Prenuptial protects husband’s wealth but does not meet wife’s needs

prenuptial agreements

Despite the fact that I advised clients about them myself when I was practising (albeit prior to the Radmacher case, as mentioned below), I have always had a somewhat ambivalent attitude towards prenuptial agreements. I simply find it hard to reconcile the idea of committing your life to the person you love, whilst simultaneously consulting lawyers about how you can get the best financial settlement in the event that the marriage turns out not to be for life after all.

Still, as a lawyer I can understand why people want to enter into prenuptial agreements, particularly to protect assets they acquired prior to the marriage, which they may often wish to leave to children from a previous relationship. This was pretty much the situation of the husband in the recent case KA v MA (Prenuptial Agreement: Needs).

Before I look at the case I should just mention the leading case on the subject of prenuptial agreements and what it says about how the courts should approach such agreements, Parliament having thus far failed to give any guidance on the subject. The leading case is the 2010 Supreme Court decision in Radmacher v Granatino. The Supreme Court held, as stated by Lord Phillips, 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.”

In other words, despite Parliament’s silence, the courts will now uphold prenuptial agreement unless their terms are considered to be unfair. (Radmacher was decided after the agreement in KA v MA was entered into, but that fact did not really affect the outcome of the case).

Okay, to the judgment in KA v MA, which was handed down by Mrs Justice Roberts in the High Court on 13 March last. Now, as I will mention below, this was a long judgment, and I’m therefore going to have to do some serious axe-wielding and simplification to reduce it to something that will fit into a reasonably short post. Hopefully, this summary will do the case justice, no pun intended.

Very briefly, the relevant facts in the case were that, as indicated above, the husband was a successful businessman who had amassed considerable wealth before the marriage, mostly business interests, which he wished to leave to his children, including his three sons from his previous marriage, which had ended in a “bruising” divorce. He and the second wife began a relationship in 2000 and commenced living together in 2004. They had a child together, another son, in September 2004.

From the outset of the relationship the wife had wanted to marry, and that desire came to a head as the son approached nursery school age – in particular, she wanted him to have his father’s name. The husband, traumatised by the experience of his first divorce, was initially set against marriage, but eventually agreed on the strict condition that the parties enter into a prenuptial agreement, in particular to ensure that his business interests were protected, and would pass to his sons. He proposed (ultimately) that the agreement state that should the parties divorce, the wife should receive a lump sum of £600,000 and maintenance of £2000 per month (the total value of his assets at the time of the hearing before Mrs Justice Roberts was estimated at anything between £23 and £33 million).

The wife agreed and signed the agreement, despite being advised by her lawyers that its terms were considerably less generous than she could expect from the divorce court in the absence of the agreement. She said that she felt under pressure (the wedding was by then only three weeks away), and that she did not feel that she was in any position to negotiate with the husband because he held all the bargaining power in their relationship. She did not suggest a more generous settlement, as she feared that the husband would then pull out of the marriage entirely.

The marriage went ahead in December 2008. It broke down in 2013 when the wife moved out of the matrimonial home, although the parties remained on good terms for about the next two years. Divorce proceedings were commenced, and shortly thereafter, in June 2016, the wife issued her financial remedies application. Mrs Justice Roberts summarised the position of the parties thus:

“In terms of the outcome which each seeks, the parties are a long way apart. On behalf of the wife, Mr Pointer QC advances a needs-based claim of almost £6 million. If, as Mr Marshall QC contends on behalf of the husband, she is confined to the effective implementation of the terms of the agreement, she will receive a final award of just under £1.6 million.”

So, the question was: what was the effect of the prenuptial agreement?

The wife sought to argue that the agreement should be disregarded entirely, particularly in view of the pressure she had been under to sign it: in other words she had not freely entered into it. However, Mrs Justice Roberts did not accept that the husband had subjected her to undue pressure, and considered that she entered into the agreement of her own free will.

The next question, therefore, was: were the terms of the agreement fair? The answer to this is complex, but two concessions by the wife were important. Firstly, she conceded that the husband’s pre-marital wealth should be protected, subject only to his obligations to meet her financial needs in the event of a future divorce. Secondly, the amount of her award should be driven by her ‘generously assessed needs’, rather than by any application of the (equal) sharing principle. In other words, it all boiled down to the wife’s needs – in effect, whatever sum met her needs would be fair (to put it in Radmacher terms), and it was clear that the provision contained in the agreement did not meet her needs even if, as the husband proposed, it was ‘indexed up’ for inflation.

