Family Law Hub

BN v MA [2013] EWHC 4250 (Fam)

Here we have the court considering the effect of a pre-nuptial agreement on an application for maintenance pending suit, interim periodical payments for a child, and legal services provision (a s.22ZA Matrimonial Causes Act 1973 order).

  • In a tweet: Considers pre-nup impact on MPS as well as s.22ZA orders

    Summary: Here we see Mr Justice Mostyn considering the impact of a pre-nuptial agreement on a wife's ("W") application for maintenance pending suit, interim periodical payments for a child and an order for a costs allowance under s.22ZA MCA 1973.  

    The parties, an international couple who were aged 50 and 44 respectively, had negotiated the terms of the pre-nuptial agreement between February 2010 (following their engagement in 2009) and 30 May 2012 when it was signed. They married very shortly afterwards in June 2012. Each party had taken expert legal advice and given financial disclosure. It is fair to say that the parties had had an on-off relationship since 2001; they had one child and were expecting another when the relationship broke down in August 2013. 

    The husband ("H") had disclosed total net property assets worth £13.08 million (some apparently held on trust) and in addition a share of a family business, the value of which was stated to be unknown. He had a net business income of £350,000 a year and rental income of €40,000 a year. W disclosed details of two flats, each said to be worth £250,000 and both with 100% mortgages.

    The provision made for W by the agreement differed depending on the length of the relationship. As I said, the parties married in June 2012 and separated in August 2013 – the marriage therefore lasted for a little over a year. Under the terms of the pre-nuptial agreement this meant that:

    • H would procure the redemption of the mortgages on W's two flats as well as the extension of their leases to the maximum extent available in law. It seemed that that provision would probably require a total capital payment on H's part of about £778,000; 
    • W would receive £2 million on trust for housing, varied upwards in accordance with the national Halifax house price index; 
    • spousal periodical payments of £96,000 a year index linked from the date of the agreement; and 
    • child maintenance of £24,000 a year for each child. They already had one child aged 8 and, at the time of the hearing, W was pregnant with that child due to be born in February 2014.

    W made an application to the court for the full range of financial remedies including maintenance pending suit under s.22 MCA 1973, interim periodical payments for the parties' child under s.23(1)(d) MCA 1973 and a legal services order or costs allowance for £400,000 under s.22ZA MCA 1973.  

    Mostyn J noted that nowhere in her correspondence or statements in the lead up to the hearing had W articulated why the pre-nuptial agreement did not take effect. The burden, he said, was on W to show why the terms of that agreement should not be followed. During the hearing though it became plain that W was seeking to allege that H had failed to provide full financial disclosure and that there were circumstances surrounding the signing of the agreement that meant that it would be unfair to hold W to it.  

    Held: Early on in his judgment, Mostyn J summarised the principles governing the treatment of pre-nuptial agreements resulting from Granatino v Radmacher [2011] 1 AC  534 (which I have set out in full here as they are a useful reminder):

    "Regarding the question of the treatment of a nuptial agreement, there has been definitive guidance given by the Supreme Court in the well known case of Granatino v Radmacher [2011] 1 AC 534. I myself attempted to summarise the principles in my decisions of Kremen v Agrest No. 11 [2012] EWHC 45 (Fam) [2012] 2 FLR 414 and B v S [2012] EWHC 265 (Fam) [2012] 2 FLR 5012. In Granatino v Radmacher the Supreme Court analysed very closely the nature of nuptial agreements. They pointed out that nuptial agreements come in numerous shapes and forms and can be entered into at any point before, during or after a marriage. And so our case law has dealt with agreements which have been entered into before marriages, the classic prenuptial agreement, as is the case here; although usually they are longer lived than a mere 15 months, which is the case here. The cases have addressed postnuptial agreements or intranuptial agreements made while the parties are living together and are intending to live together -- that was the case in MacLeod v MacLeod [2010] 1 AC 298; separation agreements made after the marriage has broken down but before divorce proceedings have been launched but made in contemplation of such divorce proceedings -- that was the case in Edgar v Edgar [1980] 1 WLR 1410; agreements made that compromise a financial remedy claim made in divorce proceedings but which compromise has not yet received the approval of the court. That was the case in Xydhias v Xydhias [1999] 1 FLR 683. 

    The most important difference between these various types of agreement is the chronological point at which they are entered into. Obviously, in the general run of cases, a prenuptial agreement would be entered into a long time ago, whilst a Xydhias agreement will have been reached shortly before the hearing of the financial relief claim in question. The significance of the effluxion of time is, of course, as the Supreme Court explained in paragraph 65, that with the passage of time circumstances eventuate in a way in which the parties have not apprehended, and this is one of the principal reasons why the courts look most carefully at the fairness of justifying an old, in the sense of it happening a long time ago, prenuptial agreement. But in this case the prenuptial agreement was very recent, as I have said, a mere 15 months ago. 

    The Supreme Court has modified the test for the treatment of these nuptial agreements, as expressed in Edgar and Xydhias and, indeed, in MacLeod, so as to provide one single test applicable to all nuptial agreements, which is this, "The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement". That now is the test to be applied in every case where a nuptial agreement falls for consideration. 

    As I sought to explain in B v S, in considering questions of what circumstances are relevant in determining whether it would be fair to hold the parties to their agreement, one has to have regard to the following important factors. First, no agreement can ever be allowed to prejudice the reasonable requirements of a child. Second, and this is referred to in paragraph 78 of Granatino v Radmacher, is the important principle of autonomy, that respect should be accorded to the decision of a married couple as to the manner in which their financial affairs should be regulated, particularly where the agreement addresses existing circumstances and not merely the contingencies of an uncertain future. 

