In a case in the UK, a wife has had her post-nup agreement upheld in court despite the settlement being far less than what she could have sought without a pre-nup in her divorce battle with her multimillionaire ex-husband.
We set out below the facts, then look how this may highlight areas of concern in Australian pre-nups.
The UK couple had signed the “post-nup” agreement after a year of marriage, when the wife went to see a divorce lawyer to seek advice about her entitlements. Things were clearly becoming difficult in the marriage. The agreement entered into entitled the wife to two properties, a large lump sum and a 50% share of her husband’s pension. However, the wife later sought to set aside the agreement, claiming she had been forced to sign by ‘undue pressure’, and had been ‘bullied’ and otherwise exploited:
She said that when she had questioned the fairness of the agreement, (her ex-husband) had become ‘uncontrollably angry’, raising his fist and tightening her clothes around her neck. But (the ex-husband) denied there was any such incident, but accepted there may have been ‘some physical tension’ between them during an ‘extremely fraught’ time as their marriage broke down around the time the agreement was signed.
In the end, the High Court judge rejected the woman’s claim and cleared the husband of ‘badgering and harassing’ her. He said he preferred the husband’s evidence (code for “I don’t believe the wife is telling the truth”) – and added the wife had ‘sought to underplay’ the agreement and had ‘dramatised’ what happened.
Although the ex-husband had ‘confessed to bullying behaviour’ in some letters he wrote, the judge ruled:
‘I reject the wife’s case that she was operating under any undue influence, duress or improper pressure when she entered into the post-nuptial settlement. I do not find it to be a dishonest document. I find that it was entered into freely by the wife, and with full appreciation of its implications.’
It was noted that the ex-wife had received ‘copious volumes of legal advice’ before signing her name on the post-nup agreement.
The judge found the ex-husband had done nothing which undermined the wife’s ability to ‘form her own mind’ about the agreement and what it meant. The wife, at the time, ‘was rational, thoughtful, saddened by her situation, but certainly capable of independent thought…She knew her own mind and was keenly aware of her own objectives’, the judge said.
Further, in the post-nup the wife had never contended for more than a ‘needs-based award’ following her divorce, and the judge said that was what the post-nup provided her. He ruled it would simply be ‘unfair’ to the ex-husband if his ex-wife was not held to the terms of the post-nup.
The judge also mentioned the enormous expense of the case, with the couple running up astronomical legal bills in their fight over the post-nup, which in the ex-wife’s case would not even be covered by the settlement.
So what does this case highlight for Australians entering into ‘pre-nups’ (known as binding financial agreements) either before marriage, or even during marriage? Keep these important points in mind when entering into a binding financial agreement:
- You CAN enter into a ‘bad bargain’. A court won’t set aside an agreement if you change your mind. The reason you must receive independent legal advice (at often signficant cost) is because you may be entering into an agreement which is not advantageous to you. Your lawyers will advise you of the advantages and disadvantages of the agreement and of its effect (usually permanent and far-reaching) upon you.
- Duress is more than the usual negotiations before entering into an agreement. Negotiations can get robust, and sometimes people have different power positions in a relationship. This does not mean you are suffering duress. Duress means in a nutshell that you are so incapable of independent thought as a result of the other person’s conduct, that you are not really signing an agreement of your own volition. A victim of domestic violence, or a migrant who is at risk of deportation if she does not sign an agreement a few days before the wedding may be cases where duress causes the person to sign.
- Be careful your legal fees do not exceed the amount you are to receive under a binding financial agreement. Monitor your fees and ensure they are in proportion to the amount being argued over.
- Ask yourself whether you have any interest in signing an agreement. In Australia, the Family Law Courts have jurisdiction to decide a property split if you have been a de facto for two years (or had a baby, or put in a substantial amount of money into the property pool) and for all spouses after marriage. Would you be better off letting the court decide your entitlements? If so, there may be nothing in it for you to sign a pre-nup.
Please contact Alliance Family Law on (02) 6223 2400 should you wish to discuss binding financial agreements suitable to your situation.