KA v MA
 Neutral citation: [2018] EWHC 499 (Fam)

WTLR Issue: Spring 2018 #171

KA

V

MA
(PRENUPTIAL AGREEMENT: NEEDS)

Analysis

When the parties met in July 2000, they had both been previously married. In the husband’s case, a difficult divorce caused him to set his face against remarriage. He had three sons who spent significant periods of time with their father in a substantial property near Reading (Property G) which had a value of £3.35m. He (together with his brother) had a successful business in international travel and tourism, owning 51% of the shares in the company valued at £30m. The wife, who had no children, had two rented properties with a combined equity of £245,615. By the time she moved into Property G, she was pregnant with M who was born in September 2004. She gave up her job after his birth to devote her time and energy to the role of wife, mother and homemaker. After his birth, the wife began to press the husband in relation to marriage. Eventually the husband agreed to marry but only on the condition that the wife signed a pre-nuptial agreement. In September 2008 the husband instructed his lawyers to prepare a simple agreement that would protect his pre-marital assets and he was advised by them that, while pre-nuptial agreements could not safeguard assets in absolute terms, case law showed that they were influential, if not determinative, in the event of a financial dispute. The wife sought independent legal advice and was advised that the sum which was then ‘on the table’ was far less than she would be likely to receive in the event of divorce proceedings. She was uncomfortable with the terms originally proposed and felt under pressure to agree and sign it. The terms included an (increased) lump sum of £600,000 and maintenance payments of £2,000 per month, both of which were to be index-linked. The wife signed it on 11 November 2008 and the marriage was celebrated on 2 December 2008. Ultimately, the wish to marry the husband in order to create a strong and stable family unit for M was stronger than her misgivings about the pre-nuptial agreement. Some five years later in November 2013, the wife and M moved out of Property G and into a neighbouring property which was worth just under £1m. Although physically separated in terms of day-to-day living, the underlying continuum of the marriage did not come to an end until several years later. The wife made an application for financial remedy orders following the breakdown of her marriage to the husband in June 2016 and this provoked, by way of response, a separate application by the husband in the form of a notice to show cause why an order should not be made reflecting the terms of the pre-nuptial agreement. On behalf of the wife, a needs-based claim was advanced approaching £6m. The husband had already made available to the wife £300,000 to meet an ongoing liability for legal costs and offered to pay a fixed lump sum of £750,000 as well as capitalise the maintenance element of the agreement on a full life basis – altogether this would amount to just under £1.6m.


Held (accepting that the pre-nuptial agreement has legal consequence or significance)


The court should give effect to a nuptial agreement freely entered into by each party with full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement. There was nothing inherently unfair in the parties wishing to organise their finances in relation to non-matrimonial property in such a way as to meet obligations towards existing family members or children from a former marriage. The principle of personal autonomy and fairness had to be recognised for two reasons. Firstly, the computation of the wife’s award should be driven by her generously assessed needs rather than any application of the sharing principle. Secondly, the wife’s clear acknowledgement and acceptance of the husband’s position in relation to his pre-marital assets as reasonable needed to be taken into account as part of the circumstances of case. However, it should not enure to her disadvantage – she was advised that a willingness to enter into an agreement to regulate or restrict her rights on divorce was one of the factors which were likely to be taken into account, absent vitiating factors. As to whether the husband’s stance amounted to improper pressure sufficient to propel the agreement into the realms of unfairness, no threats were made to the wife and his stated position of principle that there would be no marriage without a signed pre-nuptial agreement should not be regarded as being capable of constituting duress or exploitation of a dominant position for these purposes. The wife understood the general nature of such agreements and the evidence did not lead to a conclusion that she was effectively disabled from negotiating with the husband, supported as she was by independent legal advice. The evidence did not support a conclusion that, by the time she authorised the release of the signed agreement, her free will was completely overborne by any action or inaction on the part of the husband. Consequently, her rejection of the advice she had received, no doubt motivated by what she perceived to be in her son’s best interests, did not enable the conclusion to be reached that the agreement would be entirely disregarded as having no legal consequence or significance in terms of outcome.


However, the existence of the agreement and its terms were but one component element in the overarching search for a fair outcome. While the husband could not cherry-pick the terms which should be enforced and those terms which should not, in the context of the weight to be attached to the agreement, its principal force as a driver lay in the fact that the wife accepted as reasonable its fundamental utility in protecting so far as legally permissible the husband’s premarital wealth. That and the fact that she acknowledged his wish to be reasonable in all the circumstances were two factors which carried significance in this case. Notwithstanding this, it was necessary to have regard to all the factors set out in s25(2) of the Matrimonial Causes Act 1973. The first consideration must be M and his future welfare. As regards housing needs, a property in a village location within easy commuting distance of M’s boarding school could be acquired for about £1m. If one added the costs of relocation, stamp duty and redecoration her housing needs should be assessed in the global sum of £1.35m. As regards the wife’s income needs, after more than ten years of reliance on a very generous financial provision which the husband made for his family, the wife should not now be confined to a budget of no more than the personal spending allowance he was providing at the time they agreed to marry. It had been found on a balance of probabilities that the husband did reassure the wife in terms that the agreement would in all likelihood have less significance as the marriage endured over future years. Those terms could not be regarded as reasonable or remotely fair so far as they related to income provision. It was nevertheless influential and an assessment of the wife’s income needs must be tendered by its existence, if not its terms. A net annual budget of £100,000 per annum is what the wife realistically required to run her domestic economy in a mortgage-free home while she was providing a permanent home for M. This level of need should continue until M had completed his tertiary education at the age of 21. At that stage, a step down was appropriate and the wife’s net annual budget should be reduced by 25% to £75,000 per annum. On the basis of gross earnings from employment over the next ten years of £20,000 per annum this level of provision for her future needs would require a Duxbury fund of just under £1.6m. Altogether, the wife needed a lump sum of £2.95m for housing and a Duxbury fund. With her liabilities paid, she would have available to apply towards her needs about £220,000. In order to achieve a clean break she would require from the husband a contribution of £2.73m. 


JUDGMENT
 MRS JUSTICE ROBERTS 
 [1] This is an application made by KA (to whom, for ease of reference, I shall refer as ‘the wife’) for financial remedy orders following the breakdown of her marriage to MA (‘the husband’). That application was made in June 2016 shortly after the commencement of divorce proceedings. It provoked, …
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Counsel Details

Martin Pointer QC and Nichola Gray (1 Hare Court, Temple, London EC4Y 7BE, tel 020 7797 7070, e-mail clerks@1hc.com) instructed by Boodle Hatfield (240 Blackfriars Road, London, SE1 8NW, tel 020 7629 7411, e-mail bh@boodlehatfield.com) for the applicant.

Philip Marshall QC and Millicent Benson (1 King’s Bench Walk, Temple, London EC4Y 7DB, tel 020 7936 1500, e-mail clerks@1kbw.co.uk) instructed by Horsey Lightly (7 Stratford Place, London W1C 1AY, tel 020 7222 8844, e-mail info@horseylightly.com) 
for the respondent.

Cases Referenced

Legislation Referenced

  • Children Act 1989, Sch 1
  • Matrimonial Causes Act 1973, s25