England and Wales High Court (Family Division) Decisions

IN THE HIGH COURT OF JUSTICE
FAMILY DIVISION

		Royal Courts of Justice
		10th December 2013

MR. JUSTICE MOSTYN:

1. This is an application for maintenance pending suit by a Wife mounted under s. 22 of the Matrimonial Causes Act 1973. In addition she seeks an order for interim periodical payments for the child of herself and the respondent, C, who was born in August 2005. That application is mounted under s. 23(1)(d) of the Matrimonial Causes Act and will only be a permissible application, given the terms of s. 44(1) of the Child Support Act 1981, if C or either of his parents is not habitually resident in this jurisdiction. In addition, she applies for an order for a costs allowance under s. 22ZA of the Matrimonial Causes Act 1973.
2. The facts of this case are unusual. The husband is 55 years old and was born in country P. The wife is 40 years old and was born in the Republic of Z. The parties met in 2001 and began a relationship in 2002. On any view, the relationship was then, and has always been, turbulent and it has, since its inception, been punctuated by separations brought about by ugly incidents in respect of which each party blames the other. However, in August 2005, as I have already mentioned, their son C was born, and he is eight years old and lives now with the wife as his primary carer in country S where he attends an international school.
3. Following the birth of C, again the relationship of the husband and the wife was on and off and up and down. Between 2006 and 2007 it is obvious they were not in full cohabitation but they were seeing each other periodically. They resumed a full, or fuller, relationship in 2007 and became engaged to be married in 2009. It was in that year that the wife in fact was studying abroad and obviously they were living in a relationship which was intermittent in terms of their common life together bearing in mind that the husband's work is in country P.
4. Following the engagement, a draft prenuptial agreement was produced by the husband's solicitors on 22^nd February 2010 and between then and May 2012 the agreement went back and forth, solicitors being involved. In the period immediately before 30^th May 2012 the agreement was, according to the husband, intensely negotiated, leading to the parties signing what is described as a "premarital agreement" on 30^th May 2012.
5. It is important that I identify some of the clauses in this agreement as I regard it as being highly influential in the determination of these interim applications which
   I have to decide today. On the very front of it there is headed in a large font -- I think it is probably an 18 point font -- "Importance Notice", and then it goes on to say,

"This agreement is intended to create legal contractual relations between MA and BN. It is intended to confirm their separate property interests and to be determinative of the division of their assets in the event of the breakdown of their marriage, annulment, judicial separation or divorce. [And then in upper case] DO NOT SIGN IT UNLESS YOU INTEND TO BE BOUND BY ITS TERMS. [Again in upper case] DO NOT SIGN IT UNLESS YOU HAVE INDEPENDENT LEGAL ADVICE WHICH YOU UNDERSTAND AND WITH WHICH YOU ARE SATISFIED".

6. The agreement itself runs to four pages of text and 34 clauses and there are appended to it two solicitor's certificates, which I will describe, and three appendices giving respectively disclosure of the assets and liabilities of the husband (that is Appendix A), the assets and income of the wife (Appendix B), and Appendix C, which is the provision to be made in the event of relationship breakdown, which I will describe a little later.
7. In clause 4 of the agreement it recites that the parties wished to enter into an agreement recording their wishes and intentions regarding their financial arrangements and in relation to financial provision for any children they may have. In clause 8 it recites that "the parties agree that the terms of the agreement reached between them contained herein shall be binding on them". In clause 10 it recites this,

"The parties acknowledge that this agreement constitutes the entire agreement between them and they have entered into this agreement without duress, undue influence or coercion of any kind, including the fact that they will be married very shortly and have not suffered from any inequality of bargaining power".

8. Clause 11 says,

"The parties have fully and frankly disclosed to each other their means and other relevant circumstances which are set out in Appendices A and B to this agreement. Each is satisfied with the disclosure of the other and has sufficient knowledge of the other's financial affairs to enable them to make this agreement. They acknowledge that there is a substantial disparity between their respective incomes and resources and that such disparity is likely to continue".

9. In clause 12 it says that the parties acknowledge that the terms of this agreement do not necessarily reflect the manner in which a court might resolve their financial claims against each other in the event that their marriage is dissolved. Then, by virtue of clause 21, it provides that the relationship breakdown will be defined as "divorce or annulment of the marriage, permanent separation or separation of the parties where one considers it to be permanent", and in that event, by virtue of clause 23, it states that in the event of this relationship breakdown,

"Neither party shall make any financial claim of any kind upon the other, nor upon the estate of the deceased [that is in the event of the marriage ending by virtue of death] save in accordance with the terms of this agreement, and the parties agree to incorporate the terms of this agreement, so far as may be relevant, into a consent order of the court".

