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Meta Title :Charlotte Sanders: Where are we now with pre-nuptial agreements?
Meta Keywords :family law, pre-nuptial agreements, qualifying agreements, radmacher, divorce, financial remedies, law commission report
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Apr 2, 2014, 03:55 AM
Article ID :105389
Since the seminal case of Radmacher (Formerly Granatino) v Granatino  UKSC 42,  2 FLR 1900 there has been a shift in how pre-nuptial agreements are viewed. Family practitioners have adapted to English law becoming more in line with that on the continent, representing a move towards recognising the importance of autonomy within family law.
This mentality towards pre-nuptial agreements has been confirmed over the years, in cases such as Z v Z  EWHC 3878 (Fam) and V v V (Prenuptial Agreement) EWHC 3230 (Fam),  1 FLR 1315. Indeed, the potential enforceability of pre-nuptial agreements has been so widely accepted that in February 2014 the Law Commission published its report entitled Matrimonial Property Needs and Agreements, recommending that the equivalent of pre-nuptial agreements (qualifying nuptial agreements) should be given legal standing.
This would greatly minimise the uncertainty and judicial discretion in this area, and some have hailed the report as a major change in English matrimonial law. However, does the Law Commission report actually change anything?
Law Commission proposals
In its report, the Law Commission has proposed that there should be legally binding ‘qualifying' nuptial agreements, which would allow married couples and civil partners to make an agreement as to how their assets should be divided were they to separate. The report even includes a draft Bill.
Legislation on this topic would provide further certainty and predictability in this area of the law, which is a central requirement for the rule of law. It would also emphasise the importance placed on autonomy and ability for individuals to exercise greater financial control over their lives.
The Law Commission though has suggested that there be some caveats to the general principle of enforceability of nuptial agreements. This is that nuptial agreements must ‘qualify' to be enforceable. A qualifying nuptial agreement is one which meets the financial needs of both parties, as well as the needs of any children. Further, such agreements would only be legally binding if both parties had received independent legal advice prior to signing the agreement and if they had disclosed their financial position beforehand. The report also recommends that the agreements should be entered into at least 28 days before the marriage takes place.
As Professor Elizabeth Cooke said, the Law Commissioner for property, family and trust law, 'qualifying nuptial agreements would give couples autonomy and control, and make the financial outcome of separation more predictable'. However, 'we have built in safeguards to ensure that they cannot be used to impose hardship on either party, nor to escape responsibility for children or to burden the state'.
Does this represent a change to the current law?
It is suggested that these pre-signing requirements are far from revolutionary and merely reflect the guidance originally set down in Radmacher v Granatino, which has been clarified and developed in subsequent case-law.
Proper legal advice and appreciation of the agreement's implications - AH v PH
This issue was recently looked at in AH v PH (Scandinavian Marriage Settlement)  EWHC 3873 (Fam),  Fam Law 441. Mr and Mrs H were from the same country in Scandinavia. They were both comparatively young (in their early 30s), they were married for 4 years (with one and a half years of cohabitation in addition) and they had two young children. Although their wedding took place in Scandinavia, they had lived in London for the duration of their marriage.
Mrs H had very few assets, while Mr H had a net worth of £76m (derived from a gift from his uncle a few years prior to the marriage).
They signed a pre-nuptial agreement, which was negotiated and executed in Scandinavia, stipulating that there should be a regime of partial separate property. It provided that Mrs H would receive 10,000,000 Kroner (approximately £850,000) in order to purchase a property in Scandinavia. This was in fact more generous than she would have received under the law of the country in which the agreement was signed.
However, Moor J declined to uphold the agreement. He was not satisfied that at the time Mrs H entered into the agreement she had a full appreciation of its implications. He cited three main reasons for his decision:
(1) The agreement did not provide for English housing for Mrs H, and she wanted to remain in London.
(2) Mrs H had not been made aware of the option of making wider financial claims under English law. As she was being divorced under the English system, the agreement could not bind her.
(3) The agreement did not prevent a claim for maintenance. This allowed Moor J to conclude that she would be awarded maintenance of £200,000 pa, capitalised to a lump sum of £2.25m.
