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High Court Tears Up Unfair Pre-Nuptial Agreement in Big Money Divorce

Pre-nuptial agreements are a useful and entirely legitimate means of dealing with situations where one prospective spouse is much richer than the other, whether as a result of inherited wealth or otherwise. However, as a High Court case showed, if such agreements lead to unfair results, or are entered into without independent legal advice, they are likely not to be worth the paper they are written on.

The case concerned an American heiress who married, and had two children with, a hotel concierge. She was a beneficiary of family trust funds with an overall value of at least $65 million. By contrast, he earned £35,000 a year, including tips. His sole capital asset, a half-share in his mother’s home, was worth about £50,000. However, debts of double that meant that he had a negative net worth.

Prior to the marriage, the husband had signed a pre-nuptial agreement which was heavily slanted in the wife’s favour. Although it entitled him to a share in increases in value of certain properties owned by the wife, there had been no such increases. If enforced, therefore, the agreement meant that he would receive not a penny of the wife’s fortune if their marriage ended in divorce, which it did.

In ruling the agreement unenforceable, the Court noted that the husband must have been very surprised by its contents. Although it purported to be made under the laws of the State of New York, the husband had been advised by an English lawyer with no expertise in those laws. The lawyer also obviously lacked independence in that he had previously advised the wife in her divorce from her first husband.

The agreement made no provision at all for the husband’s needs and also suffered from a fatal defect in that it was not accompanied by a duly authenticated certificate that it conformed to the laws of New York. In those circumstances, it would have attracted minimal weight even had the wife sought to enforce it in a New York court.

As the wife’s wealth was almost entirely inherited, the Court noted that the husband’s entitlements stood to be assessed on the basis of his reasonable needs, rather than the sharing principle. Those needs included a three-bedroom home of his own, close to his children, and an income sufficient to avoid an unhappy and divisive disparity between his standard of living and that of the wife. The husband’s capitalised award came to £1,333,500.



 
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