Bill and Melinda Gates recently announced their separation after twenty seven years of marriage.
This divorce is notable for two reasons, firstly because Bill Gates is listed as the fourth wealthiest man in the world (at $124 billion).
Secondly, because unlike many divorces of the rich and famous that we have seen recently, they have resolved the related financial remedy proceedings discreetly and consensually with the assistance of their lawyers in a separation agreement.
Bill and Melinda Gates reside in Seattle, in the USA. The media in the US have accessed the divorce petition, which states that ‘this marriage is irretrievably broken down’, but are unable to access the separation agreement.
The children of the couple are now grown up and there are clearly sufficient funds for the spousal support not to be required. Therefore, it is simply a question of dividing up their fortune.
Other separating high net worth couples in England and Wales can learn some lessons from the Gates divorce, despite the difference in jurisdiction.
High net worth couples in this jurisdiction, like in the US, are able to enter in a separation agreement.
Separation agreements in the UK
The law as to the status of agreements in England and Wales is the same whether it relates to a pre-nuptial agreement (before marriage) or a post-nuptial agreement (separation agreement).
While pre-nuptial agreements have pierced the cultural consciousness through the mediums of television and celebrity gossip columns, separation agreements are not so well known. Nevertheless, they can prove to be effective in the right set of circumstances.
The important point to remember is that no agreement can totally oust the jurisdiction of the court in England and Wales. Our courts will always retain jurisdiction to ensure that agreements are fair. The key principle is that: "The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
According to the Supreme Court, in Radmacher (formerly Granatino) v Granatino [2010] UKSC 42 (https://www.bailii.org/uk/cases/UKSC/2010/42.html ).
When considering what weight the court will attach to any agreement, the court will take into account:
- Both the husband and wife must enter into the agreement of their own free will, without undue influence or pressure, and informed of its implications;
- Each party should intend that the agreement should be effective;
- Are any of the standard vitiating factors: duress, fraud or misrepresentation, present? Even if the agreement does not have contractual force, those factors will negate any effect the agreement might otherwise have.
- Unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage, would reduce or eliminate it.
- When the Court considers whether it would be fair to hold the parties to their agreement, it will ensure that the reasonable requirements of any children of the family are not prejudiced by the agreement.
The reason why the court should give weight to a nuptial agreement is that there should be respect for individual autonomy.
The Supreme Court considered this to be particularly true, where the agreement of both parties addresses the existing circumstances, that is, a separation agreement, rather than merely addressing the contingencies of an uncertain future.
Therefore, agreements negotiated at the point of separation, which subsequently breaks down, because one or other party thinks they should have more, may very well find that the court holds them to the agreement if they entered into the agreement freely, with sufficient legal advice.
