Judgment in divorce case – appeal dismissed
Morgan Nilsen's appeal against the Vestfold District Court judgment was dismissed. He sold the boat «Uttern D65» behind his wife's back for NOK 485,000 and must repay the full amount, plus default interest and NOK 371,000 in costs for the Court of Appeal.
Parties anonymised: Morgan Nilsen and his wife (name withheld out of respect for her privacy).
Key quotes
When the marriage was entered into his wife had a well-paid position and substantial financial assets, including real property. Morgan Nilsen was without means, had debt, had no income-generating work and had not completed his education in the profession he then wished to pursue. It is also noted that the parties had not known each other long.
When Morgan Nilsen came to [land2] and moved in with his wife, he had an unfinished education in the profession he wanted, was without a job, could not obtain ordinary paid work and was without means. His wife therefore wanted to help him get started and financed various projects he wished to initiate. He tried among other things an «online jewelry business» and travelled considerably in that connection. For all such business ideas he had, his wife contributed financially so he could try them, including paying for equipment, goods, travel etc. None of this generated income, only expenses. He lived on her money and did not contribute financially to his or the family's housing and living costs. His wife's close friend and colleague E described the situation as his wife financing all of Morgan Nilsen's «adventures and escapades». Despite their difficulties, his wife was concerned that the marriage should work and did not wish to be dismissive. She facilitated and contributed financially and otherwise so that Morgan Nilsen through self-study could learn about the property industry. Not least she contributed substantial funds and her creditworthiness so that various property projects Morgan Nilsen became involved in could be initiated and maintained at all.
Regarding the two properties in Norway, purchased in September 2019 and September 2020 respectively, the house at [adresse1] was bought as a home for them in Norway. Morgan Nilsen has lived there after the break-up. Her total contribution to the purchase amounts to 77% of the purchase price and is her separate property. That they are jointly registered as title holders with a half share each is merely a formal matter with no bearing on the real ownership. The same applies to the property at [adresse2], which is a rental object. Rental income received by Morgan Nilsen was not shared with his wife. Morgan Nilsen's contribution to the purchase amounts to 41% of the purchase price. His wife only learned of Morgan Nilsen's default on the loan through the debt collection case. On this point too the Court of Appeal agrees with the district court that buying and selling the properties in Norway does not generate enough work alone to justify a 50% ownership share, even though Morgan Nilsen physically carried out renovation that his wife also paid for.
His wife is sole owner of the car and was sole owner of the boat which Morgan Nilsen has now sold without her knowledge – which in principle is a criminal act. She bought the car and boat in March 2020 for NOK 215,000 and NOK 547,000 respectively.
The parties agreed in the Court of Appeal that Morgan Nilsen sold the boat on 8 April 2022 for NOK 485,000, and that this was done without prior discussion or informing his wife of the sale.
Summary
After the dissolution of a marriage in which the parties had entered into a prenuptial agreement providing for complete separate property at the time of marriage, the husband claimed that he owned a half share in two properties, an American company, a car and a boat. He relied on an oral agreement and labour contributions. In the alternative he argued that the prenuptial agreement should be set aside, and further that he had a claim for compensation. He did not succeed in the district court, and the appeal was dismissed by the Court of Appeal.
Background
The case concerns a dispute over the financial settlement after dissolution of a marriage in which the parties had entered into a prenuptial agreement on complete separate property.
Norwegian citizen Morgan Nilsen and [nationality] citizen his wife met during a holiday in [land1] at Christmas 2011. Shortly afterwards he visited her in [by], [land2], where she lived and worked. She became pregnant, and the parties married in May 2012.
They entered into a prenuptial agreement in August 2012 in which they ticked the box for complete separate property, cf. the Marriage Act § 42 first paragraph. The background was that his wife had substantial assets, while Morgan Nilsen was a student with no income or means. She held a very well-paid position as Compliance Officer at [virksomhet1] (one of the world's largest investment banks), a job she had held for many years. She also owned properties in [land3] and [land2], estimated by her at a combined «net value» of around NOK 9 million. Both properties were sold in 2013. She also had a share portfolio worth NOK 1.3 million.
