Practice Area: Family

Couples who enter into pre- or post-marital agreements with their eyes open and with the benefit of legal advice can expect to be bound by them. The High Court made that point in a so-called ‘big money’ divorce case in which an extremely wealthy woman’s assets dwarfed those of her ex-husband.

Before their relatively brief marriage, the wife’s net assets were already valued at about £50 million. The husband’s net assets were worth about £225,000, plus a small pension and modest employment income. The wife’s wealth, which was entirely derived from her family, later swelled to £250 million.

They entered into pre-and post-marital agreements by which the wife undertook, amongst other things, that in the event of their relationship permanently breaking down, she would meet the husband’s reasonable housing needs until any children of the marriage reached adulthood or completed full-time education.

The husband agreed that he would have no claim against the wife’s assets and that she would have no obligation to pay him maintenance. The agreements specifically stated that the husband’s reasonable needs were met by their terms and that the principle of asset sharing should not apply in the event of divorce.

Ruling on the financial aspects of their divorce, the Court noted that the agreements were in entirely conventional terms and contained a warning that the couple should not sign them unless they intended to be bound by their terms. The husband could have been under no illusions as to the extent of the wife’s wealth and had received independent advice as to the effect of the agreements on his rights.

It was not a long marriage and the couple could have done no more to make clear their intentions as to what should happen in the event of separation in terms of their assets and the issue of spousal maintenance. In making financial orders designed to meet the husband’s reasonable housing and income needs, the Court ruled that the agreements should carry full weight and were largely decisive as to the outcome.

Pre-nuptial agreements (PNAs) which are not entered into freely or which have unfair results will generally not be worth the paper they are written on. However, as a High Court case showed, judges are far more likely to treat them as valid if they are signed after taking independent legal advice.

The case concerned a PNA executed by a couple about three months before they married. The husband, an extremely successful financier, had a net worth of about £32.5 million at the time and had continued to prosper mightily since. The wife had not much more than £60,000 in assets. Their marriage lasted about 14 years, yielding two children, before the wife petitioned for divorce.

In accordance with the terms of the PNA, the husband offered the wife £11.75 million with a view to achieving a clean break. That represented a housing fund of £4.75 million and income-producing capital of £7 million. In contending for more extensive provision, however, the wife boldly argued that the PNA should be wholly ignored.

Ruling on the matter, the Court noted that, prior to signing the PNA, the couple had each received independent legal advice from highly regarded family solicitors. The equal sharing principle was not ignored and the PNA, which also made very generous provision for child maintenance, would have been torn up had the marriage lasted 25 years.

The Court acknowledged that the couple had had what was described as ‘the mother of all arguments’ prior to signing the PNA. However, it was a two-way argument and they had time to cool off prior to signing the document. The husband had made it plain that there would be no marriage without a PNA, but that was commonplace. Overall, the Court was not satisfied that the wife had been placed under undue pressure to enter into the PNA.

In reaching the very clear conclusion that the PNA could not be ignored, the Court found that a fair deal had been struck. It certainly did not represent a capitulation by the wife. The ruling meant that the wife and children would be provided for in accordance with the husband’s offer.

Giving guidance for the future, the Court noted that litigants should be aware that it is a significant step to instruct lawyers to prepare a PNA. Such agreements are intended to bring certainty and minimise the risk of subsequent dispute. In the absence of something fundamental that undermines their validity, judges are highly likely to give them full effect.

Find out more about our experience in drafting and advising on prenuptial agreements.

Couples who enter into a pre-nuptial agreement (PNA) with their eyes wide open can expect to be bound by its terms. However, as the outcome of a ‘big money’ divorce case made plain, judges have the power to effectively rewrite them if they fail to make fair provision for the reasonable needs of either husband or wife.

The case concerned a middle-aged couple whose realisable assets, worth more than £43 million, were almost entirely held in the wife’s name. On their wedding day they signed a PNA by which the separation between their assets was maintained. Under its terms, the husband’s financial entitlements on divorce were restricted to about £190,000 in cash and repayment of a £250,000 loan.

Following a hearing, a judge rejected his arguments that the PNA should be entirely disregarded on the basis that he entered into it in haste and without legal advice. He was found to have signed it freely and with a full appreciation of its meaning and consequences. The judge suspected that he had come to regret signing the document in the belief that it would never come into effect.

In ruling that the PNA failed to provide fairly for his reasonable needs, however, the judge noted that he had made a full contribution to the marriage and the upbringing of the couple’s three children. The wife having received a huge sum on the sale of her family’s business, the whole landscape of the couple’s finances had changed dramatically since the PNA was signed.

The judge directed the wife to provide the husband with a £2.5 million house that would revert to her on his death. She was further ordered, amongst other things, to pay him £1.2 million in capitalised maintenance and to cover his substantial debts. His total financial award came to around £1.9 million.

Had the couple married without signing a PNA, the judge suspected that, given the scale of the wife’s fortune, the husband’s award would have been significantly higher. The outcome, however, properly recognised the limiting consequences of the PNA, balanced against his reasonable needs.

Some couples have second thoughts in the midst of divorce proceedings and get back together. However, in a unique decision, the High Court has ruled that the resumption of a toxic relationship does not amount to marital reconciliation.

The case concerned a wealthy couple who had been married for about two years when the wife petitioned for divorce. In doing so, she asserted that the husband’s behaviour was such that she could not reasonably be expected to continue living with him and the marriage had thus irretrievably broken down.

