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DB v PB: a reminder of potential effect of maintenance agreements

Michael Allum, Solicitor with The International Family Law Group LLP, considers the implications of maintenance agreements in financial remedies cases.

Michael Allum, Associate, The International Family Law Group LLP

The recent case of DB v PB [2016] EWHC 3431 (Fam) serves as a reminder of the potential effect an agreement in relation to maintenance can (for the time being at least) have on financial proceedings following the breakdown of a marriage.

In this case the husband and wife were 50 and 49 years old respectively and were both born in, and nationals of, Sweden.  Having spent a large part of the 20 year marital relationship in the US the parties moved (after a short period in Belgium) to England in 2011 where they remained living ever since with their two children.

When the marriage broke down the wife issued divorce proceedings (narrowly first in time) in England in 2015 and also sought to have financial issues resolved in England.

However, the parties signed three pre-nuptial agreements before they married which provided (in considerable summary) that if the marriage broke down (i) any proceedings would take place in Sweden and (ii) each party would retain the assets in their respective sole names.

Although a choice of law clause does not affect a spouse's right to issue divorce proceedings in an EU Member State country (it is simply whoever lodges divorce proceedings first), it can have a fundamental effect on which type of financial claims the court can make on divorce.

This is because Article 4 of the EU Maintenance Regulation provides (again in considerable summary) that parties may agree that the courts of a Member State shall deal with any maintenance claims on the breakdown of a marriage.

In England and Wales the courts apply the principles of sharing and needs. The starting point is that anything acquired during the marital relationship shall be shared equally unless there is a good reason to depart from equality. 

The most common 'good reason' to depart from equality is that one party needs more than half.  There is a statutory requirement to achieve a clean break as soon as possible and therefore maintenance is only available if, and to the extent that, it is required to meet needs.

In this case the parties had the following assets:

- the family home in the parties' joint names with a net equity of just over £1.8m;

- a property in Sweden in the husband's sole name with a new equity of £40,000; and

- investments in the husband's sole name worth approximately £9m.

The approach of the English court to pre-nuptial agreements is to uphold them unless it would be unfair to do so.  If an agreement is unfair, the English court does not 'tear it up' but instead varies it to the extent required to meet needs.

As the parties had agreed that maintenance/needs based claims would be dealt with in Sweden, all the English judge felt able to do was order that the family home be sold and the proceeds shared equally.  To do anything else would involve making an order based on the needs of the wife and the children.  This was despite the fact that the judge was 'completely satisfied' that the needs of the wife and children could not be met by this award alone [paragraph 64].

As the children were living in England the wife was also able to make an application for financial provision for them pursuant to Schedule 1 to the Children Act 1989 but of course, orders under this legislation are limited to meeting the needs of the children and any capital award will usually revert to the other party once the children finish education.

In this case Mr Justice Francis ordered the husband to provide the wife with £2m to provide a house for the children (which would revert to the husband once the children finish full time education) and pay the wife £95,000 per year as a carer's allowance to meet the needs of the children.

Although in this case the maintenance agreement was clear, they can take many forms and therefore professional advisors need to be very careful when advising clients.  For example, maintenance agreements can be formed in letters and e-mails (including between parties' professional advisors) and the full implications are often not appreciated until many years down the line. 

As a result of the agreements these parties entered into before the marriage, the wife now finds herself having to bring further proceedings in a country where she has not lived for many years in order to obtain a fair financial outcome following the breakdown of her marriage.  Depending on what happens in Sweden there may yet be further proceedings in England.  It is likely that by the time the proceedings are finally resolved there will be significantly less money to go around the family.