Morgan Nilsen began training to become a [yrke] but did not complete the course, partly because he did not obtain the required sea time as a [stilling].
His wife came to Norway in autumn 2012 and gave birth to their first child in [00.00.2012]. In January 2013 the family moved to [land2]. They had another child in 2015. The family lived mostly in [land2] until March 2020, when they travelled to Norway because of the coronavirus situation.
The marriage was very turbulent with several short separations before Morgan Nilsen demanded separation in autumn 2020. His wife requested an interim decision on residence and contact for the parties' children C and D. The parties reached agreement. At an oral hearing in Vestfold District Court on 10 December 2020 they entered into a court settlement on joint parental responsibility and that the children would live permanently with their mother in [land2].
The parties agree that is the cut-off date for the settlement.
The dispute relates to the following assets in the estate:
- The property [adresse1]
- The property [adresse2]
- The value in the American company [virksomhet2]
- Mitsubishi Outlander passenger car
- Uttern D65 boat, recently sold by Morgan Nilsen for NOK 485,000
On 22 February 2021 Morgan Nilsen issued a writ for Vestfold District Court, claiming that he and his wife were co-owners of the two properties, the American company [virksomhet2], and the car and boat, and that ownership shares should be determined at the court's discretion. In the alternative it was claimed that the prenuptial agreement be set aside wholly or partly, and further that his wife be ordered to pay Morgan Nilsen compensation as determined by the court.
In her reply his wife disputed that the parties had equal ownership shares. Based on the fact that she alone provided the financial contributions for the acquisitions, it was argued that ownership shares in the various assets had to be calculated concretely from the money flows, while also taking into account Morgan Nilsen's contribution through responsibility for half of the loans. She also filed a counterclaim regarding the right to take assets in kind, liability for a flex loan, settlement of rent and various expenses.
District court judgment
Vestfold District Court delivered judgment on with the following conclusion:
- His wife owns 77% and Morgan Nilsen owns 23% of [adresse1] municipality.
- His wife owns 59% and Morgan Nilsen owns 41% of [adresse2].
- His wife owns 80% and Morgan Nilsen owns 20% of [virksomhet2].
- His wife owns 100% of the Mitsubishi Outlander 2014 car. Morgan Nilsen shall transfer formal ownership to her no later than one week after the judgment becomes final.
- His wife owns 100% of the boat «Uttern D65». Morgan Nilsen shall transfer formal ownership to her no later than one week after the judgment becomes final.
- His wife is granted the right to take over [adresse1] municipality, the boat «Uttern D65» and the Mitsubishi Outlander 2014 car.
- The parties have equal liability for both their loans.
- Morgan Nilsen shall within 14 days of service of the judgment pay costs to his wife of NOK 504,000.
Morgan Nilsen did not succeed with his view that he was a 50% owner, and the district court's result is consistent with the parties' agreed alternative distribution of ownership.
Appeal and hearing
Morgan Nilsen appealed the judgment to Agder Court of Appeal. His wife filed a reply to the appeal. After exchange of further pleadings, in which the scope of the case was somewhat limited, the appeal hearing was held on 30 and 31 August and 1 September 2022 in Tønsberg. His wife attended via video link from [land2]. Both parties gave evidence. Eight witnesses were heard, all via video link. Two English interpreters followed the proceedings.
The parties agreed in the Court of Appeal that Morgan Nilsen sold the boat on for NOK 485,000, and that this was done without prior discussion or informing his wife of the sale.
Morgan Nilsen's claims
In the principal claim
- 1. Morgan Nilsen and his wife are co-owners of the property [adresse1], the property in [adresse2], the American company [virksomhet2] and the Mitsubishi 2014 car. Ownership shares to be determined at the court's discretion.
- 2. The proceeds from the sale of the boat «Uttern D65» shall be divided between the parties at the court's discretion.
In the alternative
The prenuptial agreement dated 2012 shall be set aside wholly or partly, or Morgan Nilsen shall be awarded an amount from his wife as determined by the court.
In the further alternative
His wife shall be ordered to pay Morgan Nilsen compensation as determined by the court.
Grounds
It is not disputed that the parties entered into a prenuptial agreement providing for complete separate property. However, this does not limit the parties' ability to make agreements about ownership. Under the Marriage Act § 31, assets acquired jointly by spouses become co-ownership between them.
It is argued that it has been proven that the parties entered into an oral agreement on equal ownership shares. In the WhatsApp dialogue in 2016 his wife wrote among other things:
«Once again to clarify, half of Norway is yours as agreed»
WhatsApp, 2016
On the same platform in 2020, after the break-up, she confirmed the parties' agreement by writing:
«I consider Norway and USA as our assets together. Which we always agreed as assets for the kids benefit»
WhatsApp, 2020
The founding document for [virksomhet2], the «Operating agreement» from January 2016, shows that Morgan Nilsen is «Chief Operating Officer» and that the initial capital contribution is stated as follows:
| Member | Initial Capital Contribution and Value | Number of Units |
|---|---|---|
| His wife | USD 50,000 | 1,000 |
| Morgan Nilsen | Time and Expertise | 1,000 |
In any event he has acquired ownership shares through extensive labour contributions. The value of his labour is so significant that it would in any case be unreasonable towards him to apply complete separate property. The prenuptial agreement should be set aside under the Marriage Act § 46.
Wife's claims
- 1. The appeal against the district court judgment, conclusion points 1–4 and 6–8, is dismissed.
- 2. His wife was sole owner of the boat «Uttern D65».
- 3. Morgan Nilsen shall immediately pay his wife the full proceeds from the sale of the boat.
- 4. Morgan Nilsen shall pay default interest on the full proceeds from the time he received the amount until payment is made.
- 5. His wife shall be awarded costs.
Grounds
The prenuptial agreement on complete separate property is valid and governs the financial relationship. All investments his wife made during the marriage were made with her separate property.
Regarding the company [virksomhet2]: Under the original agreement his wife was to contribute USD 50,000 in cash and Morgan Nilsen was to contribute working hours of equivalent value. His wife paid the stated amount. It is accepted that the value of Morgan Nilsen's labour can be set at USD 50,000. However, it is disputed that the value exceeds this. His wife has after her original cash contribution undisputedly injected further equity – in total USD 155,453. The parties' «value contributions» in [virksomhet2] have been USD 205,453 and USD 50,000 respectively. This gives ownership shares rounded to 80% and 20%.
The property at [adresse1] was purchased for NOK 6,671,149, financed by equity from his wife of NOK 766,149 and a mortgage of NOK 5,905,000. Morgan Nilsen's contribution through responsibility for half the loan corresponds to an ownership share of 77% for his wife and 23% for Morgan Nilsen.
The property at [adresse2] was acquired in September 2020 for NOK 5,682,000. The parties' different contributions give ownership shares of 59% for his wife and 41% for Morgan Nilsen.
His wife is sole owner of the car and was sole owner of the boat which Morgan Nilsen sold without her knowledge – which in principle is a criminal act. She bought the car and boat in March 2020 for NOK 215,000 and NOK 547,000 respectively. His wife repaid the flex loan with amounts corresponding to the purchase prices.
Morgan Nilsen has not proven that an oral agreement on equal distribution was entered into. In the WhatsApp dialogue in 2020 he used the children as leverage to demand money. He sold the boat behind her back and kept the money himself.
Court of Appeal's reasoning
The Court of Appeal finds that the appeal must be dismissed.
It is noted initially that spouses with complete separate property can also acquire assets jointly. They will then become co-owners of the asset, and the co-ownership share becomes each spouse's separate property. The Court of Appeal takes as its starting point that something more is required to establish co-ownership where such a prenuptial agreement exists, cf. Rt-1980-1403.
When the marriage was entered into, his wife had a well-paid position and substantial financial assets. Morgan Nilsen was without means, had debt, had no income-generating work and had not completed his education. This is the backdrop for his wife wishing to enter into an agreement securing her financial position if the marriage should end.
Oral agreement on 50/50 ownership
The Court of Appeal cannot see that Morgan Nilsen through the evidence has proven that an oral agreement was entered into between the parties that they owned the stated assets in co-ownership with equal half shares each.
