To love and to cherish …until the pre-nup kicks in

Jenny Duggan examines the decision in the recent case of KA v MA (Prenuptial Agreement: Needs) [2018] EWHC 499 (Fam), which considered whether a husband could rely on a pre-nuptial agreement (“pre-nup”).

Background

The husband and wife were in their mid-fifties and had a 13-year-old child at the time of their divorce.

They had met in 2000 and started living together in 2004 but the husband had been reluctant to marry. This was due to the fact that he had a bruising divorce from his first wife that had “left a lasting scar”. Eventually, in 2008, the parties married but the husband made it clear that he would only do so if they signed a pre-nup.

The pre-nup

The pre-nup was signed three weeks before the wedding and the husband and wife both received legal advice.

The husband’s wealth at the time of the pre-nup was £34m, most of which comprised his interest in a family business. The wife’s assets were around £216,000.

The pre-nup said that on divorce the wife would receive a lump sum of £600,000 and maintenance of £2,000 per month (both index-linked).

The wife’s solicitors advised her that the pre-nup would give her far less than she was likely to receive on divorce. The wife’s solicitors also noted their concern that she was under some pressure to sign the pre-nup.

£1m a year lifestyle

The parties enjoyed a high standard of living. The husband and wife lived in a 20-acre estate in Berkshire. They employed various members of staff. They travelled extensively, spending £250,000 each year on holidays. Towards the end of the marriage, it cost approximately £1m net per year to sustain their family lifestyle.

The couple had agreed that the wife would give up her work (earning around £40,000 a year) after the birth of their child in September 2004.

Divorce

Divorce proceedings were started in 2016 and the husband tried to hold the wife to the terms of the pre-nup.

At the final hearing, the husband offered the wife a lump sum of £750,000, (which would buy her a four bedroom property near Reading), maintenance of £27,000 per year (in an upfront sum of around £540,000), plus £300,000 for her legal costs. This amounted to around £1.6m in total. Notably, the husband’s budget for himself was around £660,000 per year.

The wife argued that the pre-nup failed to meet her “reasonable needs” taking into account their lavish lifestyle during the marriage. She sought a housing fund of £2.3m, (which would buy her a five bedroom property in an affluent area), and maintenance of £150,000 per year (upfront as a lump sum of £3.22m). The wife agreed that she could work again and earn around £20,000 a year until she was 65 and this was taken into account.

The parties also agreed that the wife would receive maintenance for their son of £30,000 per year, although when that would end was in dispute.

Decision

The judge considered that the wife’s request for the housing fund of £2.3m may have been reasonable if a pre-nup were not in place, but given the circumstances it would not be fair on the husband. This was even though he would remain in the estate worth more than £3.5m. He had owned that estate long before he met the wife. The judge, therefore, awarded the wife a housing fund of £1.35m.

The judge ruled that the wife’s future needs should be tempered by the pre-nup. Maintenance of £100,000 per year was ordered, decreasing to £75,000 when the child was 21 years. This would require a sum of £1.6m (taking into account her earnings of £20,000 per year gross).

The judge did not consider that the husband had made overt threats to the wife. Telling the wife he would not marry her without a pre-nup in place did not amount to duress or exploitation of a dominant position. The wife knew that this was a key condition of the marriage as he wanted to preserve his wealth for his children.

Partner Richard Hogwood says:

“The case provides a useful reminder that pre-nups in this country, although persuasive, are not binding but are merely a “depressing factor”.

“In particular, the longer the marriage, the more likely that what may have seemed fair at the time of the pre-nup may be unfair at the point of divorce.”