Weekly Family Law Update January 25, 2023

What is a post-nuptial agreement, and is it binding?

Couples who are about to marry quite often enter into an agreement setting out how their assets should be divided in the event of a separation or divorce. This is known as a ‘pre-nuptial’ agreement.

But sometimes such an agreement is entered into after the marriage. Unsurprisingly, this is known as a ‘post-nuptial’ agreement.

The circumstances in which a post-nuptial agreement are entered into are varied. It may, for example, be simply to confirm a pre-nuptial agreement, it may be that the couple are contemplating a separation, or it may be that the couple have already separated.

Whatever the circumstances, the rules relating to the agreement are the same. The court will not be bound by the agreement, but will normally uphold it if it was freely entered into by each party with a full appreciation of its implications, unless in the circumstances prevailing it would not be fair to do so.

A recent case neatly demonstrates the application of these rules.

Consent order

The case concerned a couple who married in 2004 and separated in 2008, when the wife left the former matrimonial home.

The wife then commenced judicial separation proceedings, and a financial settlement was agreed, with the assistance of solicitors.

The basis of the agreement was that the husband and wife were each entitled to half of the matrimonial home, which was the only asset. The equity in the home was then worth £60,000, and the agreement provided for the wife to raise a mortgage and buy the husband out, failing which the husband would keep the property, and pay the wife the sum of £30,000.

The agreement was approved by the court, and made into a consent order.

The order would have been given effect if the judicial separation proceedings had been finalised. However, the wife never applied for the proceedings to be finalised. Accordingly, the order did not take effect.

The agreement was never implemented.

The judicial separation proceedings were eventually dismissed in 2019, which had the effect of ‘morphing’ the agreement into a simple post-nuptial marital agreement.

A question of fairness

The husband issued divorce proceedings in 2019 and applied to the court for a financial settlement.

Both the husband and the wife accepted that the basis of the agreement was still valid, but they did not agree as to how it should be implemented,

The husband argued that he should pay the wife the original sum of £30,000, to which he was prepared to add another £10,000, to take into account inflation.

The wife, meanwhile, invited the court to implement the agreement so as to give her the opportunity to have the former matrimonial home transferred to her or, in the alternative, sold and the proceeds divided equally. With the property now estimated to be worth some £525,000, this would amount to an order in the region of about £250,000 – £300,000.

Applying the abovementioned rules, the judge decided that it would not be fair to hold the parties to the exact terms of the 2008 agreement, due to the passage of time and the change in the value of money.

The £30,000 figure mentioned in the agreement obviously did not take into account the increase in the value of money since then, and the husband’s offer of £10,000 was not enough to cover the increase either.

Instead, the judge preferred to look at what the £30,000 was as a percentage of the gross value in 2008. He calculated that it was some 10.71 percent. Applying that percentage to the current value of the property gave a figure of £56,227.

The judge then rounded up that figure to £60,000, which is what he ordered the husband to pay to the wife, in full and final settlement.

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