In a recent divorce case, the wife repudiated a signed financial settlement agreement made by the parties without legal advice three days after signing.

In this article, senior paralegal James Fox considers the family court’s judgement in Pierburg v Pierburg [2022] EWHC 2701 (Fam), in which the judge considered the impact of the agreement and its repudiation on the financial award made in favour of the wife.

Background

The parties were married in September 1985 in Neuss, Germany. They had one child during the marriage, a son born in 1987, who was educated in England. Before their marriage, and due to the husband’s financial position (he owned 56% of the Pierburg Company family business), his mother insisted that a pre-nuptial agreement was essential. The husband agreed.

A pre-nuptial agreement (PNA) was drawn up between the parties. At the wife’s request, the PNA was redrafted to exclude her from receiving any financial provision on separation as she insisted she was marrying for love, not money. The PNA was signed on 9 September 1985. The wife did not receive legal advice in relation to this PNA. Further, there was no financial disclosure of assets between the parties.

Acquisition of wealth by the husband

Following the signing of the PNA, the husband came into significant financial wealth. In 1986, the husband sold the family business for DM180 million (Deutsche Mark); his share was the equivalent of £42m in 1986.

In 2000, the husband’s mother died, and he inherited a further £56m. Later the same year, the family moved to Switzerland from Germany, primarily for tax reasons. In September 2005, the husband received a further £62m following the maturity of an insurance bond.

Separation and divorce proceedings

The parties separated in 2017. At this time, the husband valued his assets at £160m. Initially, the wife sought a divorce settlement of £39m. In July 2017, the husband proposed a counter settlement amounting to £17.4m, although it was payable over approximately 20 years.

The wife petitioned for divorce in England in January 2018. The husband filed his own divorce proceedings in Germany in February 2018. The husband defended the English proceedings on the basis that the court did not have jurisdiction. The wife’s divorce petition was dismissed in April 2019 because the court did not have jurisdiction when she filed her petition. On 15 April 2019, the wife filed a divorce petition in Germany, and the husband applied to lift the stay on his divorce proceedings.

The husband requested a declaration that due to the PNA, the wife had no entitlement to maintenance after the termination of the marriage. The husband also sought a declaration that there was no entitlement to equal sharing of the accrued gains during the marriage.

By June 2019, the wife had changed her position and sought a capital payment of £31m. In addition, the wife sought a declaration that the PNA was invalid, an equal share of the accrued marital gains and monthly maintenance of £150,000. The German court in which the wife lodged the divorce petition had “considerable concerns regarding the validity of the overall waiver as agreed (in the PNA)”.

During the divorce proceedings in Germany, it became clear to the wife that the German courts would not award her more than £15,000 per month, which would not be capitalised. She was already receiving this sum from the husband, which was a far cry from the £150,000 she sought. The husband insisted that any settlement the wife received should be held on trust for her, but she disagreed and complained this would be to her detriment. It further transpired that the German courts would take over 10 years to resolve matters. The wife instructed her lawyers to withdraw all her claims in Germany.

Application to the English courts

After withdrawing her claims in Germany, the wife applied for permission to bring a claim in the English courts under Part III of the Matrimonial and Family Proceedings Act 1984 in February 2021. An application under Part III gives the English courts the power to grant financial relief after a marriage has been dissolved (or annulled) in a foreign country. The husband did not dispute that he should make financial provision for the wife. However, he argued it should be at the rate he was currently paying her, namely £15,000 per month plus an additional £2,500 per month for the upkeep of her home.

The case was set for a four-day final hearing in the English courts in July 2022.

Düsseldorf Agreement

Before the final hearing, the parties met without their lawyers on 7 May 2022 in Zurich at the wife’s request and again on 20 May 2022 at a hotel in Düsseldorf. Through these meetings, a supposed agreement (Düsseldorf Agreement) was reached, settling the financial proceedings. This Düsseldorf Agreement was put in writing, signed by both parties and toasted afterwards with champagne.

Shortly after the agreement was reached, the wife disputed the document’s legitimacy. The wife insisted that only “proposals” were made and that she was pressured into signing the Düsseldorf Agreement. The Düsseldorf Agreement provided financial provision to the wife as follows:

1. Monthly lifetime maintenance of €40,000;
2. A cash payment at the conclusion of English proceedings at €1.5m and a second payment of €1.5m after one year; and
3. Their property in London was to be made available to the wife on a lifetime basis insofar as this was possible (if it were not possible, another similar property would be purchased), and the cost of refurbishing it was to be borne by the owner (who would most likely be their son).

The wife spoke to her London lawyers three days after the Düsseldorf Agreement was signed and immediately sought to repudiate it.

Judgment

At the hearing, Mr Justice Moor found that the wife had repudiated the Düsseldorf Agreement. Importantly, he also said it would have been enforceable had she not repudiated it.

On the issue of jurisdiction, Mr Justice Moor was satisfied there was sufficient connection for him to make a financial award in principle and found that the wife now intended to live in the UK indefinitely. The wife made her life in the UK after her marriage had broken down, and their son was educated in the UK. The judge considered that Germany was abandoned as a place of residence 22 years ago and did not consider the parties had links to Germany to be so strong as to prevent him from making an order. This was similarly the case in relation to Switzerland.

The judge held that the wife had reached the Düsseldorf Agreement with the husband voluntarily and “with her eyes open”. Moreover, the provision set out in the Düsseldorf Agreement was very much within the bracket of possible awards he might have made in the absence of any meetings between the parties.

As a result of the repudiation, Mr Justice Moor found that the Düsseldorf Agreement was likely no longer enforceable in Germany. However, he held that an agreement was reached between the parties, which should be encapsulated in an order on the same terms as made in the Düsseldorf Agreement.

Summary

Partner Matthew Humphries comments on agreeing out of court settlements:

“The above case exemplifies why clients should always seek legal advice before signing an agreement to settle their financial claims. Even with a repudiation of the agreement by one of the parties, a court can uphold the settlement, as it tends to give considerable weight to agreements entered voluntarily.”

NOTE: All monetary values referred to above are at current pound equivalent values as at 1 March 2023 for ease of the reader.

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