This case shows that the courts are not just a rubber stamp, and if there is not proper legal advice in advance of signing the agreement it may not be binding. The case is also a warning to matrimonial lawyers that if clients are international, but have a link to England, English advice on the pre-nuptial agreement will be essential. This case ties in with the Law Commission's qualifying criterion that there be proper independent legal advice prior to signing the agreement.
Needs - Luckwell v Limata
Is the concept of departing from pre-nuptial agreements to meet needs a new one? Does this detract from one of the main reasons these agreements were allowed to be binding in the first place, namely the importance of recognising autonomy?
The case-law on this topic again seems to tie in with the Law Commission's approach. Originally, in Radmacher v Granatino the court set out that very great weight should be given to pre-nuptial agreements, so long as none of the vitiating factors is present. Many considerations are to be taken into account when deciding whether to uphold the agreement, including current and likely future need. In Radmacher v Granatino, this was one of the main factors, which might have swayed the judge into making an order in favour of the husband under the Matrimonial Causes Act 1973, rather than sticking to the letter of the agreement.
This ‘factor' was most recently highlighted in Luckwell v Limata  EWHC 502 (Fam),  2 FLR (forthcoming) . The wife was from a very wealthy family. The husband had modest means of his own. The parties began cohabiting in 2004, and married in 2005. Before the wedding, the parties signed a pre-nuptial agreement, setting out that they intended to keep their property separate and would not make claims against each other's property. The agreement specifically mentioned that the wife would retain gifts from her family. At the time of signing the wife owned about £750,000 (a mortgage free house gifted by her mother) and the husband owned about £500,000 (equity in a property he owned).
During the marriage, the husband and wife signed two further agreements when the wife's family were intending to give substantial gifts to her. The wife brought divorce proceedings in 2012. The husband brought financial remedy proceedings, whilst the wife sought to rely on their pre-nuptial agreement.
Holman J found that: 'There is no doubt that very great weight indeed should be given to the agreements in this case. There are no vitiating factors such as duress or non-disclosure. They were entered into freely by a mature man after expert legal advice'. However, the judge went on to state that 'the over-arching criterion remains the search for "fairness"'. The judge considered that under the pre-nuptial agreement the husband was in a predicament of real need - he had no real assets in his own name and substantial debts. He was also working part time in a hotel on the minimum wage. Meanwhile, the wife was living in the former matrimonial home in Connaught Square, with £6.74m of equity.
As such, Holman J ordered that the wife purchase a house for the husband's use, up to £900,000, until the youngest child reached 22. At that stage, the house would be sold and 55% of the proceeds would go towards funding a home for the husband's use for the rest of his life. The wife would get the remaining 45%.
This case confirms the judicial treatment of pre-nuptial agreements. However, it seems that this recent case is also in line with the Law Commission's proposals, in that pre-nuptial agreements will generally be adhered to, unless there are vitiating factors or needs are not met. Where the difference seems to be lie between the two bodies is that now the focus will clearly be on whether the needs are met, rather than the more vague search for fairness. However, in reality, this may ultimately come down to semantics, rather than a substantive change.
There is always a difficult balance to be struck between the Kantian tradition of viewing individuals as autonomous entities who should be allowed to live their lives according to their own reasons and motives, versus a paternalistic argument, justifying intervention to protect the individual and/or society in general.
It remains to be seen how the Law Commission's recommendations will be enacted, and the devil can often be in the detail. However, from an initial assessment it seems that the Law Commission has adopted the right balance. It allows individuals to agree their own future, which also comes with the benefit of reducing arguments, acrimony and legal costs at the point of separation, whilst also protecting individuals from harm.
Although it is submitted that these proposals largely mirror the position enunciated in case-law, the rule of law will also be strengthened by these proposals becoming statute, which is to be welcomed. Indeed, a focus on ‘needs' rather than ‘fairness' is likely to make the law clearer and more transparent.
Charlotte Sanders is an assistant solicitor at Vardags.
She joined Vardags in September 2013, having completed her training contract at Manches LLP where she gained experience in family, employment, litigation and private property, before choosing to qualify and specialise in family law.
Charlotte takes a keen interest in humanitarian issues: after graduating in 2009 she spent three months working for a law firm in Atlanta, USA, aiming to secure the release of three detainees held at Guantanamo Bay.