10. At clause 24 it says,

"In the event of a separation, the husband will make the financial provision for the wife and any children of the family as set out in Appendix C to this agreement in full and final settlement of all claims which either the one may have against the other for capital or income or pension sharing arising out of the marriage whether under the provisions of the Matrimonial Causes Act 1973 or otherwise".

Then there is a proviso, which provides for a cap, which is that,

"The capital provision in all events is limited to 30 per cent of the total value of assets to which the husband is legally or beneficially entitled, including, by way of Trust interests, listed in the schedule to this agreement".

So it can be seen there that there is here clear reference to the husband having Trust interests, referred to on the face of the agreement.

11. I now turn to the solicitor's certificate of Sarah Whitten of Charles Russell, who was instructed on behalf of the wife. It says this,

"I am a duly qualified solicitor. Prior to the wife entering into the agreement between herself and the husband, to which this certificate is annexed, I have provided to the wife independent legal advice as to the following matters, (a) the effect of the agreement on her rights, (b) whether at the time my advice was given it was to her advantage, financially or otherwise, to enter into this agreement, and (c) whether at the time it was prudent for her to enter into the agreement, and (d) whether at that time, and in light of such circumstances which were reasonably foreseeable, the provisions of the agreement were fair and reasonable".

12. Appendix A sets out the assets of the husband. It sets out that he owns six properties, one in Z Street, London, a house in country E, a flat in country E, a house in country P, a flat in Y Street, London and a flat in , country S which was then described, the latter being a future sole property which the husband is under contract to purchase. He made it plain that in relation to the properties in London and the house in country E, that they were owned by YA Investments. He did not say by whom YA Investments was owned but it is reasonable to infer that they were part of a Trust arrangement having regard to the reference to Trust interests in clause 24 of the agreement.
13. It gave total net property assets of £13.08 million and in addition the husband disclosed that he had a share in the family business. He gave the estimated value of that as "unknown". He said that his business income, including bonus, was net £350,000 per annum. In addition he had rental income from his house in country P and flat in country E, around €40,000 per annum.
14. The wife gave details of her two flats that she owned in X Square, London, with values said to have been £250,000 each mortgaged 100 per cent at £250,000 in each case.
15. The provision provided for in Appendix C was different depending on the length of the relationship to its termination. If the relationship endured only less than two years then there was provision on a certain basis. The other three categories were two to nine years, ten to fifteen years, and fifteen years plus. For the less than two years category, which is the relevant one for my purposes, the husband agreed that he would procure the repayment, in other words the redemption, of the mortgages on the wife's two flats, and the extension of their leases to the maximum extent available in law. That redemption of the mortgages, it would seem, would cause the husband to have to find a capital payment of £528,000, and in addition, to extend the leases to the maximum extent available in law would probably be, according to Mr. Marshall QC, who represents the wife, another £250,000.
16. As to housing provision, the agreement was that there would be £2 million in Trust, but it was specified that that figure would be varied upwards in accordance with the national Halifax house price index from the date of the agreement, so as at today it probably would be a little more. Annual spousal payment was to be £96,000 index linked from the date of the agreement and for each child -- so that is C and any child later born, as the agreement expressly contemplated -- £24,000 annually.
17. I will come to the legal effect of this agreement in due course but I would say at this point that given the important notice in its prominent font at the beginning of the document stating that it is intended to confirm separate property interests and to be determinative of the division of their assets, it must be obvious that the principal object of the exercise in this case (as indeed in every case where a nuptial agreement is signed) is to avoid subsequent expensive and stressful litigation; and it is for this reason, as will be seen, that the law adopts a strict policy of requiring the demonstration of something unfair before it will open the Pandora's Box of litigation where there has been an agreement of this nature. I now revert back to the chronology.
18. The parties married very shortly after the agreement in country R in June 2012. In March 2013 the husband bought, in lieu of the property in country S, referred to in the agreement, an alternative property in country S. The reason he bought this alternative property is because the developer of the property did not complete the development in time; the contract that the husband had entered into was consensually cancelled and he decided to buy somewhere else. He purchased this property for 4 million and it is subject to a 3 million mortgage. Those figures correspond to £3 million and £2 million respectively. That was in March of this year and after he bought the property the wife and C lived there.
19. In May 2013 the wife became pregnant. There is no question but that the husband is the father of the child, and the child, a girl, is due to be born in February 2014, and it seems to be agreed between the parties that the birth will take place here in London.
