Beware a divorce hangover from post-nuptial agreements
January 6, 2009 3 comments
My first client of the New Year contacted me whilst I was in Central London for the New Year celebrations.
On New Year’s Eve, at 11.30 pm I was snug in my fleecy dressing gown, cosily watching the freezing crowds on the Embankment on television when…. we decided on the spur of the moment to dash there ourselves to see in the New Year! We quickly got into some warm clothes and rushed into the cold. We arrived with our champagne and plastic flutes, just in time, because at midnight the London Eye was lit by the most spectacular firework display,- shortly after which my parents telephoned to say “We’re watching London on the telly but we can’t see you….!” Not unexpected in a crowd of hundreds of thousands of people!
The excitement of that night was sadly at odds with the new client meeting. The lady lives abroad and she too was in London for the New Year. She was about to divorce and, although she and her husband had separated on several occasions during the course of the marriage, this time it was final. She produced an agreement she had signed: a post-nuptial agreement.
Each time the couple had separated previously they talked about a financial settlement. On the last occasion they had decided to do something about it and instructed solicitors who negotiated a deal and drew up an agreement which my client and her husband then signed.
It wasn’t a good deal for the wife, of that there was no doubt. The husband was left with a large percentage of his wealth intact – more than would have been the case had it litigated – but the wife had wished to settle. Subsequently they reconciled again – but sadly they had now decided to permanently call it a day. Her husband had instructed solicitors to issue divorce proceedings. She wanted to know if I thought she was bound by the agreement.
The Privy Council, in a judgment given by the leading family lawyer, Baroness Hale, recently issued a decision on this point, in an Isle of Man case called McLeod. The law is the same as in England and will be binding in England. Although Mrs McLeod had signed such an agreement, she argued she should not be bound by it, as the provision it contained was inadequate. No matter said the 5-Judge Court, she had signed it, she had not been obliged to do so, and in the absence of any compelling reason to the contrary, they held her to it.
This case states the existing law. It does not make new law. A similarly intended document was not upheld by Mrs Justice Baron in the case of NA-v-MA where the Judge found there had been duress by the husband.
Talking to my client however, it seemed pretty clear, that she had been properly advised by her lawyers. There had been full frank and accurate disclosure of his financial position by the husband, and she had signed the agreement because, whilst she was advised and appreciated her settlement was low, she thought it would save her a great deal of money in legal costs and would leave her with a good relationship with her soon to be ex-husband.
She now clearly regretted her decision in the cold light of the New Year.
I advised her not to waste her money contesting the agreement. It is by no means certain that agreements however apparently unjust will be set aside. Indeed in one case involving a Tory grandee and his former wife Lady Anne-Marie Judge, she is appealing against the payout which saw Sir Paul Judge end up with 81 per cent of the assets. Lady Judge argues that as her ex-husband (perfectly legally) avoided making a substantial charitable payment that had been factored in to his part of the settlement she is entitled to a larger sum. So far, notwithstanding the apparent injustice, she has been unable to persuade a court to set aside the original agreement.
Deciding when and how to settle is always difficult, particularly for women who frequently have less negotiation power and are frequently less commercial than their spouse. They often put themselves under greater emotional pressure, not fully understanding that “matrimonial assets” are there for joint and in many cases, equal division, and are not simply doled out by the husband, even if he has been the bread winner and she the home maker.
I would certainly advise a negotiated settlement between spouses, and one which saves money but I have found on too many occasions that people who settle for too little frequently come to regret it.
McLeod is a case which will make contesting a signed agreement even more difficult. So, if you are thinking about settling on less than good terms, and you are advised by your lawyers it is too low, then take your time, and consider whether in 12 months’ time you will be regretting your perhaps too generous decision. If you think you will, make the best New Year’s resolution you will ever make and resolve not to sign it until you are truly happy with the outcome.