L v M

A separation agreement should generally be upheld where it was freely entered into and each party understood its implications, unless the circumstances make it unfair to do so. Independent legal advice and full documentary disclosure are desirable but are not absolute prerequisites where the evidence shows that the party understood the agreement and chose to proceed. A party seeking to avoid such an agreement on the basis of changed circumstances bears the burden of establishing that change. The court may examine resources held through trusts or analogous structures by reference to realistic access rather than formal ownership. The agreement was substantially upheld, but terms beyond the court’s jurisdiction and a punitive interest provision were removed or modified.

The wife applied for the husband to show cause why he should not be held to a separation agreement dated 6 August 2010 and a draft consent order reflecting its terms. The agreement provided for a £2 million lump sum, substantial periodical payments, education costs and the establishment of a trust. The husband did not attend or participate in the final hearing. He relied on alleged inadequate disclosure, lack of legal advice, lack of jurisdiction in respect of certain provisions, and a substantial deterioration in his financial circumstances. The central issues were whether the agreement was freely entered into with sufficient understanding, whether the husband had established a material change of circumstances, and which provisions could properly be included in a financial remedy order.

1. Agreement upheld in substance. The husband had not shown sufficient cause to escape the fundamental terms of the separation agreement. The court applied the approach in Radmacher v Granatino [2010] 2 FLR 1900: effect should generally be given to a nuptial agreement freely entered into with full appreciation of its implications unless it would be unfair to hold the parties to it.
2. The absence of proven independent English legal advice did not make the agreement ineffective. On the evidence, the husband probably received advice about the financial consequences of divorce in both Zambia and London. In any event, he had ample opportunity to obtain advice, was financially sophisticated, had initiated the principal settlement proposals and understood the agreement’s implications.
3. The husband’s assertions of inadequate disclosure and changed circumstances were unparticularised or unsupported. His failure to answer the wife’s questionnaire, disclose documents and attend for cross-examination justified adverse conclusions. He had failed to establish that his financial position had materially deteriorated so as to justify departure from the agreement.
4. In financial remedy proceedings the court considers resources, not merely formal ownership. Trust and analogous structures must be examined realistically by reference to the likelihood and accessibility of distributions. The husband’s failure to explain his position in relation to Foundation E was a grave omission.
5. The agreement required modification before being embodied in an order. The court would not enforce provisions purporting to continue maintenance after remarriage or cohabitation, to exclude variation of periodical payments, or to require future occupation of K House. Interest could not be awarded on unpaid periodical payments. The agreed 1% monthly interest on the lump sum was punitive and unfair; the court instead ordered £2,682,573.54, calculated by reference to the £2 million capital provision, payments made and 8% interest. The husband was also ordered to complete the child’s trust arrangements.