Fable of a post-nup

The Courts have time and time again, stated that prenuptial (sometimes referred to as pre-nup) and post-nuptial (also referred to as post-nup) agreements are treated equally. 

This fable involves a husband and wife who entered a post-nup in 2014. 

The case reference is SC v TC [2022] EWFC 27, with Judgment handed down on 20 May 2022. A full copy of the Judgment can be accessed here.

The background

In this case, the circumstances were a little unusual. Namely, that in February 2022, it was declared that husband did not have legal capacity (the capacity required to give instructions to his legal representative and understand advice) and as a result a solicitor was appointed to act as his Litigation Friend. 

When the case came to Court, husband was 58 years old and had until 2022, worked in international investment banking. Wife was aged 50 and whilst currently a homemaker, had worked for an NGO.

The parties met and married in 1994. In 1998, they purchased their first family home. They had one child in their marriage, a son then aged 17 who was in private boarding school.

Over the course of the marriage, the parties had acquired a substantial number of investment properties mostly due to husband’s high earning capacity but also assisted by wife. 

During around 2003 to 2004, husband started experiencing early symptoms of Parkinson’s Disease. A formal diagnosis was not made until 2011 and, over time, his condition became progressively worse.

By 2013, the marriage was not a happy one and husband visited a sex worker in December 2013. Riddled with guilt, husband confessed his indiscretion to wife in January 2014. 

Upon learning the news, wife wanted to end their marriage. But, husband wanted to save it. However, if wife was to continue to be bound by the parties’ marriage, she wanted to bolster her financial position. 

Wife then consulted solicitors who drew up a post-nuptial agreement which was significantly favourable and advantageous to her. Within the wording of the draft post-nup, it stated that the document was legally binding upon them irrespective of the parties’ age and medical conditions. In essence, the agreement would give wife 80% of the assets, leaving husband with 20%. 

Husband also consulted solicitors to complete the process of the post-nup. At the time, husband simply wanted to sign it, despite the fact that it was grossly unfavourable and indeed, woefully unfair. 

Even though husband’s solicitors gave very sound legal advice, husband was in a hurry to sign the post-nuptial agreement. In their continued duty to husband, husband’s solicitors attempted to slow down the process by trying to improve a couple of the clauses contained within the draft document. 

However, husband was adamant in his haste and in his instructions, stating that given that he has Parkinson’s Disease, it made no sense for him to have any assets in the long-term. Husband signed the agreement first before his solicitors and thereafter the document was sent to wife’s solicitors. The post-nuptial agreement is dated 4 April 2014. 

Following this, the parties move from their current family home into a new family home.

By November 2020, the marriage had broken down completely. Wife remained living in the family home whilst husband returned to the parties’ previous family home. 

The divorce process started in January 2021. Decree Nisi took place in August 2021. The divorce was yet to be finalised. 

Court applications

At the time of husband instructing his solicitors (during the period when he had legal capacity), his solicitors wrote to wife’s solicitors stating that the post-nuptial agreement did not stand. 

Unsurprisingly, wife did not agree and made a Court application for a ‘Show Cause Notice’, asserting that husband should be bound by the terms of the post-nup. Additionally, wife made an application for financial remedy. 

Despite engaging the Court’s timetable, the parties were unable to reach a financial settlement and the case came before the Court in May 2022 for a Final Hearing.

Wife argued that the Court should attach a ‘magnetic’ factor to the post-nuptial agreement whereas, husband contended that the post-nup should bear little or no weight and that there should be equal division of the assets between the parties.  

The law

The Judge reiterated that there was no difference between a prenuptial and postnuptial agreement.

The Judge reminded himself of the factors to consider when deciding what weight, if any, should be attached to a nuptial agreement, namely that:

1.  The parties having all the information relevant to his or her decision making.

2.  The Court giving effect to nuptial agreements entered into freely and willingly on the understanding of the full implications unless the circumstances were unfair.

3.  The parties unlikely to have intended that any nuptial agreement shall leave one party in a predicament of real need, whilst the other enjoyed a sufficiency or more.