    The principle of autonomy is, in my view, extremely relevant. In many cases, and this case is an obvious one, the parties entering into the agreement are sophisticated, highly intelligent and have the benefit of the best legal advice that money can buy. Where in those circumstances they have thrashed out an agreement, which they have both then freely signed, in my view, heavy respect should be accorded to that decision. The question of autonomy is particularly relevant where the agreement seeks to protect premarital property. This is clear from paragraph 79 of Granatino v Radmacher, and in this case that is exactly what the agreement was intended to achieve. As it says on its first page, it is intended to confirm their separate property interests. By contrast, if the agreement sought to allocate money yet to be earned in a way which was disproportionately in favour of the earner rather than the home-keeper, then, as the Supreme Court point out in paragraphs 80 and 81, it may well be easier to find that the agreement is unfair. 

    Paragraph 81 also confirms that no agreement can overreach basic need. If the agreement had the effect of leaving one partner in a predicament of real need, while the other enjoys a sufficiency or more, then such a result is likely to be unfair. However, the Supreme Court pointed out in paragraph 119 that a predicament of real need, at least on the facts of that case, was merely one that did not leave the claimant, Mr. Granatino, in a state of destitution. 

    So that deals with the circumstances which might inform the question of whether the agreement was fair or not. What then did the Supreme Court say about how to determine whether an agreement has been freely entered into with a full appreciation of its implications? In paragraph 69 it was stated that there is no rule at all that full disclosure, or full legal advice, is a necessary pre-condition for the satisfaction of this criterion. On the contrary, the question is in the individual case whether there has been a material lack of disclosure, or a material lack of information, or a material lack of legal advice. I venture the opinion that usually -- and that is in the usual run of cases and not a case when one is dealing with such a highly intelligent sophisticate as Mr. Granatino -- a full appreciation of the implications will normally carry with it a requirement of having at least enough legal advice to appreciate what one is giving up; but in this case the question of legal advice does not arise, because the legal advice here came from the most high quality sources. The question is whether the husband here gave sufficient disclosure, and it is important to understand that the disclosure in question, as the Supreme Court pointed out in paragraph 69, is that which is necessary to permit the party to reach a decision that is material. As the Supreme Court put it, "What is important is that each party should have all the information that is material to his or her decision". That does not require "full and frank disclosure" (as Mr. Marshall [for the wife] repeatedly put it); it requires only a sufficiency of disclosure to enable a free decision to be made." 

    It is fair to say Mostyn J was not convinced that W had made out her case of non-disclosure or that she had even begun to make it out. Moreover, he said:

    "… it must be the case, surely, that one would not need really very much disclosure in order to justify as fair the level of provision to be made in a prenuptial agreement in the event of the marriage ending within two years where all the assets in question can properly be characterised as non-matrimonial."

    As to the second attack on the agreement, the circumstances surrounding the signing of it, W, Mostyn J said, had been unable to elaborate further on the basis of her challenge.

    Mostyn J then turned to the substantive applications for interim maintenance and a costs allowance.  

    On interim maintenance – he said: 

    "In my judgment, when adjudicating a question of interim maintenance, where there has been a prenuptial agreement, the court should seek to apply the terms of the prenuptial agreement as closely and as practically as it can, unless the evidence of the wife in support of her application demonstrates, to a convincing standard, that she has a likely prospect of satisfying the court that this agreement should not be upheld. In the absence of any evidence of that nature from the wife, it is my judgment that it is appropriate for me to seek to apply the agreement to this case as closely as I can, provided that the wife is not left in any real predicament of need . . . "

    His conclusion therefore was that on the issue of the quantum of interim maintenance, W should be held to the terms of the agreement. W therefore received maintenance pending suit of £96,000 a year together with child maintenance at £24,000 a year for each child (NB: As the court does not have jurisdiction to order child periodical payments under s.23(1)(d) MCA 1973 as the wife's petition pleads that both parties are habitually resident here (see s.44(1) Child Support Act 1991), it will take into account the child's needs as part of the wife's maintenance pending suit. 

    However, against these payments, the court did give credit to H in relation to: 

    • the £4million property which was being occupied by W in country S which was £1million more valuable than that provided for in the prenuptial agreement. Thus, as the cost of the additional £1million mortgage to H was £2,300 a month, this would be credited against W's maintenance; 
    • half of the cost of service charges and bills referable to the above property (£675 a month) to reflect the fact that the property is jointly owned; and 
    • H's property in Y Street - if W wished to occupy it in the future, there would be a further credit of £2,750 a month to H being the net rental cost and service charge.

    In relation to the "astonishing" costs allowance, Mostyn J considered carefully the statutory provisions of s.22ZA. He summarised the principles to be applied and found that W had no entitlement to a costs allowance as:

    • under s.22ZA(4)(a), W had failed to satisfy the court that she was unable to secure a litigation loan. W had received offers from litigation loan suppliers (albeit at steep rates of interest); 
    • under s.22ZB(1)(c), the court considered the subject matter of the proceedings and found W's  financial claims (generally) to be "extremely speculative" and even "borderline irresponsible" in light of the prenuptial agreement; and 
    • there was no detailed schedule of legal costs.

    Remember that the "no order for costs" rule does not apply in interim financial matters – W was ordered to pay 75% of H's costs of both the maintenance and s.22ZA applications.

Case note, published: 11/03/2014

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See also

  • Here we have the court considering the effect of a pre-nuptial agreement on an application for maintenance pending suit, interim periodical payments for a child, and legal services provision (a s.22ZA Matrimonial Causes Act 1973 order). Judgment, 18/02/2014, free

Published: 11/03/2014

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