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December 3, 2018

Challenging prenups: 7 common objections to prenuptial agreements

By Oliver Williams

Toby Yerburgh, partner and head of family law at Collyer Bristow asks if you can challenge prenups and, if so, on what basis?

You are lying on your sun lounger reaching for your first cocktail of the day when your beloved fiancé casually mentions that before you take your first sip it would be a good idea if you both signed that tiresome prenup that he had mentioned some time ago. Rather than spoil the moment you squiggle your signature and then forget all about it.

Fifteen years and two children later when the marriage ends in some acrimony you find that, as a result of that squiggle, far from sharing the fruits of the marriage, you are potentially left in something akin to penury compared to the lavish lifestyle you have enjoyed during the marriage.

Can you challenge the terms of the prenup and, if so, on what basis? This is similar to the position that Kelly Brack, whose case is currently with the Court of Appeal, claims to have found herself in when her marriage to the racing driver, Kenny Brack ended and Mr Justice Francis left her with only £500,000 out of her husband’s £10m+ fortune.

So what are the grounds on which a prenup can be challenged and what should someone wanting to rely on one do to try to ensure the challenge is not successful?

Prenups in England and Wales (the rules in Scotland are different) have no statutory recognition. However, since the 2010 case of Radmacher v Granatino they have had an imprimatur of approval by the Supreme Court who found that the terms of a prenup should be given compelling weight by the court unless it is unfair to do so.

Fairness is often thought to be in the eye of the beholder meaning that the opportunity for challenges to an English prenup are significant. Some of the most common grounds are as follows:

1. Lack of proper disclosure

Generally both parties need to disclose their income assets liabilities and other actual or prospective financial means. If the fact that you are the beneficiary of a trust is not disclosed or the fact you are likely to inherit significant assets is overlooked you can expect a challenge.

2. Lack of proper and independent legal advice

If you get your spouse to sign an agreement without the benefit of legal advice or the legal adviser is your mate then the validity will be undermined. Similarly, if your spouse takes advice on the agreement from a conveyancing lawyer rather than a specialist family lawyer you may well find that this is used to challenge the agreement.

A party to a prenup needs to be fully informed of what they are giving up. Accordingly they should have proper advice regarding what their position would have been on a future divorce if there was no prenup. The prenup should record that such advice has been given.

3. Duress

If your spouse to be is pregnant and penniless and you try to impose a prenup on them that gives them very little it may be claimed that the agreement should be set aside as a result of duress.

Similarly, a spouse who is presented with a prenup just before the wedding is likely to be able to show that they were railroaded into signing it and it will be given little weight. To be on the safe side, plenty of time (two months minimum) should be allowed to negotiate an agreement. Any attempt to impose harsh terms on a weaker party could backfire.

4. Not meeting reasonable needs of spouse or children

If the children’s needs, particularly for housing, are not met the agreement is likely to be ignored in that regard (though any provision for housing could be on trust). If the agreement leaves a spouse of a wealthy individual penniless then, again, it will be vulnerable to challenge.

For that reason agreements which simply say that each party should keep what they bring into the marriage with everything else created during the marriage to be divided equally may well be open to challenge where the marital assets turn out to be minimal and one party is left with very little while the other’s significant wealth is purportedly protected. It is for this reason that a bespoke prenup is more likely to carry weight than an “off the peg” one.

5. Failure to review

Prenups often contain review clauses that both parties forget to implement. That can be fatal to their effectiveness. Even if there is no review clause then arguably the prenup should be reviewed periodically and at the time of materially life-changing events such as the birth of children, receipt of an unexpected windfall or when the parties move country.

6. Contribution

If one party enhances the value of assets in a way that is not recognised by the agreement then this could undermine it. For example, if one spouse improved the value of the other spouse’s property by hard work or, say, a financial contribution and the other spouse sought to retain the benefit this might well be seen as unfair.

7. Compensation

Similarly, if a spouse gives up something for the relationship (e.g. a career to bring up the children) non-recognition of this under the agreement will undermine its weight.

Generally, to give an English prenup the best chance of success both parties should take independent specialist advice well ahead of the wedding and be prepared to negotiate its terms to ensure that they are not found to be unfair if challenged subsequently.

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