Wife’s Award Increased Due to Failure To Review Prenuptial Agreement

Understanding the Impact of Changed Circumstances on Prenuptial Agreements

Prenuptial agreements have become the norm where a husband or wife wish to ring-fence non-matrimonial assets or a future inheritance in the event of a future divorce. The Court typically uphold nuptial agreements if certain conditions are met, and the outcome is fair. However, in a recent decision the Court departed from the terms of a prenup because the wife’s circumstances had changed significantly since the agreement was signed.

Prenups are contractual agreements that set out how assets will be divided on divorce.

In this high value case of  AH v BH [2024] EWFC 125, a change in circumstances undermined the terms of the prenup, leading the court to award the wife considerably more than the agreement envisaged.

What happened in this case?

The parties married in April 2018, around 4 weeks after entering into a prenup which sought to ring-fence the husband’s business assets. Following the marriage the couple had two children (now 2 and 4). Following a stint in asset management before the relationship began, the wife changed direction and worked in the health and wellbeing sector until the birth of their first child. She had also sold her pre-marital property and contributed some of the proceeds towards the renovation of the family home which was in the husband’s sole name.

• Read our blog post: Breadwinner or homemaker in divorce. Does it matter?

The marriage broke down and they separated in September 2022. The total value of the marital assets was around £50m – the vast majority was in the husband’s sole name. Only £291,000 was held in the wife’s name. The wife did not seek to argue the prenup was not valid; she instead argued that its terms should be departed from as they did not meet her reasonable financial needs. If strictly adhered to, the prenup would have provided the wife with a lump sum of £818,025. At trial the husband additionally offered the wife a housing fund that would revert to him upon the completion of the children’s tertiary education, payment of school fees, and child maintenance.

Details of the prenup

The parties agreed that he prenup was valid:

• It was signed by each party with full knowledge of its meaning and consequences
• The parties had each taken independent legal advice
• There was no duress or coercion
• It included unchallenged financial disclosure
• Both parties believed it to be fair at the time of signing
• The wife knew it would heavily restrict any financial claims on divorce
• She understood and acknowledged that the husband wanted to protect his pre-matrimonial wealth, particularly his business interests

However, the prenup contained a Review Clause, providing for the agreement to be reviewed in the event of the birth of the first child.

No such review took place – and the wife contested the prenup, arguing that its terms should be departed from to the extent that her needs as the children’s mother and primary carer were not properly provided for.

Mr Justice Peel took a pragmatic approach, observing that the Review Clause in the prenup clearly indicated the parties contemplated that it might not be a fair document if they were to have children.

Wife had reduced earning capacity

Though the relationship had lasted less than six years, it had produced two children who were still very young and for whom Wife was the primary carer. She had a reduced earning capacity compared to the husband, and it would be very difficult for her to return to a corporate career. Giving evidence, the wife believed the husband was using the prenup to evade his responsibilities towards herself and the children, and she felt vulnerable and dependent on him.

Prenup unfair to children

It was the Judge’s view that if the husband’s proposals were accepted, the wife would struggle financially in the future. For example, if housing provision for the wife was to revert to the husband once the children had completed their schooling she would then have nowhere to live, and it would be unfair for the children to see their mother in heavily reduced financial circumstances while their father would be far wealthier.

Wife awarded just over £4m

The Court ordered that the former matrimonial home was to be sold and the wife would receive £2.75m (56.7% of the proceeds) to fund her own property plus SDLT. She also received capitalised periodical payments. In total, the wife was awarded just over £4m to meet her needs and those of the children. It is worth noting that the Judge made clear that the wife would have been entitled to a far greater award (as much as £7.5million or more) if there was no prenup.

This was an outcome that achieved fairness to the wife and the children, while giving appropriate weight to the prenup – and leaving the husband with “the vast preponderance” of his wealth.

How can we help?

It is vital to seek expert advice on your prenup agreement, including reviewing the terms if circumstances change significantly. The divorce and family lawyers at Osbornes Law are highly experienced in advising individuals on both prenup and postnuptial agreements.

The divorce specialists at Osbornes Law are experienced in advising HNW clients on prenuptial agreements and financial proceedings on divorce.

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