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Hayley Trim's Analysis: Safeguards and needs in marital agreements – where are we now?

Date:24 FEB 2012

Hayley Trim, Family Law PSLThe Law Commission’s recommendations on marital agreements are going to be pushed back as their remit has been expanded to take into account the treatment of needs and inherited wealth in financial proceedings (final report expected 2013). A couple of recent cases have highlighted to me that perhaps statutory guidance on nuptial agreements is needed sooner rather than later despite the relatively small proportion of divorcing couples affected.

One thing that struck me was the differing approach to the need for safeguards – in particular independent legal advice and disclosure. While the presence of such safeguards makes it more likely a pre-nup will be upheld, the absence of them does not necessarily exclude this, as Radmacher (Formerly Granatino) v Granatino [2010] UKSC 42, [2010] 2 FLR 1900 clearly showed. There the husband was a commercially savvy individual and the Supreme Court considered he knew what he was signing up to. He was awarded a housing fund which would revert to the mother when the children finished education and maintenance for the same period – effectively a Sch 1 award.

In the recent case of V v V (Prenuptial Agreement) [2011] EWHC 3230 (Fam), [2012] 1 FLR (forthcoming) the pre-nup between the Swedish wife and Italian husband which purported to exclude the husband’s pre-acquired wealth and any subsequently gifted of inherited assets from the marital property, made no reference to any children of the marriage (of which there were now two), and there had been no advice or disclosure. However Charles J took the view that rather than carrying little or no weight as the first instance judge had held, the pre-nup should carry significant weight. He pointed to there being no evidence that the parties did not intend the agreement to be effective and were aware of its obvious purpose notwithstanding that neither of them had advice. The parties’ nationalities also supported this approach. The wife would have entered the agreement irrespective of legal advice and disclosure and there was no evidence of undue pressure. In the event the outcome was dictated by needs and a Mesher order was made to reflect the agreement and other factors pointing to a division in favour of the husband. The effect was that the wife would have to downsize when the children reached the end of their education and the amount of the Mesher order was calculated accordingly.

In Kremen v Agrest (Financial Remedy: Non-Disclosure: Post-Nuptial Agreement) [2012] EWHC 45 (Fam), [2012] 1 FLR (forthcoming) Mostyn J considered a post-nuptial settlement which restricted the wife to an award on divorce of $1.5m. The circumstances were very different from those in V v V and there was an indication of undue pressure from the husband. The judge held that the wife had not known what rights she was foregoing when she signed the postnuptial agreement and so her agreement was not an informed one. He went on to say that it will be an unusual case where it can be said that ,absent legal advice and full disclosure, a party can be taken to have freely entered into a marital agreement with a full appreciation of its implications. There would have to be clear evidence of significant economic capacity on the part of the claimant spouse before the assessment of need was suppressed to that minimal level imposed on Mr Granatino. In Kremen, it would be grossly unfair to hold the wife to an agreement that deprived her of her fair share of a fortune to which she had in her own way equally contributed. The agreement did not meet her reasonable needs and prejudiced the needs of the children. It was therefore accorded no weight.

These are very different cases and easily distinguishable from one another. However the principle expressed by Mostyn J that it will be an unusual case where legal advice and full disclosure are not required to demonstrate a full understanding of the implications of an agreement does not for me sit particularly easily with the approach of Charles J in V v V. The wife in V v V was educated, but she was the financially weaker party and the couple already had a child together for whom she was caring full time. The result in V v V was probably not very different to what it would have been irrespective of any pre-nup, given the limited capital available and the husband’s pre-acquired assets. But if there had been more money so that all parties’ needs could be met easily and there was a (pre-acquired) surplus, would there have been a Mesher order then? Would the wife’s needs have been interpreted quite so restrictively under the pre-nup? Or would she have been treated more like the wife in Z v Z (No 2) (Financial Remedies: Marriage Contract) [2011] EWHC 2878 (Fam), [2012] 1 FLR (forthcoming) where needs were more generously interpreted despite the premarital agreement?

I look forward to the Law Commission’s recommendations. However whether looking at these issues in isolation from the remainder of s 25 is the right approach remains to be seen.

Hayley Trim is a Family Law PSL at Jordan Publishing and was formerly a family solicitor practising in London.

She works on the Family Law online major works providing updating notes on cases and other relevant developments as they happen for The Family Court Practice, Children Law and Practice and Matrimonial Property and Finance online.

Contact Hayley on Twitter: @HayleyTrim