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September 21, 2018

Preservation of property through prenuptial agreements

A pre-nuptial or an ante-nuptial agreement is a written contract created by two people planning to get married. The agreement typically lists all of the property each person owns, as well as their debts, and it specifies what each person’s property rights will be after they tie the knot. Ante-nuptial agreements often specify how property will be divided and whether spousal support (alimony) will be paid in the event of a divorce.

Pre-nuptials are legal in Kenya. Section 6(3) of The Matrimonial Property Act, 2013 provides that the parties to an intended marriage may enter into an agreement before their marriage to determine their property rights.

Section 6(4) stipulates that a party to an agreement made under subsection (3) may apply to the Court to set aside the agreement and the Court may set aside the agreement if it determines that the agreement was influenced by fraud, coercion or is manifestly unjust.

The Act does not tell us much past the definition. There being no jurisprudence or cases in Kenya, we must learn from other countries where it is happening.

My research led me to a June 2015 Judgment in a high value financial remedies case in which the wife came to the marriage with significant assets and where there was a pre-nuptial agreement between the parties – a “paradigm” case demonstrating “the need for more certainty in the law of financial remedies and nuptial agreements”.

This is the case of WW v HW [2015] EWHC 1844 (Fam)- Case No: FD12D05810, in the High Court of Justice, family division Royal Courts of Justice Strand, London, WC2A 2LL.

In brief, on 13th June 2002, the parties in this case signed an agreement by which they agreed [cl.13] that in the event that their forthcoming marriage ended in divorce, neither would make a claim against the other (at least in their own right).

The judge observed,if ever there were a paradigm example of a case which demonstrates the need for more certainty in the law of financial remedies and nuptial agreements, this is surely it.

The husband in this case (‘H’) is 57 and the wife (‘W’) 46. They met and began a relationship in the summer of 2000, when H was 42 and W 31. In July 2001, their elder child was born and sometime after this, they became engaged to be married.

It is now accepted (although this was not understood by W at the time), that he had never generated any substantial income from his artistic endeavours. His only significant capital was the house he owned in London, E1, which he was to sell at the outset of their relationship to generate an equity of £474,000. His current assets comprise his interest in the parties’ home in London W1 (discussed below but on his own case as put to me worth £742,000, on W’s £611,100), savings in his bank accounts, and his interest in his production company – FF. This has some value but is subject to a very significant tax issue.

In the circumstances it is unsurprising that the suggestion was made on W’s side that the parties should sign a pre-nuptial agreement in advance of their wedding. She had taken advice from her family’s solicitors, Charles Russell, and they produced the draft which H received in the middle of May 2002.

Both sides exchanged schedules of assets and income for attaching to the document prior to its signing –the document was eventually signed on 13th June 2002. They got married on July 4, 2002.

The prenuptial agreement provided as follows-By their agreement, the parties acknowledged and agreed, amongst other provisions, that:

a. The marriage was conditional upon the agreement being executed [Rec. B]

b. The parties intended that the agreement should be legally binding upon them [Rec. H]

c. They had each received independent legal advice and were fully aware of the right that they each were acquiring or surrendering [Rec. J]

d. They had each fully and frankly disclosed their respective means and other relevant circumstances. [Rec. K]

e. They each acknowledged that it was not possible to exclude the jurisdiction of the Court to make orders under the Matrimonial Causes Act 1973. [Rec. L]

f. Neither would make any claim against the other on dissolution of the marriage, and would enter into a consent order to that effect, without prejudice to their right to make such a claim in respect of a child. [Cl.13]

g. Any real property jointly owned would be vested in joint names as tenants in common, and their respective proportions of ownership would be set out in a Declaration of Trust to be drawn up, and otherwise in accordance with their respective financial contributions to that property. [Cl.9]

h. All pre-marital, gifted or inherited property should remain the parties’ respective ownership. [Cl.3/4]

i. Neither would make any claim against the other’s separate property, or against any trust interest, in the event of dissolution of the marriage. [Cl.10/11]

The judge found in favour of the agreement being given effect and of significant weight being attached to it.

The judge went on to find that it would be fair to hold H to the terms of the pre-nuptial agreement unless his needs dictated a different outcome.

Poll of the day