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Case summary: Ipekçi v McConnell [2019] EWFC 19

1st July 2019

Florence Jones, Pupil, 1 Hare Court

This case concerned a financial remedy application made by a husband, Anil Ipekçi a hotel concierge, against his wife, Morgan McConnell the great-granddaughter of the founder of Avon Products, Inc. The Judge, Mr Justice Mostyn, had to determine two issues. First: was there capital available to the wife from the family trusts? Second: was the pre-nuptial agreement valid? The Judge found that the money was available to the wife and that the agreement was invalid. He awarded the husband £1,333,500 to meet his needs.

The parties began cohabiting and married in 2005. Shortly before the marriage, the parties signed a pre-nuptial agreement which was designed to protect the wife’s assets. The parties went on to have two children together but separated in 2017, after twelve years. At the time of separation, the wife had substantial assets which were held in family trusts. The husband had virtually no assets.

The wife’s trust interests
The wife was a beneficiary of several family trusts. These trusts produced an income which she and other family members received. However, the Judge needed to determine whether the trusts merely provided her with an income, or whether the capital in any of these trusts could be used by the wife to meet the husband’s claim. The wife’s position was that it could not be.

The Judge found that the wife was “solely and beneficially entitled” [8] to the assets of one of the trusts, “The Neil McConnell 1964 Trust for Morgan A McConnell” (the Trust), worth $4.45 million at the time of separation. Crucially, he found that the trustees would make the funds available to the wife to satisfy a judgment made against her by the court. In summary, although assets were in the trust, they were the wife’s to give to the husband if the court ordered her to do so.

The Judge made this finding despite two letters from one of the trustees. The letters stated that the wife was not the only beneficiary of the trust and was entitled to income, not capital. The Judge had both a procedural and a substantive problem in accepting this evidence. First, the wife produced the letters at the final hearing rather than applying to admit the letters as expert evidence under Family Procedure Rules Part 25. As a result, the husband was unable to cross-examine the trustee about the letter or produce his own evidence in response. The Judge’s second, and principal, reason for not accepting the assertion that the wife was merely an income beneficiary was that he found it “totally untenable” [11] in the light of other evidence.

The validity of the pre-nuptial agreement
Having established that the funds were available to the wife to meet the husband’s claim, the Judge then turned to the validity of the pre-nuptial agreement signed in 2005.

The agreement was governed by New York state law. It was clear that its meaning was to be interpreted under New York law– as opposed to, for example, English law – and that any proceedings should be also be decided under New York law. The effect of the pre-nuptial agreement was that it limited the husband's claim to the increase in the value of three of the wife’s properties. At the time of divorce, it was impossible to identify an increase in value. Therefore, under the terms of the pre-nuptial agreement, the husband would have received nothing.

In deciding whether or not to give effect to the pre-nuptial agreement, the Judge reviewed Radmacher v Granatino [2010] UKSC 42. He noted that despite the importance of holding parties to their intentions when signing agreements, those intentions would be unlikely to leave one party in a predicament of real need.

The Judge held that in this case, it would be wholly unfair to hold the husband to the pre-nuptial agreement. Therefore, he attributed no weight to it.

First, and most importantly, he found there was a fatal defect in the construction of the pre-nuptial agreement: it was not accompanied by an authenticated certificate stating that it conformed with local law. The Judge accepted the evidence of the single joint expert that without this certificate, under New York law, the agreement would have “minimal weight, if any” [27]. He, therefore, concluded: “the parties have made their bed in New York they must lie in it” [27].

Second, the Judge found the husband did not have a full understanding of the implications of the pre-nuptial agreement when he signed it. Although the husband did receive legal advice, there were two problems with how this advice affected the husband’s understanding. First, the solicitor was an English law solicitor. Consequently, the husband was not advised on the enforceability of the agreement under New York law. Second, as the solicitor had acted for the wife in her first divorce, the advice was biased.

Finally, the Judge found that the pre-nuptial agreement would have left the husband in a predicament of real need, in that he could not meet his needs from his own resources. The Judge noted, however, that in cases with a valid pre-nuptial agreement a party’s needs would be lower.

The award
As the assets were pre-marital, owned by the wife before the marriage rather than built up during the marriage, the Judge calculated the award on the basis of the husband’s needs alone made a lifetime award of £1,333,500.

In assessing this figure, the Judge considered: the husband’s lack of savings or pension (he had always relied on the security of the wife’s wealth); the importance of the children having a comfortable home with both parents and not viewing their father as the poor relation; and the relatively high standard of living during the marriage. This was balanced against the reality that the husband would have no financial responsibility for the children in the future. The Judge noted that half of the sum given to the husband to buy a house could be returned to the wife, or her estate, on his death by way of a charge-back. Therefore, the wife, or her estate, would not be deprived permanently of this money.

The £1,333,500 award included a housing fund for the husband of £750,000 – with a £375,000 charge-back to the wife - and £132,000 to clear his debts. The Judge concluded that the husband needed £50,000 a year to live and, taking into account his yearly salary of £35,000, he calculated that £445,500 would make up the difference over the husband’s lifetime.

The Judge noted that this would leave the wife with $2.75 million in the Trust, in addition to the former matrimonial home and all her other trust interests.

Read the full judgment on BAILII here.