WC v HC 2022

THE APPLICATION

In this case Peel J (‘the judge’) dealt with the final hearing involving assets of c. £12m, a pre-marital agreement, post-marital agreement, and significant prospective inheritance.

INTRODUCTORY COMMENTS

At the beginning of judgment, the judge expressed that he felt obliged to comment on the parties’ preparation for trial. He made comments on 5 issues:

1. The parties’ s.25 statements had been ordered to be limited to 20 pages of narrative. W’s statement was in a smaller font and spacing than mandated in PD27A and therefore consisted of about 27 pages compressed into the 20-page limit. The judge described this as ‘completely unacceptable’ and stated that ‘Court Orders, Practice Directions and Statements of Efficient Conduct are there to be complied with, not ignored’. He asked why it was fair for one party to comply with the rules and the other party to ignore them.
2. By para 11 of the High Court Statement of Efficient Conduct of Financial Remedy Proceedings, s.25 statements must only contain evidence, and ‘no account should contain argument or other rhetoric’. The judge commented that W’s statement crossed the line and descended into personal and prejudicial matters. He stressed that it was high time that parties and their lawyers disabused themselves of the erroneous notion that to describe the other party in pejorative terms will assist their case.
3. Approximately 1 week before trial, W, in putting together the draft bundle index, included a 102-page section of narrative comments and fresh property particulars, to which H objected. The judge largely acceded to H’s objections on this.
4. After the parties exchanged and lodged skeleton arguments, H served updating disclosure, to which W objected. The judge therefore started the trial with competing composite schedules, which he described as ‘thoroughly dissatisfactory’.
5. The working day before the hearing, H served on W a financial analysis of matrimonial expenditure through the parties’ joint account in 2018 and 2019. The judge deprecated the practice of lawyers producing at the eleventh-hour spreadsheet analysis of expenditure during the marriage based on primary documents which had been in their possession for many months. He suggested that if an exercise such as this is to be relied upon, it must be provided well in advance of final hearing.

BACKGROUND

H (55) is a national of an unnamed country who grew up in Switzerland. H came from a very wealthy family who held a significant stake in a publicly quoted company, Company 2. W (52) is a UK national. The parties began cohabiting in 2002 or 2003, married in 2004 and separated in 2019.

The parties have two children who are based primarily with W, now aged 16 and 13. Both children required particular medical care and attention and attended independent day schools in London.

In August 2004, the parties entered into, and fully executed, a Pre-Marital Agreement, followed by a supplemental agreement concerning child maintenance in September 2004, and 2 Swiss agreements mirroring the Pre-Marital Agreement also in September 2004. Pursuant to the Pre-Marital Agreement, upon marriage H transferred his pre-owned property ‘X’ Street into joint names and transferred £1.3m of his own resources into a joint account. The Pre-Marital Agreement provided a sliding scale provision for W in the event of divorce up to 2014 but was silent thereafter. W alleged that she signed the Pre-Marital Agreement as a result of undue pressure.

The parties lived in London at ‘X’ Street property and enjoyed a very affluent standard of living, with the 2019 total family budget of £600k. H began working in the family business and the parties’ lifestyle was largely funded by the generosity of H’s very wealthy father. Over the past 3 years the parties received gifts totalling £1.17m. In 2010, the family moved to Switzerland. In 2017, the children were offered places at London schools and the intention was for W and the children to move to England.

In June 2017, H raised with W the idea of a Post-Marital Agreement. W’s opposition to the Post-Marital Agreement was clear from the outset. H told W that she could not go to London without signing the Post-Marital Agreement and in doing so, threw doubt into the children’s London schooling arrangements. In July 2017, W instructed solicitors and, despite her reservations, negotiations began.

The parties engaged in a first draft prepared by H at a without prejudice meeting in August 2017. During this period, W sent messages to a close friend describing the pressure she felt she was under. The judge was of the view that an agreement was then reached on 22 August 2017. Arrangements were then made for the document to be signed on 29 August 2017; in the event, W declined to do so. The terms of the Post-Marital Agreement provided W with about £7.1m plus child provision. It recorded the combined net assets as £12,574,292.

On 3 June 2014, H’s father settled a trust governed by Guernsey law. H’s father was the settlor and principal beneficiary and H was one of its discretionary beneficiaries. On or about 21 January 2019, before separation, H’s father transferred shares in Company 1 (which owns 30% of the shareholding of Company 2) into the trust. The value of the shares was c. €23m.

In January 2020, W’s petition was served. On 21 February 2020, the shares were transferred out of the trust and back to H’s father. The monies never became H’s and it appeared they were intended to pass down on death.

THE ASSETS

Based on a largely agreed schedule, the judge took the total assets as £12,479,304. H earned a modest income with a salary of €49,000 pa (net) and a dividend of €15,600 (net). W had no meaningful earning capacity.

Almost the entirety of wealth available to the parties originated from gifts and inheritances from H’s father and/or was owned by H prior to the marriage.

THE ISSUES

The main issues were:

1. The circumstances surrounding the Pre-Marital Agreement, and whether any weight should be attached to it.
2. The circumstances surrounding the unsigned Post-Marital Agreement, and whether any weight should be attached to it.
3. Whether H can anticipate a resumption of the inter vivos gifts previously received from his father.
4. Whether prospective inheritance from H’s father is a relevant factor.
5. W’s needs.

