Will non-disclosure of assets set aside a prenup?

The recent case of Helliwell -v- Entwistle reminds all practitioners of the ‘gold standard’ approach to prenuptial agreements. So are prenups legally binding?

What is the Law relating to Prenupital Agreements

The case of Radamacher v Granatino [2010] is the leading authority on pre and postnuptial agreements in England and Wales.

In that case the court asked whether there were any vitiating factors which would effectively negate the nuptial agreement i.e. duress, fraud or misrepresentation. Undue pressure may also reduce the weight the court will attach to it albeit it may not void the agreement. The second factor is whether the agreement is unfair having regard to all the circumstances at the time of separation.

The court ultimately upheld the agreement stating:

‘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.’(para 75).

Therefore, the current law says that whilst prenuptial agreements are not strictly binding i.e. they can’t oust the jurisdiction of the court, they are likely to be upheld in the event of a dispute unless:

1. there is a vitiating factor
2. and/or the effect of the agreement would be considered unfair.

Helliwell v Entwistle – has the law changed?

This case was an appeal by the husband against the making of a final order in financial proceedings which

1. gave effect to the parties prenuptial agreement;
2. and gave the husband a lump sum of £400,000 to meet his needs. The judgement was given by Lady Justice King.

The background of the matter was:

• The parties were both in their early 40’s and married in July 2019. They separated in spring/summer 2022.
• This was a short (3 year) marriage with no children.
• The wife came from a very wealthy family.

The appeal was allowed due to the wife’s deliberate non-disclosure. It was later found that the wife had failed to disclose assets in the sum of £47,878,800 (which totalled 73% of her wealth). It was further held that this non disclosure impacted upon the assessment of the husband’s needs.

In the first instance, the original judge found that the husband was well aware that the wife was extremely wealthy, and that this prevented the husband from relying on non-disclosure to vitiate the agreement. The wife said that she had not provided full disclosure (details of shares transferred from her father and a house where her mother lived) as her and her father were concerned about tax.

However the Court of Appeal rejected this, stating:

“It is clear from all the evidence that, whilst unclear of the precise worth of her business assets, the wife knew they were in her name, had talked to her father about it and had made a conscious decision not to disclose them” (para 75).

This is in stark contrast to the judgement given in the case of Radamacher, where the prenuptial agreement was upheld despite the wife not providing any disclosure.

So why was the nuptial agreement upheld in Radamacher and not Entwistle if both failed to provide full and frank financial disclosure?

The difference is that in Radamacher, the judge made it clear that as a general proposition, disclosure of assets by each party is not a legal requirement in order for there to be a binding prenuptial agreement. In Radamacher, there was no such agreement to provide disclosure and the husband was described as being indifferent to the particulars of the wife’s assets.

In Helliwell, the parties agreed and recorded in the prenup that full and frank financial disclosure had been provided which enabled each of the parties to make a decision as to whether they wanted to be bound by the agreement. The judge went on to say;

“Wilful or fraudulent breach of that agreement such that the disclosure made bears no resemblance to the true wealth of a party is entirely different from the position in Radmacher. In my judgment, such conduct is capable of being material non-disclosure as it deprives the other party of the information that they have agreed is necessary in order for them to decide whether to agree to a prenuptial agreement in the terms proposed.” (para 122).

In this case, the judge considered this, and held that if the parties agreed that disclosure should be provided and then there is deliberate non-disclosure or misrepresentation as to a party’s assets, then the court must consider whether that vitiates the agreement. She considered other authorities and concluded that a stringent approach should be taken in cases of fraudulent non-disclosure unless the deceit was immaterial to the outcome.

In this case, the judge held the wife had deliberately not disclosed all of her assets (despite signing to say she had made full and frank disclosure) and that was fraudulent. The deliberate decision by the wife not to disclose her business assets and her interest in her mother’s house amounted to fraudulent non-disclosure which vitiates the agreement.

The outcome was that the court agreed to set aside the order made and allow the appeal. The case will now be reheard in light of the above findings and the court will have to make a decision on the husband’s needs in the absence of any prenuptial agreement.

Is disclosure required for a prenup to be upheld?

No, in Entwistle, the Judge concluded that disclosure is desirable but not essential. Radamacher still stands as the leading authority on nuptial agreements, and all practitioners and parties should be alive to the requirements which are set out. But Entwistle reminds us that parties should, where possible, provide full and frank financial disclosure in order to ensure their nuptial agreement has the strongest chance of succeeding.

Deliberate non-disclosure / misrepresentation will be considered as a vitiating factor and could put the entire prenuptial agreement at risk. But if prepared properly, nuptial agreements are very effective in protecting wealth and we at Maguire Family Law are experts at preparing these difficult and complex documents.