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Transcription

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PRE- and POST-NUPTIAL AGREEMENTS
– INCREASINGLY RELEVANT?
th
29 April 2009
CHRISTOPHER SHARP QC
St John’s Chambers, BRISTOL
Contents
A.
Introduction
page
2
B.
The Ante-Nuptial Agreement
2
Hyman v Hyman [1929] AC 601
4
The Issues
4
The Facts
4
The Decision
5
C.
Another Rationale
8
D.
Things have changed since 1929
11
E.
Pre-Nuptial Agreements: some case law
13
F.
Post-Nuptial Agreements: some case law
27
MacLeod v MacLeod
28
G.
The Case Law Summarised
32
H.
Pre-nuptial agreements and ante-nuptial settlements
distinguished
33
I.
The Position Elsewhere
34
J.
Straws in the Wind?
36
K.
What considerations are essential to give the best
L.
chances of a pre- or post-nuptial agreement being effective?
39
Conclusion
41
Pre- and Post Nuptial Agreements – Increasingly Relevant?
© Christopher F. Sharp QC 2009
Page 2
__
A. Introduction
Barely a month goes by just now without a clutch of articles on the
status, or the drafting, of agreements designed to regulate the
financial affairs of a married couple, whether entered into before or
after the ceremony of marriage. Most recently the discussion has
been informed by Baroness Hale’s words of wisdom in delivering the
decision of the Privy Council in MacLeod v MacLeod [2008] UKPC 64
[2009] 1 All ER 851. This decision indicated that there would be ‘no
change’ in respect of what she called “ante-nuptial agreements”
but which the rest of the world calls “pre-nupts”, but the position in
respect of agreements entered into once the parties have
“committed themselves to the rights and responsibilities of the
married state” gives rise to a number of interesting and, to an
extent, novel considerations.
The developing case law has identified differing judicial attitudes to
three classes of agreement:
-
the pre- or ante-nuptial agreement (see the cases cited
below)
-
the post nuptial agreement entered into before
separation, i.e. after the ceremony but before marital
breakdown (eg MacLeod); and
-
the post-separation agreement (eg Edgar v Edgar)
B. The ante-nuptial agreement
It is commonly said that pre- or ante-nuptial agreements are not
worth the paper they are written on and that the court will guard
jealously its jurisdiction to control the financial affairs of parties
following divorce. While there is or has been some truth in this
proposition, the supposed rationale is largely based upon a decision
now nearly 80 years old and reached in a different era. It is
instructive, so as to understand how we got here, to look at the
jurisprudential history.
NOTES
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Until 1857 no Court could dissolve a marriage which was validly
contracted. In order to effect such a dissolution it was necessary to
have recourse to a private Act of Parliament (within which Act
financial provision might be included). In 1857 the Legislature for
the first time gave to the Courts the power to dissolve the marriage
tie by a decree of divorce. The legislation which introduced that
power also gave to the court a power to make financial provision,
albeit of a limited nature, and importantly (for current purposes) for
the wife by the husband.
On July 18, 1923, the Matrimonial Causes Act of that year became
law, whereby for the first time a wife was given the right to obtain a
divorce solely on the ground of adultery by her husband. By s. 190
of the Supreme Court of Judicature (Consolidation) Act, 1925 (in
words derived from s.32 of the 1857 Act and which clearly point the
way to s. 23-25, and ss.5 and 10, of the 1973 Act), it was provided
(emphasis supplied):"(1.) The court may, if it thinks fit, on any decree for divorce
or nullity of marriage, order that the husband shall, to the
satisfaction of the court, secure to the wife such gross sum
of money or annual sum of money for any term, not
exceeding her life, as having regard to her fortune, if any, to
the ability of her husband and to the conduct of the parties,
the court may deem to be reasonable, .... and may, if it
thinks fit, suspend the pronouncing of the decree until the
deed or instrument has been duly executed.
"(2.) In any such case as aforesaid the court may, if it thinks
fit, by order, either in addition to or instead of an order
under sub-section (1.) of this section, direct the husband to
pay to the wife during the joint lives of the husband and
wife such monthly or weekly sum for her maintenance and
support as the court may think reasonable."
