Gray -v- Work: Nuptial Agreements and Special Contributions
I read the judgment of an interesting case this week, the 2015 case of Gray -v- Work (Citation: EWHC 834 (FAM)) which discussed two areas of family law often in the media spotlight – nuptial agreements (pre-nuptial agreements and post-nuptial agreements) and arguments about special contributions during the marriage.
The background to the case is as follows:
- The parties married in their early/mid-twenties. They were both American and lived in California at the outset of the relationship (1992).
- Their income and capital positions at the point of marriage were modest.
- Following a job offer for the husband, the family moved from California to Texas where he worked for a private equity firm.
- The husband’s employer then offered him a role in Japan and the husband moved out in 1997 with his wife following him in 1998. Husband was very successful at establishing the practice in Japan.
- Their first child was born in January 2000.
- In October 2000 they signed a post-nuptial agreement in accordance with Texan law, notwithstanding that the parties were no longer resident there.
- Their second child was born in 2003.
- The family moved to Hong Kong in 2005.
- In 2007 they bought a property in London and the family moved to live in England in 2008, by which point the husband was no longer working.
- In 2013 wife commenced a relationship with her physiotherapist, and once this was discovered by husband, divorce proceedings were issued.
- The marriage lasted approximately 20 years in total duration, and the parties have two young children. Their financial position upon separation was significantly better than their position at the commencement of the relationship (with circa $300,000,000.00 of assets being considered).
In England and Wales, the law on nuptial agreements is well set out in case law and I do not want to go into details in this blog, save as to say that they are not considered automatically binding upon parties but instead are one of the factors the court will consider when determining a case.
In this case, the parties entered into a post-nuptial agreement in 2000 to formally separate their property. The purpose (so the wife argued) was to avoid any ‘community of property’ provisions in US law given that husband was planning to expatriate and the parties simply entered the agreement for tax planning purposes (their wealth at that point being in the region of $5,000,000.00). There were in fact two separate documents which formed their agreement, and divorce was addressed in only one of the documents although the court accepted that both agreements should be considered as a whole. The first agreement confirmed the intention to partition any properties which may be joint property, and to clarify ownership of separate property. This separation was said to apply to all future income or property accrued. The second agreement provided that wife would, in the event of divorce, get significant maintenance and in terms of capital, she would receive 50% of the first $10 million of husband’s net worth, and 40% of his remaining net worth. The agreement set out that wife would receive those sums in six instalments over five years, with no interest accruing. The husband on separation calculated the sum this would provide to the wife, and made an offer based on his calculations. However, a further clause set out that on divorce, wife did not have to accept the total capital sum offered in the agreements and was "free to seek from a court with jurisdiction over any divorce proceedings between the parties" financial provision from the husband in the usual way instead. The agreement provided that, if she took steps to pursue her claims through the court, the earlier calculated capital sum would be off the table (although the maintenance would remain).
The wording of the clauses was considered to be key, as it was argued on behalf of wife that the intention of this clause was to ensure that the wife was not bound to accept the offer made by husband and was free to take her matrimonial claims to the courts. Husband countered this argument, suggesting that whilst wife could apply to the court, she would not be able to recover from the court anything other than maintenance.
The court considered the arguments put forwards on both sides, and determined that, if the agreements were intended to achieve what the husband suggested, then the wife did not have a true understanding or appreciation of the agreement at the time it was signed, and should not therefore be held to it. In any event, the court was persuaded that the intention was not what the husband suggested, but was as the wife suggested. It was entered into for tax reasons primarily, and was constructed to allow the wife to pursue an application at court if she chose not to accept the offer put forward by the husband. Accordingly, the post-nuptial agreement was disregarded.
It is section 25(2)(f) of the Matrimonial Causes Act 1973 (MCA 1973) which requires the court to consider contributions which each party has made or is likely to make in the foreseeable future to the welfare of the family. Case law has demonstrated that if one party can satisfy the court that they made a "special contribution", then this could influence the final outcome in financial proceedings. There is however a high threshold when considering whether any contribution was a “special contribution” and it is only if the court is satisfied that the contribution was “special” that the court will allow it to the impact upon the outcome (usually, the impact being a departure from equality in favour of the party who made the special contribution).
This was a separate argument being run by the husband. He suggested that the creation of the family wealth was down to his endeavours alone, and that wife was not therefore entitled to share in the wealth equally. Whilst the court accepted that husband was hugely successful with his role and his efforts generated huge wealth, the court was not satisfied that this contribution to the welfare of the family was unmatched. Wife moved from the US to Japan to support husband and enable their family life to continue, and husband accepted that his success would have been significantly hindered had wife remained in the US and brought their children up in the US. Accordingly, husband’s contribution was not considered to be special.
This case is very fact specific but it does consider the issue of nuptial agreements and special contributions, which we regularly argue for, and defend, in the cases we have dealt with. If you are contemplating divorce and consider that your contribution to the marriage is “special” to the extent that you seek compensation for your efforts, please get in touch.
Also, if you have a pre or post-nuptial agreement in place that you seek to be either upheld or set aside in future divorce proceedings, again please get in touch and our specialist team of lawyers will be able to assist.
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