Understanding the Implications of Failing to Enforce a Post-Separation Financial Settlement Agreement

In the recent case of PN v SA EWFC 141, the Family Court faced a significant decision regarding the enforcement of a post-separation financial settlement agreement. This case highlights critical considerations for clients involved in financial remedy proceedings following a separation. The court's decision underscores the importance of meeting specific conditions and the potential impact of undue pressure in the formation of such agreements.

Background of the Case

The parties involved in this case were married in 2005 and separated in 2022. They had substantial assets amounting to £520 million. The husband (H) and wife (W) sought to enforce two separate agreements: a 2021 post-nuptial agreement (PNA) and a 2023 post-separation financial settlement agreement (2023 agreement). The 2021 PNA was established for tax purposes and provided for an equal division of assets upon divorce. In contrast, the 2023 agreement proposed placing most assets in trusts, with H receiving management fees.

Court's Findings on the 2023 Agreement

Cobb J, presiding over the case, found that the 2023 agreement was not a concluded agreement. Several conditions outlined in the introductory clauses were unmet, including the requirement for a lawyer to draft an enforceable order and the approval of the parties' respective English lawyers. Additionally, W was not informed of new and altered terms in the English version of the agreement compared to the Portuguese version, which further invalidated the agreement. 

Undue Pressure and Power Imbalance

A significant factor in the court's decision was the undue pressure exerted by H on W over nine months. H leveraged the power imbalance between them, threatening to scale back home renovations and to bankrupt them, and actively ostracised W from her lawyer, who served as an emotional support. This conduct was deemed unfair and contributed to the court's refusal to enforce the 2023 agreement.

Distinction Between the 2021 PNA and the 2023 Agreement

Cobb J rejected H's argument that the 2023 agreement was merely an implementation of the 2021 PNA. The 2023 agreement introduced an entirely different structure, allowing H to veto W's trust withdrawals, which was not in the required form to vary the 2021 PNA. The court found that neither party behaved as if they were bound by the 2023 agreement, further supporting its decision not to enforce it.

Upholding the 2021 Post-Nuptial Agreement

In contrast, the court found strong reasons to uphold the 2021 PNA. It was expertly negotiated and drafted, with both parties receiving independent legal advice. The agreement reflected the community of property regime they had intended to exit and was freely entered into with full appreciation of its implications. The court's decision aligns with the principles established in Radmacher v Granatino. UKSC 42, emphasising the fairness and voluntariness of the agreement

Implications for Clients

This case serves as a crucial reminder for clients to ensure that all conditions of a financial settlement agreement are met and that both parties are fully informed and consenting. The presence of undue pressure or a power imbalance can significantly impact the enforceability of an agreement. Clients should seek independent legal advice and ensure that agreements are drafted and approved by qualified professionals to avoid similar pitfalls.

In conclusion, the decision in PN v SA highlights the importance of fairness, transparency, and adherence to legal requirements in post-separation financial agreements. Clients are advised to approach such agreements with caution and to seek comprehensive legal guidance to protect their interests.

Jamie Beland & Minoli Vehella