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Prenups: how well will they hold up in court?

View profile for Vikkie Chetcuti-Gee
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First published on FTAdviser on 10 August 2023 - Prenups: how well will they hold up in court?

Earlier this year, judgment was handed down in the case of MN v AN [2023] EWHC 613 (Fam) by Moor J, which involved a dispute between a husband (aged 61) and wife (51) about whether or not the prenuptial agreement they entered into prior to their marriage in September 2005 should be upheld.

At the time disclosure was exchanged, the husband was worth approximately £32.5million, whereas the wife had about £62,000 in assets, so it is unsurprising that he told the wife he wanted to enter into the agreement before they got married. Both of them instructed well-known family law solicitors and, after lengthy negotiations, the terms were agreed and the prenup was signed in June 2005.

It was confirmed in the agreement that the parties had received separate and independent legal advice, that they were each entering into the agreement freely and that they intended for it to be legally binding upon them.

The terms of the agreement provided for each party to retain any assets they accumulated before they met, which is a standard term to include. The wife would also receive £500,000 for each complete year of marriage up to a maximum of £12.5million and one half of a London property on the eighth anniversary or the birth of a child (whichever came earlier). Alternatively, if greater in value, she would receive 50% of the assets accrued during the marriage (subject to an overall cap of 42% of the husband’s net assets). The husband would also pay the wife £60,000 a year for each child they had plus their school fees and medical expenses.

In 2021, two years after the marriage broke down, the wife started court proceedings, arguing that she should not be held to the terms of the prenup as the provision made was insufficient and she had been “unduly influenced” or pressured to sign. The husband made various offers to her, including one by which she would receive £500,000 more than she would be entitled to under the prenup. The wife did not respond substantively and, as is common in such cases, the husband asked the court to determine why an order should not be made in the terms of the prenup.

The judge was clear that the prenup could not be ignored and that it made a reasonable level of provision for the wife. In particular, he noted that both parties had received independent legal advice, that there was full disclosure from both of them and that the wife was not under sufficient pressure from the husband for it to have any effect. These are the core principles from the Supreme Court decision in Radmacher v Granatino (in which the court determined that couples should be held to both pre- and post- nuptial agreements unless it could be said that it would be unfair to do so).

This is a significant case, which family lawyers will be mindful of going forward, reinforcing as it does the principles of pre- and post-nuptial agreements. The Supreme Court in Radmacher in 2011 told us that each party should receive independent legal advice to ensure they fully understand the implications of the agreement, they should each make full disclosure of their financial positions, there should be no duress or undue influence and the agreement should be broadly fair. If it is signed in advance of the wedding, the Law Commission 2014 report recommends at least 28 days in order to reduce the risk of pressure influencing the parties’ decisions. The fairness test is discretionary but, broadly, must ensure that the financially weaker party has their income and capital needs met if the marriage breaks down – in other words, secure accommodation and a means of meeting expenses.

What is clear, however, is that the courts are becoming more comfortable with holding parties to such agreements, particularly where the above factors are present. Some inequality of bargaining power would not preclude a court finding that parties who understand the agreement should be bound by it. There is a strong likelihood that any agreement that meets these criteria will be upheld and, indeed, spouses entering into a prenup should assume they will be. This will be welcome news to high net worth individuals seeking to protect the wealth they are bringing into a marriage or that they might make during the marriage and to those who have already sought the protection of an agreement.