Prenups UKBlog Archive

20 September 2016

When a prenuptial agreement is challenged in divorce proceedings, does the gender of the economically weaker spouse affect the financial outcome?

This is the question explored in an article in the September 2016 edition of the Family Law Journal, by three senior family law solicitors at Penningtons Manches LLP (Louise Spitz, Laura Rowley and Rebecca Dziobon). Their article suggests that in divorce proceedings involving the interpretation of prenuptial agreements, judges may treat husbands who are the economically weaker partners more harshly than wives in such a position.

In support of their argument, the authors contrast the financial provision awarded outright to wives in cases such as Z v Z (No2) (Financial Remedies: Marriage Contract) and V v V (Prenuptial Agreement), both from 2011, with the treatment meted out to Mr Granatino in the landmark decision of the Supreme Court in Radmacher v Granatino in 2010 (which remains the leading decision on the interpretation of prenuptial agreements in England and Wales).

In Z v Z, concerning a French couple who had entered into a French separation of property agreement, in place of the default regime of community of property, the judge made it clear that, but for couple having entered into the agreement, he would have awarded the wife half of the family assets, of about £15 million. Instead, the wife had her maintenance needs addressed generously and was awarded a housing fund outright, plus capitalised maintenance, about 40% of the family's assets, as well as child maintenance to last until the end of their children's tertiary education.

In V v V, which involved assets of about £1.3 million (excluding pension and chattels) and a Swedish agreement, the Court of Appeal awarded the husband a chargeback over the wife's housing fund, forcing her to trade down when their children reached their majority, but leaving her with a smaller housing fund outright. Taking account of the costs award obtained by the husband, he would be left with about 60% of the assets.

Radmacher, in contrast, involving a German agreement in which the couple had both agreed not to make any financial claims in the event of a divorce, saw the French husband granted the use of two properties, which reverted to his German heiress wife when their two daughters had completed their university education, plus maintenance for the same period. This therefore was needs-based financial provision to reflect his role as a father, rather than providing for his long-term financial needs, as the former husband of a very wealthy woman. This was in a situation where the husband had given up a lucrative investment banking career during the marriage to pursue an academic career, and had no capital of his own. In contrast, his wife had assets of around £54 million plus shares in family companies worth a further £52 million, which gave her a net annual income of about £1.5 million.

The article goes on to discuss other court decisions which resulted in chargebacks in favour of the economically stronger spouse. These included the case of Luckwell v Limata, in 2014, where the only asset was the former family home, worth about £6.7 million, which had been gifted to the wife by her family. Having found that the husband was "in a predicament of real need", the judge ordered the sale of the former family home, out of which £900,000 was to be paid to the husband to enable him to purchase a home, of which 45% of his housing fund was to revert to the wife on their youngest child reaching the age of 22.

A further case they reference, WW v HW (Prenuptial Agreement: Needs: Conduct) in 2015, I have described in detail in an earlier blog (here). In this case too, the husband was awarded financial provision to meet his housing needs in his role as a parent, which would revert to his wife on his death and include a stepdown once their youngest child was 23, when 45% of the housing fund would revert to the wife, forcing the husband to downsize his accommodation.

The authors go on to point out fairly that the apparent difference in the court's treatment of the economically weaker spouse according to their gender may partly be explained by the fact  that inherited/family wealth features largely in the cases involving economically stronger wives. As "non-matrimonial" property, it would be likely to be ring fenced to some extent - even without any prenuptial agreement.

They also suggest, more controversially, that judges may be more inclined to find that husbands have understood the meaning of agreements they have entered into, even in situations where the safeguards recommended by the Law Commission in their final Report in February 2014 - financial disclosure, legal advice etc - have not been not observed, than wives in such situations.

The case of Caroline and William Hopkins, in 2015, which I described here, which was decided by the same judge who dealt with the case of WW v HW above, and is not mentioned by the authors of the Family Law Journal article, does not fit the thesis of their article. In that case, the wife tried unsuccessfully to renege from the terms of a postnuptial agreement the couple had entered into, claiming that she had been under pressure to sign it.

The authors helpfully end their article by suggesting specific ways in which the court's discretion in the assessment of financial needs may be limited by careful drafting of provisions in prenuptial agreements, including:

i) Providing capital to cover the housing needs of the economically weaker spouse, expressed to be for his or her lifetime, with a chargeback in favour of the economically stronger spouse, or a stepdown, forcing the economically weaker spouse to downsize his/her accommodation when their children have completed their full-time education.

ii) Listing items in a Schedule to the prenup, where the objective is to protect inherited wealth or gifts from family, and avoiding mingling inherited wealth with other assets.

iii) Drafting supplemental or postnuptial agreements when further family assets are acquired (for example holiday homes), specifying what the couple's respective beneficial interests in such properties are intended to be.

iv) Review clauses, providing for the prenup to be reviewed periodically and/or or on the happening of specified "trigger" events (e.g. the birth of a child), to try and ensure that the prenup keeps pace with changes of circumstances, as well as the passage of time.

v) Recording the couple's intention to enter into a legally binding arrangement, their satisfaction with the adequacy of the other spouse's financial disclosure and that they have entered into the agreement freely, without any pressure or duress.

vi) Providing a signed certificate from the lawyer who advised the economically weaker spouse to the effect that he/she has been advised on the implications of the agreement.

Maeve O'Higgins Family Law Partner, Burlingtons Legal | Email: maeve.ohiggins@burlingtonslegal.com, Tel: +44 (0) 207 529 5420

This blog is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained.