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Hayley Trim's Analysis: The Law Commission's report on Matrimonial Property, Needs and Agreements

Date:26 FEB 2014
Senior Associate Solicitor

Hayley Trim

The Law Commission's report on Matrimonial Property, Needs and Agreements contains some bold recommendations for reform.

While the headlines are bound to focus on the proposal for ‘qualifying' marital agreements (pre- and post-nups) to be contractually binding, and the criteria for such an agreement to ‘qualify', the recommendations concerning needs are perhaps of more significance in light of the number of couples they are bound to affect.

Needs are currently assessed in the light of all the circumstances of the case and the discretion of the judge is broad. The Law Commission accepts what practitioners have known for many years: there is considerable regional variation as to what award will be made (London having a reputation for being particularly generous to wives, a joint lives order being much more likely in the PRFD). The Commission supports the current stated objective of the court - to assist each party to obtain financial independence from the other. The recommendation therefore is that the Family Justice Council (FJC) will draft guidelines to provide for a more consistent interpretation of need. This is undoubtedly welcome - and will hopefully temper the postcode lottery which has led to something akin to a jurisdiction race to issue the petition.

Of course we still do not know what these guidelines will look like so we will have to wait a little longer. In the meantime the Commission has gone even further to propose that there be investigations into the possibility of introducing a formulaic approach to the division of assets and ongoing maintenance in needs cases. This will fill some practitioners with horror, but for many, particularly those couples who are likely to face a divorce without legal representation post legal aid cuts, this could provide welcome certainty. It is suggested that such a formula take into account a variety of circumstances and will not provide just one answer but a bracket within which the parties can negotiate, along the lines of the Canadian model.

It is perhaps surprising that the Commission is in favour of a formula when they took the view that it was too controversial to make recommendations concerning the treatment of non-matrimonial property. However cases where non-matrimonial property will be relevant will be those cases where both parties' needs are met and in making marital agreements binding the Commission is offering another route to ensuring that such property is dealt with in a predictable way. The Commission supports the idea that marital agreements are a good way to ring-fence non-matrimonial property (subject always to needs) and those seeking certainty would therefore do well to enter a ‘qualifying agreement'.

And so to pre-nups.

Despite having suggested that they were against imposing a time limit on agreements in the initial consultation (since it would only serve to move the pressure to sign to a different date), a deadline of 28 days pre-wedding has been proposed. Unsurprisingly (although contrary to the decision in Radmacher) legal advice and disclosure are absolute musts and cannot be contracted out of. It will not be possible to contract out of meeting a party's needs, so those drafting prenups will need to pay careful attention to the definition of needs to be given by the FJC.

Qualifying agreements will be contractually binding. This is very different from the existing position and family lawyers may need to brush up on their contract law. The usual contractual principles will apply (so an agreement will be invalid for undue influence, fraud, etc). This begs a comparison with financial settlements negotiated on divorce which are not enforceable contracts; for example the case of S v S (Financial Remedies: Non-Disclosure: Materiality) [2014] EWCA Civ 95, [2014] 2 FLR (forthcoming) (see the forthcoming article in March Family Law) where a financial compromise was not a contract and was therefore not automatically undone by fraud. The question of what will amount to undue influence will also be highly important - just because an agreement has been entered into more than 28 days before the marriage does not mean that invitations haven't been sent, the dress bought, etc and by that stage a financially weaker party may feel they have no choice. Is that enough to undo an agreement?

Provided that the status of the qualifying nuptial agreement can be proved, the court will not be able to make orders against either party save for the benefit of a child of the family, or to meet a party's needs. This is an uncharacteristic ceding of jurisdiction by the courts. Although the safety net of needs remains, to actually exclude the court's jurisdiction in this way is quite a step-change.

Of course in cases where there is the money and/or appetite to litigate, the argument may simply shift to whether there was indeed full disclosure, or undue influence. Lawyers advising either party on the pre-nup will need to be particularly careful as they are potentially at even greater risk of being attacked several years down the line for providing inadequate or negligent advice.

Broadly the recommendations promote certainty which is to be welcomed. It is perhaps a missed opportunity not to have asked the FJC to provide guidance on matrimonial property as well as needs, and we must wait for those guidelines before we can assess how workable they will be in practice.

Undoubtedly the proposals are aimed at trying to alleviate some of the pressure on the overstretched court system. It is to be hoped that the guidance will help those who cannot afford lawyers and that it will assist in promoting mediation and other methods of dispute resolution since there is less cause for a judge to exercise discretion.

Hayley Trim is a professional support lawyer working with the Irwin Mitchell Family and Contentious Probate teams across the country. She previously practised as a specialist family solicitor in London.

The views expressed by contributing authors are not necessarily those of Family Law or Jordan Publishing and should not be considered as legal advice.