20. The marriage came to an end in August 2013 in circumstances which are controversial. The wife says that the husband brutally assaulted her, and for that matter her parents, at the property in country E and that as a result the husband will face criminal proceedings in country E arising from that incident. The husband resolutely defends the allegation and says, on the contrary, the ugly incident was initiated and perpetrated by the wife on him.
21. Shortly after that event in August 2013, which marks the end of the marriage, the wife issued a divorce petition here in London on 12^th September 2013, in which she pleads that both she and the petitioner are habitually resident here, which, if correct, would likely deprive me of jurisdiction to make a direct order for periodical payments for C. Therefore my award will be only for interim spousal maintenance but will encompass the needs of both the wife and C.
22. Five days later, on 17^th September 2013, the wife issued a Form A seeking the full range of financial remedies. It would appear that that application was not served on the husband, looking at the correspondence in section D of the bundle. The letter written by Mr. Harper of Withers the day after the Form A was issued makes no mention of it, which is surprising. At all events, one has to ask on what possible basis the wife considered it appropriate to issue an application for the full range of financial remedies, she having signed the prenuptial agreement in the terms which I have mentioned but 15 months earlier. Certainly neither then, nor at any later stage, has the wife, in correspondence or indeed in an affidavit, articulated on what basis she can justify repudiation of the agreement.
23. I need not describe the subsequent events in the litigation other than to say that the wife applied for the relief which is before me on 12^th November 2013, that each party has made a witness statement in support, and in addition the respondent husband has obtained a witness statement in support from his first wife, CM. The witness statement by the wife, as I have just mentioned, does not explain at all how she justifies repudiation of the prenuptial agreement so recently entered into. Additionally, inasmuch as it seeks a costs allowance, her claim therefor could not be more laconic. It claims the astonishing figure of £400,000 as a costs allowance but gives no detailed particulars of that figure, almost uniquely, in my experience, for in every other case heard by me where a costs allowance has been sought I have always seen a detailed breakdown of the anticipated costs appended to the application. Here the application merely says that the wife expects to incur costs up to a directions hearing fixed for 20^th December of £50,000; a further £150,000 up to the FDR; and for a final hearing a further £200,000, without stooping to detail how many days in court this final hearing is expected to endure. The fact that the wife can advance a claim of £400,000 in order to litigate this issue demonstrates that it is her intention to attack on a wholesale and comprehensive basis the prenuptial agreement that she so recently entered into.
24. Regarding the question of the treatment of a nuptial agreement, there has been definitive guidance given by the Supreme Court in the well known case of Granatino v Radmacher [2011] 1 AC 534. I myself attempted to summarise the principles in my decisions of Kremen v Agrest No. 11 [2012] EWHC 45 (Fam) [2012] 2 FLR 414 and B v S [2012] EWHC 265 (Fam) [2012] 2 FLR 5012. In Granatino v Radmacher the Supreme Court analysed very closely the nature of nuptial agreements. They pointed out that nuptial agreements come in numerous shapes and forms and can be entered into at any point before, during or after a marriage. And so our case law has dealt with agreements which have been entered into before marriages, the classic prenuptial agreement, as is the case here; although usually they are longer lived than a mere 15 months, which is the case here. The cases have addressed postnuptial agreements or intranuptial agreements made while the parties are living together and are intending to live together -- that was the case in MacLeod v MacLeod [2010] 1 AC 298; separation agreements made after the marriage has broken down but before divorce proceedings have been launched but made in contemplation of such divorce proceedings -- that was the case in Edgar v Edgar [1980] 1 WLR 1410; agreements made that compromise a financial remedy claim made in divorce proceedings but which compromise has not yet received the approval of the court. That was the case in Xydhias v Xydhias [1999] 1 FLR 683.
25. The most important difference between these various types of agreement is the chronological point at which they are entered into. Obviously, in the general run of cases, a prenuptial agreement would be entered into a long time ago, whilst a Xydhias agreement will have been reached shortly before the hearing of the financial relief claim in question. The significance of the effluxion of time is, of course, as the Supreme Court explained in paragraph 65, that with the passage of time circumstances eventuate in a way in which the parties have not apprehended, and this is one of the principal reasons why the courts look most carefully at the fairness of justifying an old, in the sense of it happening a long time ago, prenuptial agreement. But in this case the prenuptial agreement was very recent, as I have said, a mere 15 months ago.
26. The Supreme Court has modified the test for the treatment of these nuptial agreements, as expressed in Edgar and Xydhias and, indeed, in MacLeod, so as to provide one single test applicable to all nuptial agreements, which is this, "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". That now is the test to be applied in every case where a nuptial agreement falls for consideration.
