Pre-nuptial and post-nuptial agreements strive to provide
certainty, predictability and clarity: they are an attempt by
(usually) the wealthier spouse to limit the other's potential
financial claims in the future and to avoid a messy and expensive
scrap over money on the breakdown of a marriage. In some cases the
objective is achieved, but in others, it can result in costly and
bitterly fought litigation about whether or not the agreement
should be upheld.
2015 saw Nicholas Cusworth QC (sitting as a Deputy High Court
Judge) hear two cases involving nuptial agreements: Hopkins v
Hopkins [2015] EWHC 812 (Fam) and WW v HW [2015] EWHC
1844 (Fam). In both cases, attempts to subvert the agreements
failed.
The facts
In Hopkins, the parties signed a post-nuptial agreement
in 2011 shortly before the eventual breakdown of their marriage and
just months after the Supreme Court's landmark decision about
nuptial agreements: Radmacher v Granatino [2010] UKSC 42
('R v G'). Both parties' solicitors had
advised their respective clients not to enter into the agreement
(and required them to sign a disclaimer when they did). When the
marriage ended, Mrs Hopkins started financial proceedings, claiming
the agreement should not be upheld because, she asserted, it was
vitiated by duress or (alternatively) her husband's conduct had
been unconscionable (for example, she said he had exerted undue
pressure). The judge did not accept her evidence.
The case of WW v HW featured a pre-nuptial agreement
signed in 2002, a number of years before R v G was decided. Mr
Cusworth QC's judgment began by observing that although under
the terms of that agreement each of them agreed not to make a claim
against the other, they had nevertheless managed to run up combined
legal costs in court proceedings of c£1.77m. He pronounced
'if ever there were a paradigm example of a case which
demonstrates the need for more certainty in the law of financial
remedies and nuptial agreements, this is surely it.' The
husband in this case was the financially weaker party, and his
attempts to wriggle out of the terms of the agreement were
dismissed emphatically by the judge, who was critical of his lack
of candour and found him to be an unreliable witness.
Ignorance is no defence
As Mr Granatino learned at his expense in 2011, having the opportunity to obtain legal advice is enough. In both Hopkins and WW v HW, the individual trying to undermine the agreement (ie Mrs Hopkins and Mr HW) argued that she/he did not have a proper understanding of the implications of their respective agreements.
Mrs Hopkins claimed not to have read more than 'a few' pages of a 21 page letter of advice her solicitor sent to her. She was taken to see Counsel specifically about the terms of the draft agreement, but claimed not to have taken on board his advice. The judge did not believe her. Similarly, Mr HW told the judge that he 'switched off' after being told by his solicitor that pre-nuptial agreements were not binding in England and did not listen any further. That, the judge found, is no excuse. He held that both Mr HW and Mrs WW 'understood the agreement, had the opportunity for full advice about its contents, entered into it freely and intended it should be binding upon them at the point when it was executed'.
Catch 22?
People who feel bullied or pressured into signing a nuptial
agreement should make that known to their solicitors. And their
solicitors' advice will probably be not to enter into it in
those circumstances. But if that advice is ignored, and the
agreement is signed, an allegation of duress later down the line is
likely to fail.
The more Mrs Hopkins insisted she wanted to sign the post-nuptial
agreement, the more vociferously her lawyers advised her not to,
and she was warned of the 'watertight nature' of the
agreement if, against that backdrop, she did sign.
It is up to the party alleging duress to prove it. Like Mrs
Hopkins, he or she should expect to waive privilege and reveal
copies of all communications (including letters, e-mails, advice
and notes of calls and meetings) between client and lawyer during
the negotiation of the agreement. If there is no evidence of
duress, a question mark will surely hang over the veracity of the
allegation. And if there is such evidence, then it is likely the
solicitors will have advised against signing (and probably, like
both parties' solicitors in Hopkins, require the client to sign
a disclaimer). The judgments in Hopkins and HW v
WW suggest that with the benefit of legal advice, proving
duress (or the lesser charge of undue influence) will be a
difficult hurdle to overcome.
Confidentiality agreement?
Mr Hopkins instructed his solicitors to issue a divorce petition in London even before he was ready to face the end of the marriage in order to avoid his financial affairs being in the local courts, where he feared his wife would start proceedings. Yet ultimately, he was faced not only with a reported judgment for public consumption, but he had to endure the intrusion of his intimate letters and e-mails to his wife being poured over by teams of lawyers in court.
A high profile third party who was mentioned in the HW v WW judgment (anonymised as 'CC') and separately, details of Mr HW's tax situation, could have featured in any financial remedy case – but it has to be remembered that at least one of the parties had relied upon there being no court case and no judgment. Many nuptial agreements will contain a confidentiality clause preventing the parties from disclosing the terms (and sometimes even the existence) of an agreement to anyone other than legal advisors, but such confidentiality becomes academic if the agreement is challenged and there is a reported judgment or even a public hearing (which is possible). One way to avoid unwelcome publicity, would be to have the dispute resolved through an arbitration process (see separate article).
Predicament of real need
Pre- and post-nuptial agreements are not binding in England and
Wales, because the court retains discretion and must be satisfied
in each case that the terms agreed between the parties are
'fair'. This does not mean the court should be
paternalistic – the Supreme Court in R v G warned
judges not to override agreements 'simply on the basis that the
court knows best', and there is more emphasis than ever now on
individuals' autonomy. In Hopkins, the judge observed
that the outcome could be 'some distance from the order the
court might have made had there been no agreement'.
In a similar sentiment, in the judgment of Kremen v Agrest
(No 11) [2012] EWHC 45 (Fam) (also referred to in his more recent
judgment of SA v PA [2014] EWHC 392 (Fam)), Mostyn J qualified what
'need' can mean: 'It is likely to be unfair to hold
the parties to an agreement which leaves one spouse in a
predicament of real need, while the other enjoys a sufficiency or
more. However, need may be interpreted as being that minimum amount
required to keep a spouse from destitution.'
The Supreme Court made sure that Mr Granatino was not left in a
'predicament of real need' and that he had suitable
accommodation to house his children when they visited him. That
appears to remain the bottom line when it comes to the court's
cross-check of 'fairness'. The agreement Mrs Hopkins signed
was, the judge found, 'not one which pays no regard to her
needs'.
While the family home is generally treated as 'matrimonial' property regardless of which party funded it (the Supreme Court was clear about that in Miller and McFarlane [2006] UKHL 24), the judge reminded us that this does not necessarily mean it should be shared equally. Where contributions are significantly disparate, an unequal division of the net equity can be justified, as occurred in HW v WW.
Winning and losing
Most financial remedy cases are not binary – there is a range of possible outcomes because the court has such a wide discretion. But when there is an (alleged) agreement in dispute, there will be a winner and a loser. For those content to stick to what they agreed, a lot of heartache and expense could be spared, but for those who consider the terms to which they signed up to be unfair, the stakes can be high.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.