Hyman v Hyman [1929] AC 601
Page 4
Against such a background the House of Lords came, in April 1929
to hear the case of Hyman v Hyman. Since Hyman is still used as
identifying the basis from which the law relating to agreements
1
between parties to control their own affairs has developed , and
indeed was considered by the Privy Council in MacLeod, it is
important to look at it to see how valid it is as a foundation for the
modern approach, and what its remaining legacies may be.
The Issues
The issues which exercised the House (and had exercised the Full
Court of Appeal from whom the appeal came) continue to exercise
some commentators to-day. On the one hand was the sanctity of
marriage and on the other the sanctity of the freedom of parties to
contract and to have that contract upheld by the court. In addition,
and importantly, the House was concerned with the consequences
of the change in status which derives from divorce, and whether
there was a matter of public interest arising from that which
required the court as a matter of public policy to ensure its
jurisdiction was not ousted.
The Facts
Hyman was not in fact a case of a pre-nuptial or ante-nuptial
agreement but, like MacLeod, a post-nuptial agreement, albeit an
agreement (unlike MacLeod) entered into after the marriage had
broken down. What it was contended the agreement did, however,
was to preclude the wife from seeking the exercise of the court’s
powers over and above the provision made for her under the terms
of the agreement. It sought to oust the court’s jurisdiction (and the
husband sought to rely on such a term despite his adultery).
The parties were married in 1912, there were no children. In 1919,
by which date the husband was living in adultery with another
woman (but this – without more, eg bestiality or incest – did not
then entitle the wife to seek a divorce), the parties entered into a
See eg Wright v Wright [1970] 1 WLR 1219 per Sir Gordon Wilmer and N v N (Jurisdiction)
[1999] 2 FLR 745 per Wall J
1
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deed of separation whereby the husband agreed to pay some
capital sums and a guaranteed weekly income to the wife for life (i.e
not simply for joint lives). In exchange she covenanted (inter alia) not
to bring any proceedings for financial provision against the husband.
Following the change in the law in 1923, however, she brought
proceedings for divorce on the basis of his adultery and for
maintenance. The husband contended she was barred from
pursuing the financial claim by reason of her covenant. The judge at
first instance, and subsequently the Court of Appeal, held she was
entitled to bring the claim.
The Decision
Their Lordships did not all speak with one voice. Lord Shaw focussed
on the perceived sanctity of the status of marriage and the
proposition that an agreement which prevented the court from
reviewing an agreement between spouses, when the marriage is
dissolved by virtue of adultery (or other grounds which then involved
fault) was contrary to public policy, and in effect a licence to commit
adultery. He said:
“The true principle is that whenever the aid of a Court is
invoked to grant a judicial allowance and there is presented
to it an agreement as in bar of the exercise of the right or
the discharge of the duty under statute then the Court is
bound to look at such an agreement and to decline to be
turned from the performance of its judicial duty or the
exercise of its judicial rights when the agreement so tabled is
of a nature repugnant to and defiant of those obligations
which are inherent in the sanctity of marriage itself. To hold
otherwise would bring the law into confusion and Courts
into contempt, for, as already indicated, it would be using
Courts of law for purposes essentially subversive of society.
…… the principle, so put, applies all round, that is to say,
not only to applications for alimony in cases of divorce but in
those also of judicial separation.”
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This was not however the basis upon which the majority put the
decision. Lord Atkin held that the state had an interest in the way in
which a wife was provided for and the parties could not contract
out of the court’s jurisdiction, granted by the legislature, to review
the consequences of her change in status. This interest, however,
derived largely from the status of a married woman and the
obligation of the husband to provide for a wife - a duty of the
husband which could be enforced by the wife, while a wife, by
pledging his credit as agent of necessity but which was also a public
obligation, and could be enforced against him by the State under
the Vagrancy Acts and under the Poor Relief Acts. When the
marriage was dissolved the duty to maintain arising out of the
marriage tie disappeared. In the absence of any statutory enactment
the former wife would be left without any provision for her
maintenance other than recourse to the poor law authorities. In
Lord Atkin’s opinion the statutory powers of the Court were
therefore granted partly in the public interest to provide a substitute
for a husband's duty of maintenance and to prevent the wife from
being thrown upon the public for support. If that were true, the
powers of the Court in this respect could not be restricted by the
private agreement of the parties. “The wife's right to future
maintenance is a matter of public concern, which she cannot barter
away.”