She obtained a decree nisi and, following financial relief proceedings, orders were made in accordance with the terms of a pre-nuptial agreement that both she and the husband had signed after taking legal advice. Provision was made for her housing, maintenance and other needs. However, she thereafter took no steps to finally terminate the marriage by obtaining a decree absolute.

Some years after the decree nisi was granted, the wife applied to rescind it. She did so on the basis that she and the husband had reconciled soon after it was issued and their marriage had thus continued. She asserted that her original divorce petition should be dismissed and the financial orders set aside. She acknowledged that the marriage had now finally broken down and, if her applications were granted, she intended to lodge a fresh divorce petition.

Ruling on the matter, the Court noted that it had not previously encountered a case in which a spouse sought to impeach an earlier decree nisi made in his or her favour. The wife’s applications were superficially curious and the facts of the case were very unlikely to be repeated in the future.

The Court observed that the wife’s motive in making the applications was purely financial in that the pre-nuptial agreement provided for her to receive increasing levels of financial provision depending on the length of the marriage. If the marriage had lasted for eight years, as she contended, as opposed to two, the level of her provision would therefore be substantially increased.

In dismissing the applications, the Court acknowledged that a relationship of sorts had resumed after the grant of the decree nisi. It was, however, as unhealthy and toxic as it had been since the early days of the marriage. Whilst they may have still referred to themselves as husband and wife, there was no mutual comfort or assistance and they obtained no enjoyment from each other’s society.

The Court found that it would be an abuse of language to describe the resumption of such a dismal relationship as a marital reconciliation. The original decree nisi was not granted in error in that there had indeed been an irretrievable breakdown of the marriage. The husband was granted a decree absolute, with the result that the financial orders would now, at last, take full effect.

If you feel there is a danger that your spouse might be hiding assets and money in divorce, or is already disposing of assets before divorce, and this action is intended to deprive you of your rights to matrimonial wealth during a divorce financial settlement claim, a freezing injunction might be a suitable course of action.

A freezing injunction (also known as a freezing order) is an interim court order which can be granted under Section 37 of the Matrimonial Causes Act 1975 to prevent the dissipation of assets.

Speak to Wellers Law Group, so that our experienced divorce solicitors can listen to your concerns and explain the options available to you.

Disposal of marital wealth and financial misconduct

Before the court grants a freezing injunction, you will need to prove that your matrimonial wealth is at immediate risk and that any movement and/or disposal of assets is substantial enough to affect the size of the matrimonial pot to be divided in a financial settlement on divorce.

If proven, the court may consider any reckless, frivolous or unusual disposal of wealth by your spouse to be financial misconduct.

Some of the signs of asset disposal include:

• Abnormal spending and expensive spontaneous purchases
• Unplanned and extensive gifting to family and/or friends
• Unplanned, quick sales of property and investments
• Large cash withdrawals from savings accounts
• Unplanned and unexplained trips away and/or expensive holidays
• Unusual transactions on credit card statements
• You suspect funds are being transferred into hidden bank accounts
• Gambling

How do I put a freezing order in place?

You will need to apply to the court for a freezing injunction. In most cases, this will be ‘without notice’, in other words, your spouse or civil partner will not be informed of your application. This will prevent them from having time to dispose of assets before the court grants the freezing order.

You may be expected to attend at least one court hearing in person before the order is granted and there will be fees involved, however, the potential loss of significant assets is likely to far outweigh the cost of seeking a freezing injunction.

You will need to provide strong evidence that your spouse or civil; partner intends to hide or dispose of assets and that, without the order, you would suffer unfairly when the financial settlement on divorce comes before the court.

You will also need to prove that there are sufficient assets to meet your claim and you will almost certainly need to make an undertaking (solemn promise) to compensate your spouse or civil-partner in the event of any loss they incur should the freezing injunction be later set aside.

This ‘cross undertaking’ might include legal costs for the main proceedings, as well as the injunction application. If a third party suffers losses as a result of the freezing injunction, you also undertake to compensate them.

What can a freezing injunction protect?

Any asset to which a judgment may be attached can be frozen under a freezing injunction. For example:

• Bank accounts
• Property – real estate and land
• Shares and investments
• Valuable items such as cars, jewellery and artworks

It may be possible to seek a freezing injunction on assets held in trust for a beneficiary, however, this is more difficult and uncommon.

A domestic freezing injunction applies to assets held in England and Wales, while a worldwide freezing injunction applies to assets held overseas, although this type of order can be limited depending on the jurisdiction in which the assets are situated.

The importance of full financial disclosure in a freezing injunction application without notice

As the applicant, you must provide full and frank disclosure of all relevant information, including any material that may be unfavourable or potentially damaging to your own position.

If full disclosure does not occur and is not ongoing, the court can set aside the freezing injunction. You may also be ordered to pay for losses suffered by the other party whether or not the court decides to leave the freezing injunction in place.

The consequences of knowingly attempting to mislead a court are very serious and carry the risk of serious penalties, including criminal charges of perjury and contempt of court.

Contact the divorce solicitors at Wellers Law Group for expert legal advice

It is crucial to have expert legal advice when applying for a freezing injunction. Contact our Family Law team for more information.

We offer an initial fixed fee interview so that we can discuss your situation. Call 020 8464 4242 for our Bromley team, 01732 457575 for Sevenoaks, 020 7481 6393 for central London or 01372 750100 for our Surrey team. Alternatively, you can email an enquiry to enquiries@wellerslawgroup.com.