The perils of a prenup agreement

Marriage|Relationships | 13 Jul 2020 0

The perils of a prenup agreement: While it remains the case that prenuptial and postnuptial agreements are not binding on the parties or the judge upon divorce, the Courts are giving increased weight to nuptial agreements where the recommended formalities are complied with. 

This is in line with the judgment in the Supreme Court decision in Radmacher v Granatino [2010] UKSC 42: 

‘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 perils of a prenup agreement

In order to give a nuptial agreement the best chance of being upheld, the following requirements should be met: 

The terms of the agreement must be fair and meet the needs of the parties and any dependent children. If this condition is not met, there is little prospect of the agreement being upheld:

Contractual validity – it must be capable of being enforced as a contract

No evidence of undue influence or duress – the parties must enter into the agreement of their own free will; 

Execution – the agreement must be signed or executed as a deed

Timing – the agreement should be prepared and signed in good time before the wedding/civil partnership. The Law Commission report addressing Qualifying Nuptial Agreements recommends that a prenuptial agreement should be entered into at least 28 days prior to the wedding or civil partnership; 

Both parties should disclose full details of their respective financial situations; 

Independent legal advice – to be taken by both parties at the time that the agreement was formed to ensure that they fully understand the consequences of the agreement. 

There are other considerations that may impact whether a nuptial agreement is upheld, such as evidence of fraud or misrepresentation at the time the agreement was entered into. 

However, provided the terms of the agreement are substantially fair and the needs of the parties and the children have been met, the Courts are increasingly willing to uphold and/or give significant weight to nuptial agreements. 

The case of S v H

While there are examples of pre-nuptial agreements being upheld, at least in part, where some of the above requirements were not met, the recent case of S v H is a stark reminder that failure to comply with the above formalities, especially the need to ensure that the agreement meets the needs of both parties, can render a prenuptial agreement worthless. 

The case of S v H involved a husband (69 years old) and a wife (56 years) who had both been married previously and both had children from their previous relationships. 

The wife had significant resources at the time of the marriage whereas the husband had very little. 

The parties entered into a prenuptial agreement for them each to retain the assets they held at the outset of their marriage and likewise, any future assets acquired by either one of them during the marriage were not to be shared.

The marriage lasted approximately 6 years. The wife had a net income in excess of £100,000 per annum and she held capital assets of c.£3 million net at the date of the Final Hearing. 

During the marriage, the husband received a modest salary through the wife’s business but his main role was to care for the wife’s twin daughters who at the date of the marriage were 11 years old.  

The husband incurred significant debts during the marriage after borrowing from friends to discharge a variety of debts and to contribute towards his living costs. Following their separation, the wife sought to uphold the agreement whereas the husband, who had at that point been adjudicated bankrupt, sought financial provision from the wife to meet his housing and income needs.  

There was a dispute between the parties over the circumstances that led to them entering into a prenuptial agreement. 

The husband’s case was that until he was called to attend the notary’s office to sign the agreement, he was unaware of the wife’s wish for them to enter into a prenuptial agreement. 

The wife’s case was that the decision to enter into a prenuptial agreement was a joint decision and was discussed before the arrangements were put in place. 

Notwithstanding that the parties intended to live as a family in the UK, the prenuptial agreement was drawn up in the country of which they were both nationals and where the marriage took place.  

The judgment 

‘In my judgment, there is no value in the prenuptial agreement. There was no formal process of disclosure, there was no advice given to either party, other than by the notary who prepared the document and at five days before the ceremony…

Even if I held that the agreement was binding, it plainly leaves the husband in a position of real need, when the only way of alleviating that needs being to take funds from the wife to provide for him, contrary to the terms of the prenuptial agreement’. Trial Judge, paragraph 44

The husband was awarded 60% of the wife’s pension fund to provide him with an income stream. 

The wife was ordered to make a lump sum payment of £270,000 in order to discharge the husband’s debts which included his outstanding legal fees. 

The wife was also ordered to purchase a 3-bedroom property at a cost of £350,000 for the husband to live in until his death or until he no longer needed the home, at which point the property would revert to the wife.    

Getting the right legal advice 

Clients are often surprised by the amount of work involved in preparing and executing a prenuptial agreement and many assume that it will simply be a matter of signing a standard proforma document.   

However, as demonstrated by the outcome of the case of S v H, every effort should be made to comply with the requirements listed above to give the prenuptial agreement the best chance of being upheld and in all cases, the issue of needs and fairness must be addressed.

Read Prenups: can you change them and do they count 

Get in touch 

To avoid the perils of a prenup agreement, download our guide to prenup agreements or please do contact our Client Care Team to speak to one of our specialist family lawyers with experience of prenup agreements here.

Angela Sussens is a Partner at Stowe Family Law’s city centre office in Leeds. She has worked across all aspects of family law but has focused in particular on financial settlements following divorce. Angela regularly acts on behalf of high net worth clients in complex cases involving foreign jurisdictions, trusts, companies and offshore assets. Clients appreciate her attention to detail and her direct, straight to the point, approach.

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