Family Court Weighs Impact of Pre-Nup Agreement and Asset Transfers on Financial Relief Claim

Citation: [2023] EWFC 229
Judgment on

Introduction

In the recent judgment of the Family Court in the case of BL v OR [2023] EWFC 229, key legal principles relating to financial remedy orders, pre-nuptial agreements (PNAs), and the treatment of ‘non-matrimonial property’ were exhaustively discussed. The case exemplified the court’s approach to those instances where PNAs inform the judgment and where one party’s disposal of matrimonial assets could influence their claim for financial relief. This article provides a structured analysis of the said case, laying out in detail the considerations and applications of the law as articulated by SIR JONATHAN COHEN.

Key Facts

The dispute arises upon the dissolution of the marriage between the wife (W) and the husband (H), both with grown-up children from previous marriages. at the time of their marriage in 2012, W was 52 and H was 56. The couple entered into a PNA aimed to protect H’s already accumulated wealth across various assets totaling £48m, according to the summary provided. W’s primary asset, a St John’s Wood flat worth £1.36m, was gifted to her daughters during the marriage. This act, alongside the non-enforcement of a costs order against her former husband, significantly reduced W’s financial standing, becoming a pivotal aspect of the legal debate.

The court was tasked with evaluating adherence to pre-marital agreements and the concept of ‘needs’ as it corresponds to fairness within financial remedy orders. The overarching guidance comes from the Supreme Court decision in Granatino v Radmacher [2010], which established the principles of individual autonomy while giving effect to nuptial agreements, unless it results in an outcome that is unfair considering the circumstances prevailing. A distinction is stressed between matrimonial property and ‘Separate Property’, where an agreement made prior to marriage, concerning assets already owned, is often considered fair and just.

The court grappled with whether W’s decision to transfer her primary asset to her daughters without informing H was conduct to be taken into account when determining W’s needs. The pertinent consideration was whether it should affect the assessment of her housing and income needs in the proceedings. The pivotal question was whether W’s actions diminished her claim to fairness regarding H’s wealth, especially given the PNA’s existence.

Peel J in HD v WB [2023] EWFC 2, as well as the judgment in Brack v Brack [2018] EWCA Civ 2862 by King LJ, were cited. Both highlighted that while needs-based outcomes are usual where an effective PNA is in place, the court maintains discretion guided by Section 25(2) of the Matrimonial Causes Act 1973 to ensure the outcome is fair in the individual case, permitting latitude in assessing the extent of one’s ‘needs’.

Outcomes

The court determined that W’s decision to transfer her flat to her daughters was a material factor to consider, thereby rejecting the argument that failing to plead as conduct or ‘wanton dissipation’ would render it irrelevant. The judgment flowed from an adoption of a balance between the expressed intent of a PNA and the autonomous actions taken by W that impacted her financial state. The court ordered a housing fund for W up to £2.6m, with a 40% interest in the property retained by H, to ensure that the property cannot simply pass to W’s descendants upon her death. Additionally, an income fund was established, capitalizing an annual need of £140k, counterbalanced against her own assets, resulting in a payment requirement of £2.269m from H to W.

Conclusion

The Family Court’s judgment in BL v OR sheds light on the nuanced application of legal principles concerning financial remedy orders under the shadows of a PNA. The balance struck by SIR JONATHAN COHEN, while unique to the circumstances of this case, reaffirms the discretion afforded to courts in assessing fairness within the overarching realm of matrimonial law in the UK. It also emphasizes the respect given to the contractual agreements entered into by autonomous individuals, albeit mitigated by the court’s consideration of fairness when determining each party’s needs in light of their actions during the marriage.

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