Mr Justice Moor’s judgment in
MN v AN [2023] EWHC 613 (Fam) is the latest to reinforce the position that valid prenups will be upheld by the court of England & Wales.
When you get engaged, thinking about negotiating asset division on a hypothetical breakdown of the relationship, is not the most attractive prospect. However, this case only strengthens the benefits of taking this pragmatic step and reinforces that, provided the required steps are complied with, it is very likely to be upheld.
For a financially stronger party,
prenups allow assets to be protected and the outcome is likely to be at the conservative end of what a court could have ordered. For the weaker party, they also benefit from assurance their needs will met and both parties can avoid the messiness and upset – not to mention expense – of contested financial proceedings.
Sadly, the divorce rate remains stubbornly high at 42%. Accordingly, prenups are becoming more common. This judgment provides clarity that those agreements will be abided by, in the hope that they can avoid the expense, stress and acrimony of a divorce battle.
It is a myth to think you can secure a divorce settlement which is well below what a court would order by virtue of a prenup, given the outcome must still be fair and meet parties’ needs. However, given the very wide parameters of fairness which result from the family court having so much discretion – a prenup can anchor an outcome at the lower end.
For more information prenups and its benefits please refer back to our
previous article on this topic.
Where are we now following latest judgment?
In 2010, the Supreme Court determined Radmacher v Granatino 2010 [2010] UKSC 42 that the courts would uphold (honour / enforce) valid prenups. This approach is retrospective, so valid prenups (i.e. those meeting the above conditions) entered into before 2010 are also capable of being upheld.
The facts of the MN v AN case telling us an ‘iron-clad’ prenup is achievable are as follows, but the 29-page judgment is very much worth a read in full:
The Husband (H) aged 61 is a successful investor and the Wife (W), a 51 year old home maker. They married in 2005. H was 44 and it was his second marriage. W was 33 and had no children/had not been married before. They had met in 2003 and after a brief break, began cohabiting in 2004. The parties have two children, aged 14 and 15 and H had two adult children from his previous marriage. H wanted a prenup to financially protect his eldest children.
In 2003, H purchased a London townhouse in his sole name. This became the family home. After proposing and explaining marriage would be contingent on a prenup, they began negotiations. Saying you will not marry without a prenup is not undue pressure (KA v MA 2018). At this point, H was worth £32.5M (million) and W had £62k of assets in her name. Both H and W instructed well-respected London law firms. W’s solicitors obtained Duxbury calculations from a chartered accountant.
Although the Supreme Court had yet to hear Radmacher, W’s lawyers sagely advised she should treat the terms of the prenup as being capable of enforcement. The prenup negotiations were extensive. In total there were five proposals exchanged and four full drafts of the document. In March 2005 there was an argument in which H allegedly branded W a ‘gold digger’. This is relevant as W tried to argue this event resulted in undue pressure being placed on her – and she sought to argue the prenup should be torn up. However, the judge disagreed.
The parties spent weeks cooling off and the negotiations resumed. It’s also important to appreciate that the wedding ‘save the date’ cards had yet to be sent so W could not successfully argue that she had no choice but to sign the prenup and go through with the wedding.
The signed prenup provided for W to receive £500k per year of marriage – up to a maximum of £12.5M. She would also receive 50% of the family home on the 8th anniversary of the agreement or on the birth of children – it also provided that if greater in value, she would receive 50% of the net matrimonial assets. H wanted to cap any total award W could receive on divorce as 42% of his net worth. W would also receive £60k per year in child maintenance (to be CPI linked) and H would pay school/children’s medical fees. After 25 years of marriage, the prenup would fall away.
In February 2019, after 14 years, the marriage broke down. At that point, H’s net worth was £44M and W had accrued c.£600k in assets in her own name and received over £2M in gifts from H during the marriage. W’s coercive control/financial abuse allegations were considered unfounded.
H looked to enforce the prenup which provided for W to receive a £7M lump sum and let her remain at the family home until 2030, before proceeds of the property would be divided. Alternatively, H also offered to sell the family home and give W £11.5M. W refused, claiming she considered the prenup unfair. Even after H sweetened his offer – W rejected it and continued to argue the prenup was unfair and should be torn up given she’d been subject to duress. H issued a notice to show cause. W stuck to her guns and argued she should receive £18M i.e. 40% of the total assets.
However, the prenup prevailed. W received 26% of the total assets, including the £7M Duxbury fund and £4.75M for housing. The judge pointed out that both parties had entered into the prenup on the understanding it would likely to upheld and it met the two-limb applicability test:
1. Were there any circumstances to exclude or reduce the weight attached to the prenup? The judge deemed not
2. Does the prenup provide for a fair result in light of all s.25 MCA 1973 factors?The judge concluded it did
W tried to argue that she did not think the prenup would be enforceable when it was signed and that she didn’t consider it fair – but the judge noted that her solicitors had advised to the contrary and had not asked her to sign an indemnity, evidencing they considered the prenup provision reasonable. Moor J noted that if the sharing principle had provided for greater settlement, W would have received that - and the 25-year fall away provision also demonstrated the fairness.
Key takeaways from the case are that for clients hoping to distance themselves from prenups, are that:
a. arguing undue pressure to sign will be all the harder if they received independent legal advice at the time (and both parties will need to have this to ensure the prenup is enforceable); and
b. the argument that saying ‘no prenup, no wedding’ is undue pressure will not hold up.
For further advice and information about any of the issues covered in this article, please get in touch with one of our family solicitors today.