AH v BH [2024] EWFC 1257 June 2024

Published: 19/06/2024 21:35


Peel J final hearing judgment in high-net-worth FR case in which the parties had entered into a pre-nuptial agreement which purported to ‘severely limit W’s financial remedy claims in her own right and the financial needs of W and the children’.

The case concerned a pre-nuptial agreement entered into shortly before the marriage. The parties’ cohabitation and marriage lasted approximately 5½ years. It was the husband’s case (as the financially stronger party) that the wife should be held to the precise terms of the pre-nuptial agreement. The wife did not assert a vitiating factor such that the pre-nuptial agreement should be disregarded; however, she argued that the pre-nuptial agreement did not meet the children’s needs or her own needs.

The judge found there were assets of close to £50 million of which £291,000 was attributable to wife’s assets. It was of note that the wife had made significant contributions to assets held in the husband’s sole name and ringfenced by the PNA (including financial contributions which depleted her own asset base). During the course of the marriage, the wife’s circumstances had changed significantly: she had gone from living independently in a mortgage-free property with stable earnings to having limited assets of her own and a ‘heavily diminished’ earning capacity. The wife had been, and would continue to be, the primary carer for the parties’ young children (aged 4 and 2).

The husband’s open offer quantified the provision under the terms of the pre-nuptial agreement that the FMH be sold, and the proceeds divided so that the wife received 40% (c. £1.9m) which she could invest on a Schedule 1 basis (reverting to the husband following the children’s tertiary education). The husband would pay to the wife a lump sum of £818,025 in accordance with the calculation under the terms of the pre-nuptial agreement. He would pay child maintenance at £60,000 p.a. stepped down to £36,000 in February 2025 and then at the CMS level when the youngest child reached secondary education. In contrast the wife asked for the outright transfer to her of the FMH (valued at £5m) with the proceeds being divided 50/50 on sale once the children completed tertiary education. In addition, the husband would pay a lump sum of £1,867,522 as capitalised maintenance and child maintenance at £60,000 per year ongoing.

Housing needs

The judge noted that there has not been a reported pre-nuptial agreement case in which the primary carer of the children has not received an outright lump sum for housing (where they have no significant assets of their own). The judge found that it would be unfair for the housing provision for the wife to revert to the husband on a Schedule 1 basis, questioning how the wife’s housing needs would be met thereafter on the husband’s proposals. He noted the risk of the children (as adults) seeing their mother in very different financial circumstances to their father.

The judge found that the wife was over-housed in the family home and that it tied up a significant amount of the liquid capital available to the husband to meet wife’s award. The judge ordered that the family home was to be sold with the wife to receive 56.7% (c. £2.75m) outright plus a lump sum of £300,000 to meet SDLT and other costs (including refurbishment costs).

The judge did not provide for a charge over the wife’s new property in the husband’s favour on the basis that (a) the wife would not be significantly over-housed at £2.75m; (b) the wife should not be forced to sell in circumstances where the (adult) children may come to stay (and possibly their own children); (c) the wife would have the option to downsize if the capital provision proved insufficient (more below); (d) it would be unreasonable for the wife to have the anxiety of the possibility of a forced sale.

Income needs

The parties’ standard of living was in dispute. The wife produced analysis of bank statements and credit cards which the judge found was persuasive evidence of the parties’ expenditure and preferred to the budgets the parties had prepared. This analysis formed the basis of the judge’s determination in respect of capitalised maintenance together with a finding that the wife was likely to re-establish her earning capacity at £21,000 gross p.a. within five years (and that any earnings in the interim should be disregarded).

The judge awarded the wife a lump sum of £710,000 being a rounded capitalisation of £110,000 per annum over ten years to £910,000 with a deduction of £200,000 in respect of the wife’s own capital (as proposed by the wife). The judge noted that the ten-year term was perhaps ‘generous’ to the husband and had been counter-balanced by there being no step-down in the wife’s accommodation.

The judge ordered child maintenance of £20,000 per annum until completion of tertiary education (apportioning 1/3 to the wife and 2/3 to each child on the later of each child reaching 18/finishing secondary education). The husband was ordered to pay nursery and school fees (as agreed).

The husband was ordered to pay interim maintenance of £12,500 pcm for a period of three months and £5,000 pcm thereafter pending the sale of the family home.

Pre-nuptial agreement

The judge was not persuaded that Mostyn’s ‘book-end’ approach to needs was appropriate in every pre-nuptial agreement case and commented that the case law (noting in particular, Radmacher and Brack) has ‘emphasised the latitude and flexibility available to a judge to meet the demands of fairness in cases where a pre-nuptial agreement has been entered into by the parties’ noting that ‘each case is a highly fact specific evaluation and discretionary exercise’.

In this case, the judge noted that although the agreement ‘represents a constant influence on the case’ there was a ‘powerful counterweight’ in the wife’s role as primary carer of the children for the remainder of their minority.

The pre-nuptial agreement included a review clause which recorded that the agreement ‘shall be reviewed’ in the event of the birth of children. The parties had not reviewed the agreement. Although the failure to review the agreement did not prevent the court’s consideration of the overall fairness of the pre-nuptial agreement, the judge did determine that the clause ‘clearly indicates the parties contemplated that it might not be a fair document upon children being born’.

The award totalled £4,051,944, being approximately 8% of the assets. The judge noted that, absent the pre-nuptial agreement, the wife may have been entitled to as much as £7.5 million (or more) on a sharing basis. This was calculated on the basis that the value of the husband’s business had increased by €30m gross during the marriage, netting down to £15m of which wife would have had a 50% sharing claim. The judge further commented that the pre-nuptial agreement restricted the wife’s needs-based claim and that absent the agreement, her award would likely have included the retention of the family home and a longer term of maintenance.

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