Ipekçi v McConnell - How to get a Pre Nup so very wrong!
The recent decision in Ipekçi v McConnell [2019 EWFC 19] demonstrates the double whammy of how not to do a Prenuptial Agreement and the potential consequences of annoying a judge.
The wife was the great granddaughter of David McConnell who set up the Avon business empire. She was the beneficiary of several family trusts in the USA with an overall value of at least $65 million. In addition, the matrimonial home (in the wife’s sole name) had a net value of almost $1.1 million.
The husband was working as the head concierge of the London Hilton Metropole Hotel earning £35,000 per annum gross. He owns a 50% interest in his mother’s house in Turkey (£50,000) and he had debts of just over £100,000.
The parties met in New York in autumn 2003. At the time the husband was working as a concierge at a luxury hotel in New York and the wife was married to someone else. By January 2005 the parties were cohabiting and they married on 26 November later that year. They separated in November 2016 by which time they had two children who at the time of the hearing (March 2019) were aged 11 and 7.
In anticipation of the marriage and give the disparity in the parties’ wealth a Prenuptial Agreement was drawn up by the wife’s lawyer. An independent lawyer was identified for the husband so that he could be advised on the terms of the Pre Nup. The selected lawyer just happened to be the lawyer who had acted for the wife in her divorce from her first husband. The husband also only met this lawyer for the first time on 3 November 2005 - 23 days before the wedding.
The Prenuptial Agreement stated that it was deemed to be made under the laws of the state of New York and its validity, effect and construction should be determined in accordance with those laws regardless of where either party resided, or was domiciled at the time of death, divorce or separation. In addition the Agreement stated that the parties wanted any proceedings relating to the marriage to be determined in accordance with the laws of the state of New York.
The present proceedings were being dealt with by the Family Court in London.
The provision for the husband in the Pre Nup for the husband was that he would receive 50% of any increase in value of three properties that, at the time of the hearing in London, no longer belonged to the wife. An assumption was made that the proceeds of sale of the three properties had been used to purchase the present matrimonial home and as there was no increase in value of the equity in the present matrimonial home, this meant that under the terms of the Agreement the husband was due to receive nothing at all.
Not only was there a question mark over the independence of the husband’s lawyer, but that lawyer was an English solicitor with no competence to advise on New York law relating to the enforceability of Prenuptial Agreements. Whilst the said English solicitor advised the husband not to sign the Pre Nup, he signed it on 11 November 2005.
Judge Mostyn decided that on the facts it would be wholly unfair to hold the husband to the terms of the Prenuptial Agreement because there was a fatal defect with the Agreement. According to expert evidence provided at the Hearing, the Agreement should have been accompanied by an authenticated certificate required under local New York law. An Expert gave evidence that without the certificate this particular Agreement would have had minimal weight, if any, in a New York Court.
The Judge took the view that having stated that New York law was to be applied to the Agreement, it would be unjust to give weight to an Agreement that would not be afforded any weight in the jurisdiction elected by the parties.
The Judge also considered it inconceivable that the husband fully appreciated the implication of the Agreement when he had had no legal advice at all about the impact of New York law.
In addition Judge Mostyn believed that the solicitor who advised the husband was compromised and biased.
Finally the Agreement did not meet the husband’s needs.
The Judge then went on to determine the husband’s claim based on his reasonable needs. He awarded the husband £750,000 to purchase a home (albeit with a charge back to the wife in the sum of £375,000 enforceable only on the husband’s death). The husband was then awarded a further £186,500 to cover legal costs, Stamp Duty and house purchase costs, and also an allowance for furniture.
With regard to the husband’s income requirement, the Judge awarded him a Duxbury lump sum of £445,500, from which the value of the husband’s 50% interest in his mother’s property was taken into account.
The value of the overall award to the husband was £1,333,500, £375,000 of which would eventually be returned to the wife on the husband’s death.
So what had annoyed the Judge? What had got the wife’s case off to such a bad start?
On the second day of the Court Hearing a letter addressed to the Judge was left on the Judge’s bench. This letter was from one of the Trustees of one of the wife’s trusts and it stated that the wife had no power or control over the trust assets and if she were to ask the Trustees for a payment from the trust assets then compliance would be beyond the powers of the Trustees.
This letter was discussed at the hearing and it was pointed out that the information was inconsistent with other trust documents and information provided on behalf of the wife.
The discussion at Court prompted a further letter from the same Trustee to the Judge which arrived the next day. In that letter the Trustee challenged the views expressed at the hearing the previous day at which point the Judge reverted to procedure. He rejected all the information/evidence in the letters on the basis that it was not expert evidence because if it was expert evidence then a proper application would have been made to obtain a direction that this evidence was needed and an independent single joint expert would have been appointed.
The Judge also decided that it was too late to put forward this information/evidence and therefore he was not going to attribute any weight to it. In the Judge’s view, had this evidence been so important to the wife then proper procedures would have been followed. The Judge also took the view that the information being put forward by the Trustee was obviously incorrect and he questioned why such misleading and partial evidence was being given on behalf of the wife.
It would have been very hard for the wife’s case to recover from this castigation as ultimately proved to be the case.
The Judge was however not finished in his criticism of how the case had been handled by the parties’ advisers. He expressed disquiet and dismay at the wholesale noncompliance with Practice Directions on Bundles, identifying the following faults:-
- Two Bundles were delivered to the Court “in blatant breach of the One Bundle Rule”.
- The Two Bundles contained many duplicated documents, but omitted the most important ones, namely the Trust Deeds.
- There were no preliminary documents, no agreed Schedule of Issues, no agreed Asset Schedule and no Chronology.
- No attempt was made to agree an Asset Schedule at the hearing.
- When the Judge insisted on having a Chronology produced it arrived on the third day of the hearing and omitted vital events such as the date of the Prenuptial Agreement and the date the parties married.
- One of the barrister’s skeleton arguments was filed late - this being blamed on late delivery of the Bundles.
In the Judge’s opinion the omissions and defaults by the parties’ advisers were completely unacceptable, particularly when the wife had been charged £252,331 in fees and the husband £235,669.
It is not often that legal advisers receive such a public roasting from a Judge.
Posted on: 08/10/2019
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.
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