DB v PB: English divorce of Swedish nationals and the impact of prenuptial agreements

April 6, 2017

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In this blog, Ann Northover consultant at Family Law in Partnership examines the implications of the case of DB v PB [2016] EWHC 3431 (FAM).

Factual background

This was an English divorce of two Swedish nationals aged 49 and 50, who had cohabited since 1994, married in 2000, and resided in England since 2009. They have two minor children. There was a forum race to divorce in Sweden versus England, but the wife beat the husband and “got in” first in England (per the Brussels IIa regulation).

There were 3 prenuptial agreements, a Swedish one in July 2000, an American one in December 2000 and a further Swedish one on 26 December 2000.

All of the 3 prenups contained a prorogation clause stating Swedish law should apply on divorce and granting exclusive jurisdiction to the court in Stockholm on a divorce.

The wife asked that the prenups be ignored on the grounds of misrepresentation and unfairness and sought half of the family pot. The husband asked for the prenups to be respected and accordingly for the wife simply to have her half share in the family home.

The court found the agreements to be unfair, as they left the wife with around 5-6% of the family assets, and failed to meet her needs. A device was found by the Judge to provide some extra relief for the wife using the Children Act 1989 (“CA 1989”). However, the Wife’s claims for maintenance had to be dealt with in Sweden. Child maintenance could be dealt with here where, the children were residing.

  1. Could the court ignore the prenups?

The agreements could not be torn up, as no vitiating factors such as fraud, misrepresentation or undue influence were found.

  1. Role of the English court & relevance of fairness?

The court’s role is to allow parties to freely contract and to uphold those agreements where it would not be unfair to do so. Fairness differs in each case Radmacher v Granatino [2011] AC 534, and can mean the court sanctions an invasion of the husband’s separate property to achieve it.

  1. Limitations on English court: the agreements and EU Maintenance Regulation
  1. Per the agreements, the wife received her half share of the marital home worth approx. £560,000 after debts. But no more. Almost £11m was built up during marriage, but placed by the husband in his sole name maintaining the separate property agreement in the prenups. The Judge termed this “unacceptable fairness…Certainly it would put the wife and children in a predicament of real need.”
  2. But, an English judge could only seek to make the terms of the prenups fairer within limitations of EU law, given the prorogation clauses. Maintenance claims (i.e. lump sum and periodical payments) had to be heard in Sweden.

In the UK since 18 June 2011, the Maintenance Regulation (EC no. 4/2009), Article 4 allows written agreement on choice of court within the member states for issues of maintenance: “prorogation.”

  1. Residual powers of the English court

The Judge held property claims arising out of the matrimonial relationship and sharing can be dealt with here, (disagreeing with the husband’s Silk on sharing), however, “…unless those claims are negated by the terms of the pre-nuptial agreement itself..” In this case sharing was not permitted by the prenups.

Per CA 1989, the Judge ordered a housing fund of £2m (which has to be held on trust and revert to the payer) to last until the end of tertiary education, and index-linked child maintenance and carer’s allowance globally of £95,000 per annum.

  1. Conclusion

The approach adopted in this case, useful when approaching other similar complex cases, was:

  • Were the prenups void ab initio due to vitiating factors? No, then;
  • Was there an effective prorogation clause? Yes, Swedish jurisdiction, then;
  • The effect of such prorogation is to engage the Maintenance Regulation: all maintenance (lump sums and spousal maintenance) to be dealt with in Sweden, not here; then;
  1. What claims can England deal with? “rights in property arising out of a matrimonial relationship”, so;
  2. What residual claims can England address? There was debate on this. Francis, J concluded it included “sharing and real property claims” but, crucially, unless such claims are “negated by the terms of the pre-nuptial agreement itself..” [Here, the prenups negated a sharing claim.]
  3. What regard is to be had to the prenup? Per Radmacher, the court is to give effect to the prenup, unless it would be unfair to do so, and a prenup cannot be allowed to prejudice the reasonable requirements of any children of the family.
  • What is fair and unfair? It is case specific. If deemed unfair, (as here), does that mean the prenup should be disregarded? Francis, J, held no. He followed Radmacher where the agreement had also been unfair, but in respecting autonomy of parties to enter legal relations, extra provision was then added in by the court, simply to alleviate the unfairness. (He highlighted the difference between inherited wealth, as in Radmacher, and wealth generated during the relationship, as in this case.)
  • The court should alleviate unfairness but having regard to the terms of the prenup – and not seeking to restore the parties to the position they would have been in absent the agreement. (Here there was a separate property regime and all was in husband’s name save for family home, so the court could only meet the wife’s needs.) How generously needs are to be met is considered on a case by case basis, and by invading the husband’s separate property. (Needs include spousal maintenance, and the making of Duxbury lump sums, but that is for Sweden to deal with in this case).
  • Housing needs of wife and children? Where the European Maintenance Regulation is effective (as here) the needs cannot be met, and sharing is prevented per the prenup, so recourse can be had to the Children Act 1989, within divorce proceedings, to provide housing on trust, (and here, without contribution by the wife so she can invest her own share of the family home for when this trust property reverts to husband.) And, further a carer’s allowance under CA 1989, plus child maintenance.
  1. Comment
  1. “Fairness” is case specific
  2. Autonomy and the ability to enter binding legal relations (which may not meet reasonable needs) may come into conflict with the court’s desire to achieve “fairness” on divorce and so protect the weaker party. In this case the husband maintained he would not have married without a prenup being agreed.
  3. There is, of course, a unique power dynamic in any family law based legal contract, and it is often the woman who bears and raises children that later loses out on the wealth accrual and division. All too frequently, and despite legal advice, many parties in the weaker position are willing to sign such rights away in a prenup, such that even reasonable needs are not to be met. Should legislation provide for minimum provision?
  4. The effect of the EC Maintenance Regulation and Brussels IIa may be unhelpful and add to legal costs – as in this case.
  5. What about “compensation” – is that inside or outside a maintenance based claim?

As the judge refers, it is possible this case will return to court here for further hearings when the Swedish court has dealt with, or declined to deal with, the maintenance aspects of the divorce.

Ann Northover is a highly regarded family law specialist. Ann’s expertise in family law derives from over 20 years in practice, and she is known for her astute and incisive yet sensitive approach to resolving her client’s issues in the context of the needs of the wider family. The focus of Ann’s practice is on complex relationship issues, with particular emphasis on the finances and the wellbeing of and arrangements for any children affected. View Ann’s website profile here or contact Ann at E: an@flip.co.uk T: 020 7420 5000.