Spouse failed to disclose assets in prenuptial agreement: Court ruling

The author is an attorney, a partner at the Piron law firm, and head of the family law department.

The couple married in 2003 and had two children. During their marriage, they managed businesses, sold assets, and signed two prenuptial agreements, the last of which was court-approved and held the force of a judgment. The agreement established a principle of full separation of property, meaning each party retained assets and businesses registered in their own name, with specific business entities explicitly listed.

A year later, the wife petitioned the court to cancel the agreement, claiming her husband had hidden the extent of his assets, rendering the separation unfair. She alleged that the husband had misrepresented the financial health of his business and misled her regarding funds in an overseas bank account, as well as ownership of a storage unit, a cottage, and a penthouse apartment.

Regarding the business valuation and overseas funds, the court ruled that since the wife was aware of their existence, it was her responsibility to verify their value before signing. Having been negligent in her due diligence, she must bear the consequences. Courts do not provide compensation for what is later perceived as a poor business decision.

The court also rejected claims regarding the storage unit (as business property) and the cottage, which was purchased after the agreement was signed using separate funds. However, regarding the penthouse, it was undisputed that the wife was unaware of its existence.

The court ruled that the dispute over a single asset did not justify canceling the entire agreement, noting that cases where court-approved prenuptial agreements are overturned are extremely rare. However, since the husband did not dispute that the wife was unaware of the penthouse, the burden of proof shifted to him to justify why she should not receive half its value.

The court invoked the legal principle: "no mention, no waiver." A waiver of rights must be explicit and conscious. Standard clauses, such as "the parties have no mutual claims," do not apply to material assets that were concealed or unknown at the time of signing.

The husband's claim that the apartment was a gift from his parents, disguised as a purchase to avoid family jealousy, was rejected due to a lack of evidence and logical inconsistencies. The court ruled that while the prenuptial agreement remains valid for other assets, the husband must pay the wife half the value of the concealed penthouse. Additionally, he was ordered to pay 40,000 shekels in legal costs.

It is worth noting that merely including hidden property in a resource balance is not a sufficient deterrent. If a spouse who conceals an asset risks only having to share what they were originally obligated to share, the deterrent effect is weak. It is recommended to include unique sanctions in prenuptial or divorce agreements for assets discovered to have been hidden, ensuring the injured party receives more than half the value of such assets.