27. As I sought to explain in B v S, in considering questions of what circumstances are relevant in determining whether it would be fair to hold the parties to their agreement, one has to have regard to the following important factors. First, no agreement can ever be allowed to prejudice the reasonable requirements of a child. Second, and this is referred to in paragraph 78 of Granatino v Radmacher, is the important principle of autonomy, that respect should be accorded to the decision of a married couple as to the manner in which their financial affairs should be regulated, particularly where the agreement addresses existing circumstances and not merely the contingencies of an uncertain future.
28. The principle of autonomy is, in my view, extremely relevant. In many cases, and this case is an obvious one, the parties entering into the agreement are sophisticated, highly intelligent and have the benefit of the best legal advice that money can buy. Where in those circumstances they have thrashed out an agreement, which they have both then freely signed, in my view, heavy respect should be accorded to that decision. The question of autonomy is particularly relevant where the agreement seeks to protect premarital property. This is clear from paragraph 79 of Granatino v Radmacher, and in this case that is exactly what the agreement was intended to achieve. As it says on its first page, it is intended to confirm their separate property interests. By contrast, if the agreement sought to allocate money yet to be earned in a way which was disproportionately in favour of the earner rather than the home-keeper, then, as the Supreme Court point out in paragraphs 80 and 81, it may well be easier to find that the agreement is unfair.
29. Paragraph 81 also confirms that no agreement can overreach basic need. If the agreement had the effect of leaving one partner in a predicament of real need, while the other enjoys a sufficiency or more, then such a result is likely to be unfair. However, the Supreme Court pointed out in paragraph 119 that a predicament of real need, at least on the facts of that case, was merely one that did not leave the claimant, Mr. Granatino, in a state of destitution.
30. So that deals with the circumstances which might inform the question of whether the agreement was fair or not. What then did the Supreme Court say about how to determine whether an agreement has been freely entered into with a full appreciation of its implications? In paragraph 69 it was stated that there is no rule at all that full disclosure, or full legal advice, is a necessary pre-condition for the satisfaction of this criterion. On the contrary, the question is in the individual case whether there has been a material lack of disclosure, or a material lack of information, or a material lack of legal advice. I venture the opinion that usually -- and that is in the usual run of cases and not a case when one is dealing with such a highly intelligent sophisticate as Mr. Granatino -- a full appreciation of the implications will normally carry with it a requirement of having at least enough legal advice to appreciate what one is giving up; but in this case the question of legal advice does not arise, because the legal advice here came from the most high quality sources. The question is whether the husband here gave sufficient disclosure, and it is important to understand that the disclosure in question, as the Supreme Court pointed out in paragraph 69, is that which is necessary to permit the party to reach a decision that is material. As the Supreme Court put it, "What is important is that each party should have all the information that is material to his or her decision". That does not require "full and frank disclosure" (as Mr. Marshall repeatedly put it); it requires only a sufficiency of disclosure to enable a free decision to be made.
31. In this case what is surprising is that, having taken the opportunity to read the correspondence, which I did, and to read the wife's statement, which I did, there was nothing in either of them at all to explain to me what was her case as to why she should be allowed to discharge the burden stipulated by the Supreme Court as to why this agreement should not take effect. It was only on questioning Mr. Marshall that some light began to be shone on this. Mr. Marshall explained to me that the wife's case will be -- and it is perhaps a signification of one of the defects of our system that we do not have a system of pleading, so that until the husband heard it from Mr. Marshall's mouth, he actually had no idea at all what case he was facing in relation to the repudiation of the agreement -- that, first, the husband was guilty of material non-disclosure; and, second, that there were circumstances surrounding the signature of the agreement, particularly relating to the haste with which it was formed, which should lead the court to conclude, applying Lord Phillips' test, that it would be unfair to apply the agreement. In circumstances where the wife did not actually depose to anything in her affidavit, it was quite difficult to make sense of the way in which this case was being put.
32. Mr. Marshall made a valiant effort to try to persuade me that there were material inconsistencies between what the husband had disclosed as his resources in the prenuptial agreement and what he now said about them in his witness statement.
    I was not at all satisfied on the basis of this via voce presentation that such a case was made out, or even begun to be made out. Moreover, it must be the case, surely, that one would not need really very much disclosure in order to justify as fair the level of provision to be made in a prenuptial agreement in the event of the marriage ending within two years where all the assets in question can properly be characterised as non-matrimonial. As to the second limb, which is the attack based on circumstances prevailing at the time of signature, Mr. Marshall was not able to give me any information at all and the wife's affidavit is totally silent on it.