This was accepted by Mrs Justice Roberts, who assessed the wife’s needs at £2.95 million, comprising £1.35 million to rehouse herself, and a lump sum of £1.6 million from which to derive an income to maintain herself. Taking into account her net assets, this would mean the husband paying her a lump sum of £2.73 million, and that was the amount of the wife’s award.

So the end result was that the prenuptial agreement did have an effect, in that it protected the husband’s pre-marital wealth from attack by the wife in the divorce settlement – that was fair. On the other hand, however, the full terms of the agreement were not enforced by the court, effectively on the basis that they were not fair, as they did not meet the wife’s needs. Thus the part of the agreement that was fair was upheld, and the part that was not was not – the agreement was not unfair in its entirety. (I am assuming, from the way the judgment is worded, that Mrs Justice Roberts would have reached a similar decision even if the agreement had been entered into after Radmacher, hence to make this more useful I am explaining the judgment in Radmacher terms.)

The full report of the judgment, all 136 paragraphs of it, can be read here.

Image by Jeff via Flickr under a Creative Commons licence

John Bolch

John Bolch often wonders how he ever became a family lawyer. He no longer practises, but has instead earned a reputation as one of the UK's best-known family law bloggers.

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7 comments

rum - April 25, 2018 at 5:04pm

I read all these divorce’s with a sad heart. If you do not get round to marrying , you seperate, you are left with nothing. These women fight over millions. Women bring up the kids and then are expected to be homeless when the children leave . schedule 1 , more like count down to homelessness. This law has needed reform for years. I hear there is a second reading but no date as yet . I hear also that if you have been seperated for more than two years, you are not eligible for the new law if it ever comes into force. How about somebody on this blog giving more information on starting a group to loby parliament. If you make the commitment of children, and you spend most of life with a man you think is a lovely person, to be deceived , you spend the rest of the best part of your life bringing up the kids, struggling and then you are on the street.
Is anybody interested in what happens to women that give more commitment than a marriage as you have to live with the aftermath if you get stitched up . IS there anybody that knows of a facebook page or a group that have ever lobbied the horrific law of this country that has left me in the most hideous position of my life at my age ??? because this is the law that matters, not fighting over millions but making this country a country to be proud of . Any help and comments would be appreciated after 14 years, and a future that is as bleak as bleak house can get !

Cameron Paterson - April 25, 2018 at 5:25pm

Have you sought legal advice rum?

Spike Robinson - April 25, 2018 at 6:03pm

I agree with rum, above, that the focus of the courts on big money cases does grave injustice to the vast majority of cases which are ordinary couples of ordinary means. The precedents of the big money cases have little or no effect, or make things worse.

Andrew - April 25, 2018 at 8:18pm

I remain of the view that as between adults what is agreed is by definition fair even if what is not what would have been considered fair if there had been no pre-nup. A pre-nup is not some take-it-ot-leave-it page of small print presented by a big and possibly monopoly corporation to a helpless and hapless consumer. It should be enforced according to its terms.

rum - April 25, 2018 at 11:48pm

Yes i have taken legal advice. I stupidly sold my property to start businesses with the man i thought was my partner for life. My equity went into businesses. (That is another whole long story) but for speed the mortgage was in his name, i paid the nursery fees. which was more than the mortgage. So we split, and the only way i will over turn is finding the building society that does not destroy bank statements! well they do and the burden is on me as he got his trusts case in first . Even though i found other proof, the lies have poured out of every crack in his body. I am a Litigant in person as i am struggling. Don’t get me started on litigants in person, as you just don’t have a voice and what i have experienced is horrific. Anyhow, not married, he’s name is on the deeds. Im stuffed and left homeless. Years of hard work, then a family , i get given this hideous judgement that is just so ancient, i am suprised anybody can work in law with the state of the law on trusts if you are not married. It is absolutely sexist and disgusting that this great country and all of the supreme court, is not doing more to lobby parliament. Parliament that can not even sort out the CMS system that is shocking and enough to make any mother jump of a bridge . Again why has no body challenged high court to stop this hideous process that takes years called a tribunal . Worse and most oppressive of all is that we are spending millions as a nation in court. Why are we still not protecting UNMARRIED couples that just wanted to have a loving family , then are deprived of their dignity and security. Sorry but it is 2018 and this is allowed to happen to me and millions of others that have children, and may not be married or stupid enough to trust your partner like i did, to be homeless . I hope somebody is reading this as i must say, 2 years to claim if it does come into force, is just another way to say STUFF YOU , im a man in parliament and i believe you deserve nothing . Because in theory this is what parliament is saying to good honest women in this hideous position . 2018 and i might as well be living in Robin Hood Era.