4.  The question of fairness is not determined by considering what the Court may order now because the fact of the agreement is capable of altering what is fair.

5.  In almost every nuptial agreement, one, the other or both parties are under a degree of pressure and emotions may run high. Ultimately, each party has to make a choice (unless undue pressure can be proved), the Court will generally uphold the agreement.

6.  It is assumed that each party who has negotiated the agreement is grown up and able to look after themselves.

7.  The Court may want to consider that the facts of the case including identifying any vitiating factors such as undue pressure, fraud, or misrepresentation.

8.  Unconscionable or other unworthy conduct is likely to eliminate the weight to be attached, particularly given the Court’s need to prevent abuse or influence.

9.  Even if the Court finds no vitiating factors, the Court will not be placed in a straightjacket so as not to be able to use its discretionary power.

The value of the assets in the marriage

In his assessment, the Judge detailed the parties’ assets as follows: 

1.  Joint assets of over £5m.

 2.  Wife’s assets at £206,543

3.  Husband’s assets at minus £353,081 (of which £292,665 related to litigation loan debt).

4.  Wife’s pension valued at £6,461.

5.  Husband’s pension valued at £611,385.

6.  Husband’s annual income being £7,912 (including state benefit of PIPs).

7.  Wife’s annual income being £19,356.

The ‘weighing’ exercise

The Judge stated that some of the circumstances of the case gave rise to weight being attached to the post-nuptial agreement including, there being financial disclosure, the parties had obtained independent legal advice and the post-nup agreement had been professionally drafted. 

However, the Judge was troubled as to why husband would place himself at a severe financial disadvantage; why husband would wind upon State care; why he would forgo the potential claim of £2.5m; and would disregard his medical condition.

The medical evidence before the Court was that at the most, husband had a life expectancy of some 10 to 15 years. His condition would become worse over time, he would be reliant upon care - particularly professional care - and ultimately, his care would have to be provided in a care or nursing home.

Also before the Court was evidence of husband’s state of mind between the period of 2009 and 2014. The evidence indicated that husband was suffering from depression and self-loathing and subsequently, he was paranoid and preoccupied that wife was allegedly having an affair.

The ‘needs’ exercise

In assessment of husband’s needs, it was detailed that husband would requiring the following:

1.  Housing i.e., a continuation of his occupancy at the previous family home valued at £1.8m where he was familiar. This was against wife’s assertion that she wished to continue to occupy the family home valued at £2.35m.

2.  A real and identifiable need for a care home.

3.  A bespoke care package costing £1.6m.

The outcome

In his conclusion, the Judge stated that it would be wrong for him to place weight on the post-nuptial agreement as this was very much to husband’s disadvantage.

The Judge said that at the time of signing the agreement, husband was a vulnerable person, and wife took advantage of husband’s vulnerable position to gain substantial financial advantage.The agreement was not fair and to hold husband to the post-nup would put him in a predicament of ‘real need’, possibly leaving him without adequate accommodation.

The Judge decided that the assets of the marriage would be divided equally.

The legal costs

Whilst the Judge made a comment that the parties between themselves had amassed a total of £700,000 in legal costs, he indicated that this was by no way a criticism of the parties’ lawyers and indeed this was not a straightforward case. 

The moral of the fable

Despite the level of assets in this marriage and their big numbers, the Court still took the same approach that the parties’ ‘needs’ needed to be considered in any division of assets.

At a time of agreeing terms of a pre-nup and post-nup, careful consideration should be given to what the Court may deem to be unfair, given that the Court ultimately retains the power to decide the division of assets between the spouses and former spouses. Until such time that pre-nups and post-nups are fully legislated, the Court’s discretion and power remains unfettered.

Further information

If you have any queries or require further information in relation to prenuptial agreements, post-nuptial Agreements and/or the settling of finances between you and your spouse, please do not hesitate to contact Muntech on 01268 824938 or via email at muntech.kaur@birkettlong.co.uk. Birkett Long offers a free 15-minute consultation via telephone.