Postnuptials; the legal view
Caroline Hopkins, the ex-wife of property tycoon William Hopkins, received two small flats, an “old car” and a £200,000 share of Mr. Hopkins’ pension in their divorce settlement – despite William’s personal fortune totalling £38m.
The pair married in 2009, after eight years of cohabitation – however, a mere year after they wed, William began consulting with his lawyers about Caroline’s entitlements in a divorce. William suggested they enter into a postnuptial agreement. Caroline’s lawyer advised her she should not sign anything without full financial disclosure, and expressed fears that Caroline was being “bullied” by Mr Hopkins. Despite this guidance, Caroline wanted to remain on good terms with her husband for the sake of their son, and signed the agreement. The divorce was completed in August 2011.
16 months later Caroline sought to challenge the validity of the postnup in court, and receive a revised settlement of £2m – but, after a lengthy battle that came at a combined cost of over £760,000, the judge ruled in favour of her ex-husband. “I reject the wife’s case that she was operating under any undue influence, duress or improper pressure when she entered into the post-nuptial settlement,” said Nicholas Cusworth QC in his judgement. “She was certainly capable of independent thought, knew her own mind and was keenly aware of her own objectives.”
While postnuptial agreements can by definition be entered into at any stage of a marriage or civil partnership, Marilyn Stowe of Stowe Family Law believes that Caroline’s experience is a common one, and that postnups are often ‘late-stage’ additions to a union. “In some cases, a partner can make a postnuptial agreement a condition of reconciliation – ‘sign, and save our marriage’,” says Marilyn. “However, it may be a trap by one side to obtain a lower settlement – and the partner wishing to salvage the marriage could be influenced to accept far less than they would normally be entitled to.”
Marilyn notes that if there are inherited money or assets involved that need protecting, or a relationship is in a difficult spot “and would benefit from having where partner stands laid out, while problems are resolved,” a postnup could be both valuable and necessary. However, if your partner does propose signing a postnup, Marilyn urges “seeking independent legal advice, and ensuring there is full disclosure of assets and that your ‘reasonable needs’ are met within the agreement.”
If reasonable needs are not met, and/or there is any perceived pressure to sign, Marilyn advises against signing in the strongest terms. Likewise, Marilyn believes that if you are the poorer partner in a relationship, and the document does not ensure your reasonable needs are met, “any postnuptial agreement cannot possibly be to your advantage.”
The case would appear then to be a clear demonstration of the power of postnuptial agreements – in Marilyn’s words, a “classic example of how cruel postnups can be.”
A significant rise in the number of postnuptial agreements being sought by wedded couples has been recorded by law firms in recent years, meaning that many may now be worried they are now ensnared in an inequitable arrangement.
However, all is not necessarily lost. Postnuptial agreements, while evidently enforceable in courts, are not backed by legislation at present – and courts can use their discretionary powers. Marilyn highlights another recent case, Gray v Work, in which the High Court overturned a postnup that had been drawn up for tax purposes, and would have given the wife around 2 per cent of joint assets. “In this case, the Court took a number of factors into account, in particular her 20 years spent as wife and mother, and the lack of legal advice she had received before signing,” Marilyn concludes. “These things clearly can count for something, and have more weight than a postnup.”
In another high-profile case last month, the UK Supreme Court ruled that an ex-wife could claim a divorce settlement from her former husband despite the divorce dating back to 1992, and his fortune being made many years later. Click here to read the YourMoney.com analysis.