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£11m divorce battle brings jurisdictional stumbling blocks and unfair prenups to the fore

3rd February 2017

On 22 December 2016, sitting in the Royal Courts of Justice, the Honourable Mr Justice Francis handed down judgment in DB v PB , a multimillion pound divorce case between two Swedish nationals. The judgment grapples with the intricacies of EU law and serves as a stark reminder that prenuptial agreements are binding, and as such should not be entered into lightly.

The parties tied the knot in 2000 and subsequently had two children, now aged 12 and 8. From 1994, the year they commenced cohabitation, the husband enjoyed a successful career as a sportsman in the United Sates, though this was sadly cut short when he was involved in an accident which left him with "life-threatening injuries" in 2003. Following the accident, the parties moved to Belgium, before settling in England in 2009. Despite a "remarkable recovery", the husband was never to compete again and now sources his income from active management of his assets portfolio, in addition to working part-time for two sports-related businesses in an advisory capacity.

The relationship broke down in 2014 and both parties issued proceedings in February 2015; the husband petitioned in Sweden, the wife in England. The wife won this jurisdiction race and decree nisi was pronounced in England in October 2016.

The prenuptial agreements

In July 2000 the couple, then engaged, signed a Swedish prenuptial agreement at Niagara-on-the-Lake during a mini-break. The agreement contained two significant provisions:

"a) a prorogation clause conferring exclusive jurisdiction on the City of Court Stockholm, Sweden; and (b) a separate property clause whereby each of the parties to the marriage retained his and her respective separate property on divorce, the effect of which would mean that the wife was not entitled to any capital payment from the husband."

The parties subsequently signed two more "almost identical" prenups in December. First a United States prenuptial agreement was executed, followed by another Swedish agreement.

The wife asserts that the husband misrepresented the implications of agreements, allegedly telling her repeatedly that it was "just a piece of paper" and, if they ever divorced, the wife would "carry on financially just as before". Despite the wifes misgivings that the terms of the agreement "clearly did appear to operate against financial security", she claimed that, during the Niagara trip, her husband was "very insistent" that the agreement be signed the same weekend.

While the wife claims that her husbands desire for a prenuptial agreement came as a shock, the husband contests that he had always made it clear that he would not marry without this in place. According to him, the wife "knew, understood and agreed that they were entering into an arrangement whereby their respective property would be their separate property and that neither of them would have a claim against the other in the event of divorce."

Counsel for the wife submitted that none of the prenuptial agreements should be upheld on the grounds of misrepresentation and unfairness. Francis J did not accept the former ground, his doubts as to the representation of the agreements "resolved in favour of the husbands case by certain objectively verifiable factors", namely that the documents show that both the husband and the lawyer who drafted the second prenuptial agreement advised the wife to seek independent legal advice, which she did not pursue. The same lawyer also recorded a "reasonably long conversation with the wife", who raised no objections regarding her entering into a prenuptial agreement.

Furthermore, Francis J could not accept that the wife "on three separate occasions signed a prenuptial agreement imaging it to be irrelevant and assuming its provisions to be of no impact".

However, the judge did accept that the terms of the agreements were unfair and, "worse still, would adversely effect the best interests of the children". As the sole breadwinner, the majority of the $11 million matrimonial assets were held solely in the husbands name. The wife has 50% equity in the former matrimonial home, valued at £3.5 million. If the property was sold, she would be left with just over £500,000 compared to her husbands lions share of approximately £9.5 million, should the prenuptial agreements be upheld.

The landmark case of Radmacher v Granatino set a precedent for upholding prenuptial agreements unless they are found to be unfair. However, it should not automatically follow, Francis J states, that unfair prenups should be completely disregarded. Rather, the court has a duty "to step in and alleviate the unfairness". In the case at hand, where the parties have "agreed to a regime of separate property", this would mean invading the husbands assets in order to meet the wifes needs.

EU Maintenance Regulation and the prorogation clause

The prorogation clause in the parties prenuptial agreements dictates that "any dispute as to...property shall be settled in accordance with Swedish law before the City Court of Stockholm, Sweden." Francis J found the clause valid under Article 4 of the EU Maintenance Regulation, which allows the parties to choose their jurisdiction, except in child matters.

The Maintenance Regulation applies to "maintenance obligations arising from a family relationship, parentage, marriage or affinity". Therefore, although the judge in DB v PB found the agreements terms unfair, he was rendered unable to remedy this by way of a Duxbury award due to the prorogation clause. He acknowledged that he is bound to "stay the wifes maintenance claims to enable them to be determined in Sweden".

Francis J determined that the wife, "having lost her sharing claim by reason of the Pre-nuptial agreement cannot presently make a needs based claim by reason of the Maintenance Regulation as applied following the Prorogation Agreement".

He found his "power...circumscribed to addressing a right in property in the strict sense", and ordered a sale of the family home, with each party to receive 50% of the proceeds.

The Schedule 1 claim

Francis J found that the proceeds from the sale of the former matrimonial home should not be used satisfy the needs of the children. He therefore ordered the husband to make sum of £2m available for the purchase of a home for the mother and children, pursuant to Schedule 1 of the Children Act 1989.

The judge conceded that he could not make any further awards unless and until the Swedish courts had declined to resolve the matters. He forewarned of the "barrage of litigation" yet to come, and appealed accordingly to the husband:

"I urge him to see whether he would not, even at this late stage, wish to settle this case on terms that would now draw a line under this marriage and this familys battle, rather than prolong the familys agony for what, at the end of the day, is money that he can spare."

Conclusion

Although his powers were stymied by way of the prorogation clause, Francis Js judgment struck a delicate balance between stressing that unfair prenups will not be upheld by the English courts, while respecting the parties autonomous decision to enter into such an agreement. Unfairness should certainly be alleviated, but, if no vitiating factors such as misrepresentation are found, its presence does not necessitate the agreement being set aside altogether.

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