Court of Appeal confirms that fraudulent non-disclosure can vitiate pre-nuptial agreements and attract indemnity costs.
Background Facts
- The wife’s assets totalled £60-70 million, while the husband’s assets were valued at £850,000.
- The parties signed a pre-nuptial agreement (PNA) on their wedding day, in which the wife disclosed assets worth £18.2 million, but failed to disclose additional business and property assets worth £47.9 million.
- The agreement’s recitals stated that both parties had ‘fully and frankly disclosed’ their financial resources and that disclosure was ‘substantially complete.’
- Prior to signing the PNA, the wife emailed her husband a draft email to forward to her solicitors, suggesting either omitting disclosure altogether or including it on the basis that the husband did not obtain legal advice.
- The wife insisted that financial disclosure be sent directly to the husband and not to his lawyers, and the husband agreed.
- The marriage was childless and lasted three years before divorce proceedings were issued.
The Decision
- The Court of Appeal held that Francis J had erred in concluding that the wife’s non-disclosure of 73% of her wealth did not undermine the validity of the PNA.
- The wife’s conduct was found to be fraudulent; she had falsely represented in the recitals that she had made full and frank disclosure.
- King LJ rejected the wife’s submission that the husband was indifferent to the wife’s wealth. Rather, the husband was deliberately deprived of the agreed disclosure and was left without legal advice once disclosure was made.
- As a result, the PNA was set aside, and the case was remitted to the High Court for a needs-based assessment under section 25 of the Matrimonial Causes Act 1973.
- The Court also ordered the wife to pay the husband’s legal costs on an indemnity basis, both at first instance and on appeal, due to her fraudulent non-disclosure and conduct in relation to the litigation, which took the case ‘out of the norm.’
Commentary
The decision confirms that where parties agree to full and frank disclosure as part of a PNA, failure to provide such disclosure, especially where it is deliberate, will vitiate the agreement. Moreover, where the failure to disclose is held to be fraudulent, the non-disclosing party risks paying the other side’s costs on the punitive, indemnity basis.
This case highlights the critical importance of transparency in financial disclosure and serves as a warning that dishonest conduct in the context of PNA’s can have serious financial and legal consequences.
If you have any queries regarding pre-nuptial agreements or any other aspects of family law, please contact Lindsay Davies.
