood to win millions as well. If both parties agree not to be within the rigid rules set, then the outcomes may end up being uncomfortable for those who can’t see beyond them.
    .
    Anyway, God forbid there’s the travesty of the housing fund being only £2 million. Hopefully some provision will be made for hardship.

  3. Andrew says:

    Sweden is a civilised country, if a bit given to the export of unsolicited good advice, and it allows its citizens to enter binding prenuptial agreements, and the Sun still rises. Why can’t we?

    Yes, they must be reached fairly – on disclosure of the assets then in being, but not necessarily with legal advice which would be a waste of money for many couples. But there should be no scope for arguing that they don’t produce a fair result (except as ever for the protection of children during minority) because the fact of being agreed makes it fair.

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