THE LAW

General principles

The judge highlighted the key points on the general law. He noted that in the vast majority of cases, the enquiry will begin and end with the parties’ needs and that the sharing principle is only engaged where there is a surplus of assets. He also noted the difficulty in a demarcation between marital and non-marital assets, citing Hart v Hart [2018] 1 FLR 1283. On standard of living, he referred to Miller; McFarlane [2006] 1 FLR 1186, and the setting of needs ‘as close as possible to the standard of living which they enjoyed during the marriage’, though acknowledging that standard of living is not an immutable guide, as shown in FF v KF [2017] EWHC 1093.

Pre-marital and post-marital agreements

The judge stated that he need not look beyond Radmacher v Granatino [2010] UKSC 42 for the essential propositions on agreements. The first question is whether any of the standard vitiating factors, duress, fraud or misrepresentation, is present. Any unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight attached to the agreement. The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement.

Inter vivos subvention

The judge referred to his judgment in M v M [2020] EWFC 41 on this matter.

Inheritance

The judge referred to the principles set out by King LJ in Alireza v Radwan [2108] 1 FLR 133 pertaining to inherited wealth, including where forced heirship provisions apply.

THE JUDGE’S FINDINGS

The pre-marital agreement

This Agreement was the product of months of discussions, with both parties having had the benefit of legal advice. It was dated 3 weeks before the marriage and signed by both parties. The judge was clear that the impetus behind the agreement came from H’s father and that had the parties not signed, the marriage would not have taken place. The agreement contained certificates signed by each party’s solicitor. W’s certificate stated that ‘[W] stated to me, and it appeared to me, that she entered into the said agreement willingly and without any pressure, duress, undue influence or deception on the part of any other person, including [H]’.

The judge appreciated that both parties were under pressure from H’s father but found that none of the vitiating factors set out in Radmacher applied. Whilst W and H were under pressure, W was not under undue pressure.

The judge indicated that the relevance of the Agreement was largely overtaken by subsequent events, but highlighted that it specifically referred to the past receipt of H’s family monies and anticipated dynastic assets which were intended to be excluded from the parties’ assets.

The post-marital agreement

The issues were:

1. Whether W was placed under undue pressure such that it should be disregarded.
2. Further, or alternatively, whether the fact that it was not signed by W dictates that it should be disregarded.

The judge found that although W was placed under pressure by H to sign, W was not placed under undue pressure, let alone duress, to sign. Both parties were under pressure for different reasons. The judge rejected that this was a long-standing pattern of controlling behaviour by H.

Article 1 of the Agreement provided that ‘This Agreement shall come into force on the date upon which the last of [H] and [W] signed the Agreement’ and the preamble contained the usual notice stating ‘Do not sign this agreement unless you intend to be bound by its terms’.

The judge referred to BN v MA [2014] EWHC 2450 and the principle of autonomy and importance of a party signing. The judge stressed that each case is fact specific, for example where parties do not sign but consider themselves bound and act accordingly. However, in this case, the judge found it to be unreasonable for an agreement to be formally binding upon W in the absence of her signature when the agreement expressly only took effect upon signing. Nonetheless, the judge was not willing to simply discard and ignore the agreement, and that it fell to be considered as one of the factors under the s.25 exercise.

Inter vivos subvention

The Judge was confident that the reversal of the funding €23m of dynastic money out of the trust was principally cause by the divorce proceedings brought by W.

A complicating factor alleged by H was that H’s father had formed a relationship with a woman 38 years younger, and that consequently H and his siblings were barely on speaking terms with their father. As a result of the disputes within the family, the judge did not find that in the foreseeable future that H’s father would be likely to resurrect the previous level of payments. The Judge was of the view that H’s father was a ‘safety net’ rather than in the foreground as a foreseeable ongoing resource.

Prospective inheritance

H’s father is 89 and in good health. H indicated in cross examination that his father was worth not less than €400m. In his Form E, H stated that he anticipated benefiting from his father’s estate or inter vivos gifts, in excess of €100m. There was discussion of forced heirship provisions in Switzerland (where H’s father resides) and if H’s father sought to move, but, in any event, the judge found that on balance it is more likely that at some point H will receive a significant inheritance.

However, the Judge also noted:

1. Such inheritance would be entirely non-matrimonial and received long after separation;
2. It was always understood by the parties that future inheritances be excluded from claims by the other; and
3. In terms of foreseeability of resource, it may be several years away.

OUTCOME

The judge principally determined the appropriate award on the assessment of W’s needs, also bearing in mind the length of the relationship, the primacy of the children’s needs, the available resources, the standard of living, the origins of the wealth, and the Post-Marital Agreement (given his findings on the matter).

The judge found W’s housing sum to be £3.5m, rounded to £4m to include purchase and renovation costs. He rejected W’s case that she reasonably required a second home in Switzerland, giving weight to the fact the children are based in London and that the Post-Marital Agreement did not include provision for a second home in Switzerland. On her income needs, W’s proposal sought c. £155,000pa on a Duxbury basis (£3.4m). The Post-Marital Agreement deemed an appropriate budget to be £110,000pa. The judge stated an appropriate sum was £150,000, capitalised at £3,319,000. The judge also took into account that H would be paying in the region of £174,000pa for the children, including child maintenance and school fees. The total figure for W and the children was therefore £324,000pa. The total needs were therefore £7,319,000, increased to £7.45m for unforeseen contingencies; this amounted to 60% of the total assets of £12.47m.

Mia Purdy, Pupil Barrister at 1 Hare Court