11th December 2024 | Alex Anastasiou | Family Law, Prenuptial agreement, Protect Wealth

We are now firmly into “engagement season” with nearly 40% of annual marriage proposals due to take place between November and February. The most popular dates in order are Christmas Day, New Years Eve and of course Valentine’s Day. Weighing up the romance with the practical, this is an ideal opportunity for couples to not only celebrate their love but also start meaningful conversations about their future, including the benefits of a prenuptial agreement.

Interpretation of a pre-nuptial agreement (“PNA”)

A PNA is a legally binding document that a couple signs before getting married to outline how their finances, assets, debts and other legal responsibilities will be managed during the marriage and in case of divorce or death.   

Status of a PNA

They can be legally binding (subject to fairness) when properly drafted if they comply with certain procedural requirements. The following is a non-exhaustive list: independent legal advice for both parties, full disclosure of assets, the PNA is entered into freely by both and in good time prior to any intended wedding. It is important to understand that a PNA does not bind a Judge and does not stop one of the parties applying to court for financial provision. Although it is open to the parties to include Non-Court Dispute Resolution clauses as a vehicle for resolving any disputes.

For those contemplating marriage it is important to have a properly drafted PNA to protect wealth, future inheritance and moreover to avoid litigation. Interpretation of a PNA was the subject matter in the case of Loh v Loh-Gronager [2024] EWFC 241.

The dispute

The wife had acquired expensive chattels via the parties’ joint bank account, the parties sought clarification as to whether the funds used were joint/separate property. The wife had utilised her own funds prior to transferring these to the joint account to make the purchase. She sought to argue the chattels were separate property due to her sole financial contribution. As one can envisage the husband argued that the financial contribution to the chattels should be considered equal as it was funded from the joint account.

The case turned on the categories of property status contained in the PNA: Separate Property, Joint Property and Jointly Acquired Chattels. The Judge had to interpret several clauses and in particular 2.9 which stated that the parties joint bank account would be considered Joint Property irrespective of the financial contribution and would be applied to utility bills and expenses associated with the Family Home and their day to day living expenses and 22.4 which provided that Chattels acquired jointly during the marriage (other than Separate Property…) will be divided between the wife and husband in accordance with the financial contribution made by them respectively.

Decision

It is important to note that the PNA had not envisaged that the joint account would be used for purchasing chattels with significant value, rather than meeting the parties’ day-to-day living expenses. It was significant in this case that the chattels in dispute were not Joint Property, but solely legally owned by the wife. This is because she had used her own finances identified as separate funds in an appendix to the PNA. The Judge found that the parties had expanded the use of the Joint Account beyond what was intended to purchase the Chattels and that these should be divided in accordance with the financial contributions made by the parties not by default because funds had gone into the parties’ joint account.

Conclusion

A well considered PNA can provide certainty, prevent misunderstandings, and minimise disputes when unforeseen circumstances arise. Its effectiveness lies in careful drafting, full financial disclosure between couples and keeping the PNA under close review with the passage of time. As engagement season progresses, couples should view PNA not as a challenge to romance, but rather as a demonstration of mutual respect and foresight

If you are contemplating marriage or would like to discuss the status of PNA or would like one prepared, please get in touch.

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