Pre-nuptial agreements – how binding are they?

Mr and Mrs Brack are both Swedish nationals. They were married for four years, but in a relationship for some 20 years. Mrs Brack was 49 and Mr. Brack was 50 at the time the court of first instance heard their case. They have two children, aged 12 years’ old and 8 years’ old. Mr. Brack was a racing driver and Mrs Brack was a home maker. Their assets were worth approximately £11M. Mr and Mrs Brack had been living in England for approximately 5 years before their divorce.

The Bracks had entered into three separate prenuptial agreements, signed in three different countries:-

1. The Niagara Agreement, dated 10 July 2000, before the marriage
2. The Ohio Agreement, dated 11 December 2000
3. The Gothenburg Agreement dated 26 December 2000, before the marriage

Mr. Brack argued that the agreements contained a valid maintenance prorogation clause, meaning that the Courts in Sweden have exclusive jurisdiction to determine Mrs. Brack’s maintenance claims. Mrs. Brack did not wish for the Swedish Court to determine her claims and she did not want the pre-nuptial agreements to be upheld. If held to the terms of the prenuptial agreement, she would have received 5% to 6% of the overall assets; a net sum of around £560,000 out of £11M.

Definitions

Needs-based award: an award in financial remedy proceedings that is not based on the sharing principle (a 50/50 division of all matrimonial assets), but is determined in respect of the needs of either party.

Prenuptial agreements are often drafted with a view to ensuring the financially weaker party’s needs are met, so that the Court would likely be satisfied he or she will not be in a predicament of real need if the marriage to end, and would be more likely to uphold the pre-nuptial agreement. Clarification can also assist with avoiding the possibility of the financially weaker party asserting he or she has a sharing claim, to enable them to achieve an award over and above the amount required to meet their real needs.

Sharing principle: The starting point in a long marriage of more than 10 years is a 50/50 division of the matrimonial assets.

First instance decision – Brack v Brack

In Brack v Brack, the Court of first instance made the following decisions:-

1. 1. 1. The Judge found that if he were to hold Mrs. Brack strictly to the terms of the prenuptial agreement, giving her the net sum of £560,000, it would have left her and the children in a predicament of real need.
      2. The Judge found there was a valid maintenance prorogation clause, the effect of which was to give exclusive jurisdiction in respect of the parties’ maintenance obligations to the Courts of Sweden (maintenance obligation includes all “needs” including housing).
      3. The Judge attempted to make up the shortfall required to enable Mrs Brack to meet her and the children’s needs using legislation other than the Matrimonial Causes Act 1973. The Judge ordered the sale of the family home and made Orders requiring Mr. Brack to:-
         • provide a property for Mrs Brack and children up to the value of £2 million, as a home for the children until they cease full time education, whereupon Mrs. Brack’s right to occupy the property would cease;
         • provide Mrs. Brack £25,000 towards the cost of a car;
         • pay child maintenance and a carers allowance to Mrs. Brack, of £95,000 per annum

   The Judge found Mr. Brack was both “mean-spirited and mean”. He also described him as “cold”. Notwithstanding this, he found him to have been truthful in his evidence.

   Grounds of Appeal

   Mrs Brack appealed the first instance decision to the Court of Appeal on two grounds:-

   Ground 1

   She argued as a general principle, where there was a prenuptial agreement without vitiating factors, but which failed to provide for her needs and the needs of her children adequately, the Court was not limited to granting her a needs-based award. She asserted that the Judge in the Court of first instance had felt constrained in law, to reach a needs-based outcome, when he should not have done. She said the Court could have made an Order based on the sharing principle.

   Ground 2

   Mrs Brack argued there was no valid prorogation clause, depriving the English Courts of jurisdiction to provide directly for her needs in financial proceedings.

   The Court of Appeal’s decision

   The Court of Appeal found in Mrs Brack’s favour in respect of both grounds as follows:-

   1. There was no prorogation clause, which meant the Court of England and Wales could determine all of Mrs. Brack’s financial claims, both capital and maintenance under the Matrimonial Causes Act.
   2. The Court of Appeal held that even where there is a prenuptial agreement without vitiating factors, when applying Section 25 of the Matrimonial Causes Act 1973 in the search for a fair outcome, the Court can apply principles of sharing and compensation, not only needs.

   What now?

   The case will be remitted to the first instance Judge, to consider what award Mrs. Brack should now receive, in circumstances where the Court of Appeal has held there is no valid prorogation clause and the Judge should not be constrained to making a needs-based award.

   It remains open to Mr. Brack to appeal the Court of Appeal’s decision to the Supreme Court.

   Will Mrs Brack now get the same award as she would if there were no pre-nuptial agreement in place?

   The short answer is no, it is extremely unlikely. It is therefore still advisable to enter into prenuptial agreements or postnuptial agreements in many cases. See top tips below.

   In the Court of Appeal Judge, Lady Justice King said:

    I should emphasise that in allowing the appeal, the court is not advocating an award in excess of the wife’s needs, nor is it saying that having considered the case, and taken into account all the circumstances of the case, the judge will not reach the same conclusion as he did before, namely that this is a “needs case”. All this court is doing is remitting the case to the judge, now absent a valid MPC, in such a way as to leave him in a position to exercise his broad discretion, to make such order as he deems to be fair in all the circumstances

   KEY TOP TIPS FOR A PRENUPTIAL (OR POSTNUPTIAL) AGREEMENT

   1. If you and your future or current spouse live in more than one country, or you may live in another jurisdiction, take advice in both countries. Technical drafting will be required (particularly in light of Brexit of there are European countries) to enable you to elect for the Courts of a particular country to determine your dispute, which will usually be advisable.
   2. In England and Wales, it is still necessary to ensure:-
      • the prenuptial or post nuptial agreement must be entered into freely;
      • the parties must have a full appreciation of the implications of the agreement
      • It must be fair to hold the parties to their agreement in the circumstances prevailing
   3. Prenuptial and postnuptial agreements can be helpful in many marriages, for many different reasons, commonly pre-nuptial and postnuptial agreements can assist in case of:-
      • Vast wealth (personal or family)
      • Significant business assets
      • Parties to the marriage are living across more than one jurisdiction
      • One party to the marriage has an interest in family business assets
      • One party to the marriage has a large proportion of assets he or she considers to be non-matrimonial
   4. Prenuptial and post nuptial agreements, if properly drafted can be extremely valuable; they can:-
      • Provide clarity;
      • Give the parties security; and
      • Save costs in the event that the marriage breaks down.

   If you are considering a prenuptial or post nuptial agreement, speak to the team at Rayden Solicitors for expert advice. Our team has vast experience in prenuptial agreements, both with UK assets and assets abroad.