Recently there has been much talk within the legal world about the Law Commissioner’s report, dated 26th February 2014 on the Matrimonial Property Needs and Agreement which includes a draft bill suggesting ways in which prenuptial agreements could be binding. Before going into detail about the Law Commissioner’s report, it is important to first look at the current legal position regarding how the courts deal with court cases which involve a prenuptial.
Prenuptial and post-nuptial agreements were until recently approached with considerable suspicion within the legal system. There have been a number of high profile cases where the outcome of an application for financial provision upon a divorce has been determined or heavily influenced by a prenuptial or postnuptial agreement. There has also been a great deal of interest about postnuptial agreements in the media and a case called Radmacher v Granatino 2010 strengthened the legal weight of such agreements significantly; however, it did not make prenuptials binding in England and Wales contrary to tabloid myth. What that case did do was set out certain principles for a court to consider when parties apply to the court for a financial order if not obliged to give effect to a prenuptial agreement.
The main principles are:-
- Each party should intend for the agreement to be binding, however, the parties cannot, by agreement, oust the jurisdiction of the court by the terms of a prenuptial agreement, however well drafted;
- The court should give effect to a prenuptial 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;
- The contents of prenuptial agreements must be fair. A prenuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family. In addition to this, a failure to meet a party’s needs could render it unfair to hold the parties to the terms of the prenuptial agreement;
- The circumstances surrounding the parties entering into a prenuptial agreement will affect the weight given to the agreement upon divorce. Therefore, any evidence of fraud, duress, undue pressure or misrepresentation will negate the effect of the agreement;
- The weight attached to the agreement may be reduced if the parties have not exchanged full financial disclosure or taken legal sound advice. The question is whether in the individual case, there is a material lack of disclosure, information or advice.
The Supreme Court decision in Radmacher developed the law as far as was possible without statutory reform. The Law Society’s recommendation for statutory reform was made in the light of the observation made in the Supreme Court’s decision of Radmacher about the abolition of the common law rule that such contracts are void for public policy reasons. What is now proposed by the Law Commission’s Report is the introduction of Quality Nuptial Agreements (QNA) which suggests QNA’s are contractually enforceable and not subject to intervention by the court. However, the parties cannot oust the jurisdiction of the court when looking at the parties needs. If the QNA is invalid for the reasons below, it can still be taken into consideration under the traditional principles of Radmacher so it is not all or nothing and may still be determinative.
A number of safeguards have been built in to ensure, as far as possible, that such agreements are only made knowingly and willingly without giving rise to hardship. Here are the mandatory safeguards to be complied with for a QNA to carry weight:-
- The agreement must be contractually valid, so no vitiating factors such as duress, misrepresentation or mistake;
- The agreement must contain a statement signed by both parties (in addition to their execution of the document as a deed) stating that s/he understands that the agreement is a QNA and that it will remove the court’s discretion to make financial provision orders, save in so far as the agreement leaves either party without provision for their financial needs;
- The agreement must be signed no less than 28 days before the marriage or civil partnership, if it is signed within 28 days, it will not be classed as a QNA but may still be determined under the Radmacher principles;
- There must be disclosure of material information about the party’s finances. Non disclosure would not necessarily lead to the agreement not being a QNA so the material financial disclosure really depends on the circumstances of the agreement;
- Both parties must receive legal advice. Therefore, if one party refuses to take legal advice, the QNA will be void but the agreement may still be determined under the Radmacher principles.
Therefore, in broad context, let’s refer to a recent case to see how a QNA could apply. In the case of Luckwell v Limata 2014 this involved an 8 year marriage with 3 children. The wife was wealthy and both parties entered into a prenuptial agreement 12 days before their marriage ceremony. The parties intended to keep their separate property and not to make any claims against each other in respect of maintenance or capital, although it did state that wife could make a claim against the husband for maintenance if she chose to do so. Wife was anticipating receiving monetary gifts from her family and on each occasion, the prenuptial was followed up by 2 supplementary agreements during the marriage. The Judge found that the marriage and gifts to the wife would not have happened without the agreement or supplemental agreements being in place. In relation to the husband’s needs, the Judge was scrupulous so as to avoid gender mis-discrimination to the husband as he was the weaker party. The Judge said that the case was about needs and passed concern about the different standard in properties in which the children would be passing between in that wife had a large family home in Connaught whilst the husband was renting a property and borrowing money. The Judge adopted the principles of Radmacher and based his decision on needs with a step down. Wife had to provide a house for the husband in the sum of £900,000 until the children reached the age of 22 years; the house was then sold and the money went back to the wife who had to provide a house for life to the husband until the end of his life on trust to be reverted back to the wife upon the husband’s death.
So in the above case, how would a QNA play out? I am presuming disclosure would not be an issue as presumably the fact that there were 2 supplementary agreements would have helped. The parties received plenty of legal advice, however, the timing of signing the agreement just 12 days before the marriage would have made a QNA void and it would have been determined (as it was) under the principles of Radmacher.
In terms of when these changes are likely to take place, if at all, really depends on the Government who now have a year to respond. Therefore, watch this space, we should all know by the end of February 2015 as to whether prenuptial agreements will be contractually binding.
The contents of this article are intended for general information purposes only and shall not be deemed to be, or constitute legal advice. We cannot accept responsibility for any loss as a result of acts or omissions taken in respect of this article.
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