Wife’s fraudulent non-disclosure invalidates pre-nuptial agreement

In 2010 the Supreme Court ruled that the courts of England and Wales should give effect to pre-nuptial agreements that are freely entered into by each party with a full appreciation of their implications, unless in the circumstances it would not be fair to hold the parties to the agreement.

The ruling has meant that in most divorce cases where a pre-nuptial agreement has been signed the terms of the agreement will be upheld, forming the basis of the divorce settlement.

But in a recent case the Court of Appeal held that a pre-nuptial agreement should not be upheld, because of the wife’s fraudulent failure to make full disclosure of her means prior to the signing of the agreement.

There are few rules setting out the procedure to be followed when a pre-nuptial agreement is entered into, but most lawyers would advise that before the agreement is signed each party should disclosure to the other details of their means, so that the parties can form a view as to the fairness of the terms of the agreement, and take legal advice.

Of course if the parties agree to make such disclosure then it should be reasonably accurate.

In the case the parties entered into a ‘drop hands’ pre-nuptial agreement (i.e. an agreement that in the event of a subsequent divorce neither party would make any claims against the other’s assets), on the day of their wedding.

The agreement made it very clear that the parties had “fully and frankly disclosed to each other their financial resources and liabilities”, which were set out in summary form in appendices the agreement.

However, in the event the wife did not make “full and frank” disclosure. In particular, she failed to disclose her business assets, and her interest in a house in Wimbledon, in which her mother lived. The total value of the undisclosed assets amounted to nearly £48 million.

When the case went to court the judge upheld the agreement. However, the husband appealed, to the Court of Appeal.

Giving the leading judgment of the Court of Appeal Lady Justice King found that the wife’s decision not to disclose these assets was fraudulent – this was not simply a failure to disclose: the deliberate non-disclosure falsified and made untrue the wife’s express representation to the husband in the agreement that she had made full and frank disclosure of her financial resources.

Lady Justice King said that the wife’s deceit was made all the worse because the agreement contained a certificate signed by her lawyer that she had been given legal advice, where her lawyer had previously given a clear indication to the husband that he would be advising his client to make full disclosure of her assets. The wife’s lawyer also emphasised that it was understood on the wife’s side that absent disclosure, the validity of the agreement would be open to challenge.

In the circumstances the Court of Appeal held that the appeal must be allowed because the non-disclosure by the wife was a vitiating circumstance which negated the effect of the agreement.

You can read the full Court of Appeal judgment here.

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