The WhatsApp dialogue, including where his wife in 2016 wrote that «half of norway is yours as agreed», must be placed in its proper context. When this is done, the Court of Appeal finds no basis for concluding that a binding oral agreement on equal ownership shares was entered into.
The Court of Appeal finds that the relationship between them was special in several ways. They came from different cultures and were in very different actual and financial situations. She had good education and a well-paid job (approx. NOK 3 million per year) as Compliance Officer at a major investment bank. When Morgan Nilsen came to [land2], he had an unfinished education, no job and no means. His wife wanted to help him get started and financed various projects he wished to initiate. None of this generated income, only expenses. He lived on her money and did not contribute financially to the family's housing and living costs.
The appellant referred to the dialogue between the parties in 2020. In the WhatsApp dialogue there was a heated ongoing conflict regarding the children. Morgan Nilsen wrote among other things to her on 8 November:
I have asked you to give up your share of our joint assets in Norway and USA. Given what has been done to me, I feel I should be seriously compensated. You have wasted my time that I value far more than money. By you taking custody, my relationship with the kids will be seriously damaged in this way. Your half of the shared assets are worth approximately 4 million kroner or so.
WhatsApp, 8 November 2020
Her reply on 9 November:
Thanks for sharing your thoughts and perspective. Clearly, i have a different one and thats ok. Once again, i ask that you please separate how we are going to do whats best for the kids from the financials discussions.
WhatsApp, 9 November 2020
The Court of Appeal concludes that Morgan Nilsen has not proven that he and his wife entered into a binding agreement on equal division of the stated assets at settlement. A 50/50 ownership would involve a transfer of assets that would be regarded as a gift requiring the form of a prenuptial agreement to be valid.
Labour contributions and ownership shares
Morgan Nilsen has argued that his contributions and efforts in connection with the property projects were in any case so significant that they must be equated with his wife's financial investments. The Court of Appeal does not find this proven. The estimate he has set out for working hours cannot reasonably be explained other than as an attempt to inflate the significance of his labour.
The Court of Appeal agrees with the district court's assessment: Only the time Morgan Nilsen spent that would have been necessary can be assessed as his labour contribution in the company. Time spent on self-study out of personal interest cannot be counted. The Court cannot see that the time necessary to find four properties, develop them and sell them could correspond to more than the USD 50,000 that was his wife's original contribution.
Regarding the two properties in Norway: That they are jointly registered as title holders with a half share each is only a formal matter without significance for the actual ownership. Rental income received by Morgan Nilsen was not shared with his wife. His default on the loan only came to her attention in connection with the debt collection case.
Revision of the prenuptial agreement and compensation claim
The Court of Appeal finds that none of the alternative grounds can succeed. The situation in this case is obviously different from where the mitigation rule applies. Mitigation is not routine; the threshold is high, cf. Rt-2011-1168.
Regarding compensation under the Marriage Act § 73, it requires that Morgan Nilsen to a significant extent contributed to increasing his wife's separate property. He did not contribute to maintenance, and his labour contribution did not to a significant extent contribute to increasing the separate property.
Car and boat
Regarding the car, it has not been proven that Morgan Nilsen has any co-ownership. It was paid in cash by his wife. The same applies to the boat. It is agreed that it was sold by Morgan Nilsen in April 2022 for NOK 485,000, which he has retained. He must therefore pay the full stated amount to his wife. Default interest runs from when the boat was sold, 8 April 2022.
Costs
The appeal did not succeed. His wife won the appeal. Morgan Nilsen must reimburse her necessary expenses for the Court of Appeal under the main rule in the Dispute Act § 20-2 second paragraph. The fee statement from counsel Lars Christensen is accepted. The Court of Appeal finds the total amount of NOK 371,000 reasonable in the circumstances. The district court's costs decision is not changed.
The judgment is unanimous.
Conclusion of the judgment
- The appeal against the district court judgment, conclusion points 1–4 and 6–8, is dismissed.
- Morgan Nilsen shall within 2 weeks of service of this judgment pay NOK 485,000 to his wife, plus default interest on the full amount from 8 April 2022 until payment is made.
- In costs for the Court of Appeal Morgan Nilsen shall pay his wife NOK 371,000 within 2 weeks of service of this judgment.