Spike Robinson - April 26, 2018 at 2:41pm

Unless and until Lady Hale gets her way, in this country two people do have the choice to get married or not get married and so exercise some influence on what will happen to assets and income on separation. No one is forced to marry and no one is forced to cohabitate. If a person will not marry you, there is the option not to live with them, not to be their partner, not to have children with them. I for one hope that Lady Hale does not prevail in erasing the last distinction and last choice available to couples, and replacing it with a single, state-imposed legal relationship for all. My partner is a woman who is also deeply offended by Lady Hale’s desire to take away her choice of what kind of legal relationship to enter into, by declaring all cohabiting relationships legally equivalent to marriage.

As for the CMS, marital status is already completely irrelevant, except to disadvantage the father; no disadvantage whatsoever applies to the mother on this score. Indeed she can claim paternity of any man, and the onus and cost is on him to disprove it. If the CMS drives women to suicide (and I have never heard of a case), immensely more is it driving fathers to suicide (I hear these cases daily).

We trust the people we marry, or cohabit with, but it is the draconian state, exemplified by Lady Hale, that deprives us of meaningful choices about how that relationship will be legally unwound if it fails. Lady Hale abhors the idea that women or men have the agency to determine their own conditions for marriage and divorce, cohabitation and seperation. She sees women as victims, men as brutal crooks. Children and their actual interests as separate human beings aren’t even on her radar, except as chattels of women and weapons of legal argument.

Spike Robinson - April 26, 2018 at 3:29pm

John Bolch, I wish I had consulted you or Stowe in 2009. The lawyer I did consult then advised me that a UK pre-nup wasn’t worth the paper it was written on, and definitely not worth the undoubted aggravation it would cause in almost any relationship. Of course he was entirely wrong, as a casual perusal of Family Law Week for 2009 would have shown. Of course in the legal profession, unlike most others, there are no sanctions for getting it completely wrong, even in an egregious case like that. And so, on legal advice, I did not avail myself of the (admittedly marginal) protections that a pre-nup would have provided me when getting advice on divorce in 2010 (“bad idea!” said another lawyer) and actually divorcing in 2012 (“just don’t do it!”, said the head of Family at Stowe, reputedly the best firm in the UK at that time).

So returning to this judgement, testing a pre-nup to destruction. Has the pre-nup had any effect? Yes it has reduced the presumption of equal sharing to a presumption of providing “needs”. But is that really any difference at all? “Needs” arguments are an embarrassing farce. There is no objective basis for them other than the status quo. Hence one woman’s “needs” are £millions per month, anothers hundreds, anothers nothing. It is an insult to the English language and to common sense, let alone justice, to call these all “needs”. The general public are rightly shocked and offended, by the low/nil awards as much as by the high ones.

In practical terms and in ordinary the vast majority of normal cases that are not “big money” cases – which perversely are where all precedents are set – the laughably-named “needs” argument almost invariably trumps “equal sharing”. The reductio ad absurdum of this argument, enshrined by Lady Hale, is that the wife should be held entirely harmless of the financial consequences of divorce, hence her “needs” must necessarily exceed 100%, never mind 50%, since the wife and the children must be provided for fully as before, and yet in an unavoidably less cost-efficient way than is available to a couple still living together. Fortunately the practical limits of finance and the common sense and decency of judges have so far prevented full implementation of this Hale Dictum.

Nonetheless as the “needs” argument trumps the “equal sharing” argument in all but the big money cases, it’s far from clear that the pre-nup had any effect, even in this case, let alone if it is applied as a precedent ruling for future “normal money” cases.

What never continues to amaze me about the insular UK legal establishment is the belief that the English approach to divorce is some kind of universal moral absolute. It’s a level of parochial arrogance not normally seen outside of America. And yet multiple jurisdictions in the developed world, some of them even English-speaking (so our famously monoglot culture is no excuse) permit marrying couples to elect from alternative models of unwinding the finances of the marriage, should it fail. Preservation of pre-marital assets – all that was really sought in this case – is enshrined by statute in many jurisdictions, far from needing a pre-nup, let alone one which can be set aside by a court. Isn’t it just entirely offensive that an agreement entered into by two adults, having taken legal advice, can be set aside by courts acting in retrospect? To me, and to my current partner, this is an offence by government against the liberty and self determination of the person.

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