33. In my judgment, when adjudicating a question of interim maintenance, where there has been a prenuptial agreement, the court should seek to apply the terms of the prenuptial agreement as closely and as practically as it can, unless the evidence of the wife in support of her application demonstrates, to a convincing standard, that she has a likely prospect of satisfying the court that this agreement should not be upheld. In the absence of any evidence of that nature from the wife, it is my judgment that it is appropriate for me to seek to apply the agreement to this case as closely as I can, provided that the wife is not left in any real predicament of need. In these circumstances, I am satisfied that the proposal advanced by Mr. Molyneux in paragraph 8 of his skeleton argument is reasonable and should be adopted. The fact that the parties may have agreed further things is no concern of mine. If the parties wish to make a voluntary agreement in relation to further aspects, that is a matter for them, but it is not something I am going to impose on the husband. It will be a matter for him.
34. Therefore, in my judgment, the appropriate award is as Mr. Molyneux has set out, which is that the periodical payments for the wife and C should be as stipulated in the agreement and should rise with the birth of the baby girl in February by a further £24,000 per annum, but against that sum credit should be given, first in relation to the value of the occupation by the wife of the £3 million property in country S, which is £1 million more than the prenuptial agreement provides. That cost to the husband Mr. Molyneux calculates at £2,300 per month, which is in effect the cost of the additional mortgage of £1 million that was taken out. Put another way, if this property had cost £2 million and they had a £1 million mortgage, the husband would be saving £2,300 per month in mortgage repayments. Secondly, £675 a month will be credited, being half of the service charges and bills referable to the fact that this property is jointly owned. Thirdly, that if the wife wishes to occupy the husband's property in Y Street, there should be a credit of £2,750 per month, being as calculated by Mr. Molyneux the net rental cost and service charge. On the other hand, if she chooses not to occupy Y Street, then that credit would not be given. The husband has agreed to pay the medical bills in relation to the pregnancy and in addition C's school fees, and the latter is provided for by the agreement.
35. So that will be the award for maintenance pending suit. I will hear counsel about from when it should take effect.
36. I now turn to the question of the costs allowance. The statutory provision, in my judgment, does no more than to codify the principles to be collected in this regard in the authorities, most recently in Currey v Currey [2007] 1 FLR 946. Under s. 22ZA(3) the court cannot make a costs allowance unless it is satisfied that without the amount of the allowance, the applicant would not reasonably be able to obtain appropriate legal services for the purposes of the proceedings or any part of the proceedings, and for the purposes of this provision the court must be satisfied in particular that the applicant is not reasonably able to secure a loan to pay for the services (see s. 22ZA(4)(b)).
37. In considering the more general matters, Parliament requires me under s. 22ZB(1)(c) to have regard to the subject matter of the proceedings, including the matters in issue in them. That reflects paragraph 21 of Currey, where Lord Justice Wilson (as he then was) said the subject matter of the proceedings will surely always be relevant. In this case, the wife has received offers from litigation loan suppliers at, it must be said, a fairly steep rate of interest, to borrow from one £400,000, and from another, £250,000, although in each instance the interest may be rolled up. The husband accepts, through Mr. Molyneux, that if the wife's claim is found to have merit, and the wife has as a result incurred unnecessary interest on these litigation loans, then the husband will have to discharge that interest. I mention that in order, really, to do no more than state the obvious. But in such circumstances where these loans are available, and where the interest can be rolled up, the wife does not satisfy the first criterion as specified in s. 22ZA(4)(a). I take the view that she can reasonably secure a loan to pay for the services.
38. Quite apart from that, and looking at the matter more broadly, as I do, under s. 22ZB, I would have been reluctant to have made any award in this regard in the absence of a detailed schedule of the costs. The breakdown in paragraphs 48 and 49 of the wife's affidavit are manifestly, and I will go so far as to say completely, insufficient for an award to be made on this footing. But perhaps more importantly still, having regard to the subject matter of the proceedings, I do take the view that the wife's claim here is extremely speculative. In argument I described it as being borderline irresponsible, and I do not resile from that view. Having regard to the speculative nature of the claim, and my preliminary view at this stage that the prospects of success are questionable, I would not have made, under this head either, any award for a costs allowance.

[LATER]

39. The wife has no defence to an application for costs in relation to the s. 22ZA application. That was mounted, it has been dismissed and the husband is plainly entitled to his costs.
40. As to the general maintenance pending suit, the husband has been successful but it was not until comparatively late in the day that he made his position unambiguously clear, so I think that the correct order overall, lumping the two limbs together, is that the husband shall have 75 per cent of his costs, to be assessed on the standard basis, if not agreed and not to be enforced until the conclusion of the proceedings.