When all is said and done: foreign pre-nuptial agreements get a much-needed boost in England

Camilla and Gerard Versteegh were married in 1993. Both were born and brought up in Sweden. Mr Versteegh was from a wealthy family. He had moved to London in 1983 and, by the time of the marriage, had built up substantial commercial and property interests. By the time of the trial, the total wealth between them was approximately £275 million (of which Mrs Versteegh had in her own name £27 million).

The parties had signed a pre-nuptial agreement under Swedish law the day before the wedding. It provided for a complete separation of property. It was brief and in standard form. There was no financial disclosure. There was no independent legal advice. It was a valid agreement under Swedish law: had the parties divorced in Sweden, it would have been absolutely binding.

Many of you reading this will say: so far, so good. Following the Radmacher case in 2010, pre-nuptial agreements are upheld by the English courts subject to a fairness test. In Radmacher itself, the agreement had been made under German law and complied with German procedural requirements; and the Supreme Court upheld it. So there was every good reason to expect the same here.

In fact, underneath the radar the lower courts had engaged in a rear-guard action when considering foreign agreements. In 2012, the issue arose in relation to a couple married in Catalonia where a default separation of property regime applied; they had also signed a separate property agreement under a different foreign law. Mr Justice Mostyn decided that, to meet the Radmacher test, the parties must have intended the agreement to apply in a court which operated a “system of discretionary equitable distribution”; and so “usually” the parties should have separate English legal advice. In a different case a year later, also involving a Scandinavian couple, Mr Justice Moor said in terms that “it is wise for the other party's advisor to insert a clause dealing with [this point] in the final agreement”.

In other words, the English system of financial orders is very different; so foreign nationals can only be taken to have signed away their opportunity to claim under it if they know how it works in detail. Underlying this is the assumption (as patronising as it sounds) that as our system is usually more generous to the economically-weaker spouse, it is therefore better; so no-one could sensibly want to contract out of it.

Mrs Versteegh rallied to this standard. The Court of Appeal cut it down. Lady Justice King said that it “cannot be right that a couple have to take legal advice of [this] kind “just in case” in ten years’ time they move to live in the UK or that they have to in some way “refresh” their [agreement] by the wife receiving legal advice prior to relocating”. Lord Justice Lewison said that, “in the case of a globe-trotting couple [this] would require the giving of advice about multiple possible matrimonial regimes all over the world [which is] both impractical and prohibitively expensive”. He emphasised that Radmacher requires parties to have a material understanding of the implications of the agreement; there is no “tick-box” set of rules, and so no need for legal advice.

However, while these comments are very helpful I should sound a warning-note. The English system remains unique. Our courts will not apply foreign law. The agreement will still be seen through the prism of the English understanding of “fairness”. This has three important consequences: 

• The court will examine in detail the circumstances in which the agreement came to be signed; and this goes beyond basic contractual issues such as fraud, misrepresentation or undue influence. Significant time was spent at trial examining the extent to which Mrs Versteegh truly understood the purpose and effect of the agreement. A former friend, Mrs L, gave evidence that Mrs Versteegh understood it perfectly, and in the knowledge that she would receive nothing in a divorce had sought some financial security from her husband. The judge was convinced by this. If Mrs Versteegh had satisfied the court that she did not know what she was signing, the agreement would not have been upheld. So this still leaves simple agreements from continental Europe at real risk.
• Self-evidently, if the test is that the agreement will be upheld if it is “fair” by English standards, an unfair agreement by those standards will fall away. An agreement which leaves a spouse in a “predicament of real need” will fail. If the effect of Mr and Mrs Versteegh’s agreement here had been to leave him with £275 million, and her with nothing, it would have been set aside regardless that it was binding under Swedish law. Indeed, to take account of “fairness” Mr Versteegh’s own position at trial was that his wife should receive more than the agreement provided (so more than the £27 million she already held).
• Credibility before the court still matters greatly. The judge described Mrs Versteegh’s arguments on the agreement as “dishonourable attempts to claim ignorance about [its] wording and effect”. Her written evidence was found to be a “compound of deliberate untruths” which were “embroidered” when challenged in cross-examination. She evidently elicited no sympathy whatsoever from the court; this must have had some effect.

It follows that, if there is any chance that an English judge will be scrutinising a foreign pre-nuptial agreement in the context of divorce, obtaining English advice before the agreement is signed is a vital precaution.

If you require further information please contact Nicholas Bennett or your usual contact at the firm on 020 3375 7000.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, May 2018