Prenuptial agreements have become increasingly popular among couples planning to marry, particularly where there is a disparity of wealth, inherited assets, or business interests to protect. This trend was encouraged by the Supreme Court’s landmark decision in Radmacher v Granatino [2010] UKSC 42, which confirmed that such agreements can carry substantial weight.
Despite their growing recognition over the past 15 years, prenuptial agreements are not automatically legally binding in England and Wales. The courts will generally uphold them only where they are entered into freely, with full appreciation of their implications, and where it is fair to do so in the circumstances.
A central requirement in this assessment is disclosure in prenups, which underpins both fairness and informed consent.
Helliwell v Entwistle is an important recent case that serves as a strong reminder of the importance of full and frank financial disclosure when entering into a prenuptial agreement.
Facts of the Case
The parties entered into a prenuptial agreement shortly before their marriage. The agreement provided for a so-called “drop-hands” outcome, whereby each party would retain their own assets and waive any claims against the other’s property on divorce.
The agreement expressly recorded that both parties had provided full and frank disclosure of their respective financial positions, as is standard practice in nuptial agreements.
However, during subsequent divorce proceedings, it emerged that the wife had failed to disclose a significant proportion of her wealth at the time the agreement was signed, amounting to approximately 73% of her total assets. These undisclosed assets included substantial business and property interests.
The husband sought to challenge the prenuptial agreement on the basis of this non-disclosure, arguing that it should not be upheld. The High Court rejected his arguments and upheld the agreement. The husband appealed to the Court of Appeal.
Judgment
The Court of Appeal allowed the husband’s appeal and set aside the prenuptial agreement, holding that it had been procured through material, deliberate, and fraudulent non-disclosure. As a result, the agreement could not be relied upon, and the case was remitted to the High Court for a fresh assessment of financial remedies without reference to the prenup.
Reasoning
The Court of Appeal based their judgment upon the following key considerations:
- Disclosure as a fundamental condition: The agreement expressly stated that full and frank disclosure had been given. This was a fundamental premise on which the agreement was based. As this condition was not met, the agreement was founded on false assumptions.
- Non-disclosure was material: The scale of the undisclosed assets, being around 73% of her assets, was substantial. The Court held that this was far from trivial and could reasonably have influenced the husband’s decision to enter into the agreement on the terms agreed.
- Fraud and misrepresentation: The Court found that the non-disclosure was not just an accidental or inadvertent omission but amounted to deliberate and fraudulent misrepresentation.
- Fairness and autonomy require transparency: While the courts respect personal autonomy and freedom of contract, true autonomy depends on informed decision-making. A party cannot be said to have freely entered into an agreement if they were materially misled.
- Legal advice was insufficient to cure the defect: Though the husband had taken independent legal advice, this was not sufficient to remedy the effects of deliberate misinformation or concealment.
What does this mean?
This case highlights the importance of taking exceptional care to ensure full and frank disclosure of all assets when entering into a prenuptial agreement. While disclosure may seem disadvantageous, undesirable or sensitive, especially where business interests or family wealth are involved, failure to disclose may ultimately defeat the purpose of the agreement.
Additionally, it may risk exposing the parties to costly and time-consuming litigation in the future.
Though prenuptial agreements continue to gain recognition and popularity, they remain subject to judicial scrutiny to ensure fairness and protect weaker parties.
How we can help
Following Helliwell v Entwistle, the importance of careful drafting and full transparency and disclosure in prenups is clear. Our firm supports clients throughout the entire pre- or post-nuptial agreement process, including:
- We ensure agreements are carefully drafted in accordance with current case law and tailored to the facts of each case, maximising the likelihood for the agreement will be upheld.
- We guide clients through the disclosure process to help them identify all assets which should be disclosed, ensuring disclosure is clear, accurate, and properly document. This reduces the risk of allegations of concealment or misrepresentation.
- We can review pre-existing nuptial agreements to identify potential issues, including assessing whether disclosure was sufficient. We can then advice on steps to mitigate risks, including preparing a new agreement where necessary.
- Where disputes arise and a nuptial agreement is being challenged, we can provide strategic advice and support clients through negotiations or court proceedings.
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