Law Articles

Prenuptial Agreements – can they be watertight? 28/06/2024

In the landscape of family law, prenuptial agreements (PNAs) have long been a subject of considerable debate and evolving jurisprudence. These agreements, which couples enter before marriage/civil partnership, outline the distribution of assets and financial responsibilities in the event of divorce/dissolution. While prenuptial agreements can provide clarity and predictability, they are not without controversy, particularly when it comes to fairness and the protection of the financially weaker party and children. The case of AH v BH [2024] EWFC 125 serves as a pivotal example of how courts balance the enforcement of prenuptial agreements with the overarching principle of fairness.

Background of AH v BH

The AH v BH case involved a high-net-worth couple who married in April 2018 after signing a prenuptial agreement. The husband had significant pre-marital wealth, whereas the wife had fewer assets, including a mortgage-free flat she sold to fund renovations on the matrimonial home. The couple had two young children, aged 4 and 2, with the wife being the primary carer. The husband's assets, amounting to about £50 million, were predominantly in his name.

The couple's marriage lasted approximately five and a half years. The husband purchased a new property without informing the wife, highlighting a significant breakdown in communication and trust. The total assets were around £50 million, almost all held in the husband's name.

The Court’s Approach

The court's decision was guided by several legal precedents and statutes, including:

• Matrimonial Causes Act 1973, s25: This statute outlines the factors the court must consider in financial remedy cases, including the welfare of any minor children, the income and earning capacity of each party, their respective needs and resources, etc.
• Radmacher v Granatino [2010] UKSC 42: This landmark case established that prenuptial agreements should be given weight, provided they are freely entered into with a full appreciation of their implications, unless it would be unfair to hold the parties to their agreement.
• Brack v Brack [2018] EWCA Civ 2862: This case further emphasised the importance of fairness and the court's discretion in evaluating prenuptial agreements.

In AH v BH, the husband argued that the wife should be held to the terms of the prenuptial agreement, which purported to severely limit her financial remedy claims and those for the children. The wife, however, contended that the agreement did not meet her or the children's needs, which had significantly changed since its inception.

The court acknowledged that, while prenuptial agreements should generally be given weight, the needs of the financially weaker spouse and children are paramount. The wife's circumstances had drastically changed, particularly with the birth of the children and her role as their primary carer. Her housing and income needs were found to exceed what was stipulated in the agreement.

The judge noted that there has not been a reported prenuptial agreement case in which the primary carer of the children has not received an outright lump sum for housing when they have no significant assets of their own. It would be unfair for the housing provision for the wife to revert to the husband on a Schedule 1 basis (Schedule 1 of the Children Act 1989) which could result in her having inadequate housing after the children's tertiary education. The risk of the children seeing their mother in significantly different financial circumstances from their father was also a concern.

The court ordered that the family home be sold, with the wife receiving 56.7% of the proceeds, equating to approximately £2.75 million. This decision exceeded the provisions of the prenuptial agreement but was deemed necessary to meet the wife's housing needs. Additionally, the husband was ordered to pay a lump sum for stamp duty and refurbishment costs.

The determination of income needs was based on an analysis of the parties' standard of living during the marriage. The wife's evidence from bank statements and credit cards provided a persuasive picture of the couple's expenditure. The court awarded the wife a lump sum of £710,000 as capitalised maintenance, reflecting £110,000 per annum over ten years, with a deduction for her own capital.

Child maintenance was set at £20,000 per annum until the children completed tertiary education, with the husband also responsible for nursery and school fees. Interim maintenance was ordered at £12,500 per month for three months, reducing to £5,000 per month pending the sale of the family home.

The court's decision in AH v BH reflects a nuanced approach to prenuptial agreements. While the agreement was respected to a degree, the court prioritised the needs of the wife and children. The wife was awarded a substantial portion of the family home's proceeds of sale and additional financial support to ensure her, and the children's, housing and income needs were met. The husband's business interests were still protected, but the agreement's terms were adjusted to reflect the changed circumstances and ensure fairness.

Implications for Future Cases

This case underscores the importance of flexibility and judicial discretion in family law, particularly concerning prenuptial agreements. It demonstrates that, while such agreements are significant, they are not absolute and must be balanced against the needs of the financially weaker spouse and children. The case also highlights the importance of reviewing, and potentially updating, prenuptial agreements to reflect changes in circumstances, such as the birth of children, a redundancy, an illness, etc.

The AH v BH case serves as a critical example of how courts can navigate the complexities of prenuptial agreements, ensuring that they are enforced in a manner that is fair and just for all parties involved. The case also reinforces the principle that the welfare of children and the reasonable needs of both parties must always be at the forefront of judicial decision-making in family law.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.