Lord Hailsham LC took a similar position, also basing himself on the
importance of divorce as something which changes status (in a way
in which judicial separation does not) with the court having
jurisdiction to adjust financial provision in consequence upon the
change in status. He too adverted to the consequences for the
public purse of an unsupported spouse. He said:
“Such a decree does not merely affect the relationship of the
husband and the wife one to another, but it also changes
the status of each of them. In my view, the effect of the
section to which I have called attention is to give power to
the Court as incidental to the exercise of these powers and
as a condition of their exercise to compel the husband to
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make adequate provision for the support of the wife. Such a
provision is not made solely in the interests of the wife, but
also in the interests of third parties who may deal with the
wife or who may, as in the case of Poor Law Guardians,
become responsible for her sustenance. If this be the proper
inference from the language of the statute, I am prepared to
hold that the parties cannot validly make an agreement
either (1.) not to invoke the jurisdiction of the Court, or (2.)
to control the powers of the Court when its jurisdiction is
invoked.”
Manifestly things have moved on in some respects (although,
interestingly, the possibility of a party to a marriage becoming a
charge on the public purse when he or she should be supported by
their former spouse was a factor which emerged again in the policy
considerations considered by the Privy Council in MacLeod).
Nevertheless the underlying refusal of the courts and the legislature
to allow parties to contract out of the freedom to have recourse to
the courts was subsequently enshrined in s 34(1) of the Matrimonial
Cause Act 1973. That section reads:
'If a maintenance agreement includes a provision purporting to
restrict any right to apply to a court for an order containing
financial arrangements, then—
(a)
that provision shall be void; but
(b)
any other financial arrangements contained in the
agreement shall not thereby be rendered void or
unenforceable and shall, unless they are void or
unenforceable for any other reason … be binding on
the parties to the agreement.'
C. Another rationale
Parliament has given the courts a power under Part II of the 1973
Act to make financial provision and property adjustment orders after
dissolution of marriage. That power is to be exercised having regard
to all the circumstances of the case and the court has a quasi-
Page 8
inquisitional role to establish those circumstances, in the course of
which the parties are obliged, by virtue of the obligation for full and
frank disclosure (and the overriding objective), to assist.
Orders made by the court, even if by consent, do not draw their
authority from the agreement of the parties but from the order of
2
the court (de Lasala v de Lasala [1980] AC 546 ). The court has an
obligation to satisfy itself that the outcome reached is fair and
equitable. It cannot do this without exercising its investigative
powers.
Marriage changes things for the parties. The introduction of children
can wholly change a party’s economic independence and the
parties’ inter-relationship. Dissolution of marriage can have
devastating results. Vulnerabilities can be exploited and unfairness
can be perpretrated. In such circumstances external regulation of the
parties’ affairs, with the possibility of protection of the vulnerable,
3
must be advisable .
Under s.190 of the Supreme Court of Judicature (Consolidation)
Act, 1925 one of the factors in the exercise of the court’s discretion
when exercising its jurisdiction (so jealously guarded) was (as now)
the “conduct of the parties” and this included the fact of the
agreement itself. Lord Hailsham said this:
“In my opinion, the fact that the deed of separation has
been entered into by both parties, the fact that it was
executed by the wife voluntarily and upon independent legal
advice, the fact that the wife was prepared to accept the
provision then made as adequate at the time, the benefits
which she obtains in the shape of the guarantee by Mr.
Walter Hyman [H’s brother] and in the continuance of the
weekly payments after her husband's death, all form part of
that conduct of the parties which by the express terms of the
statute is to be taken into account by the Court in
2
3
see also Thorpe LJ Xydhias v Xydhias [1999] 1 FLR 683 at 691
see eg per Baron J NG KR (pre-nuptial contract) [2009] 1 FCR 35 at para [129]
Page 9
determining what it thinks reasonable. It may very well be
that when the facts come to be investigated, the Court will
say that a sum of this magnitude, so secured, voluntarily
accepted as a sufficient maintenance ten years ago, and
faithfully paid ever since, is a sufficient provision, and that
the Court will not deem it to be reasonable to order any
further payment to be made: this is not the question which
your Lordships are considering.”
Similarly Lord Atkin observed:
“This is not to say that in any particular case the Court must
make an order; still less that in this case it must do so. I
could well understand the Court coming to the conclusion
that the parties' pre-estimate of the wife's reasonable needs
was judicious, and that the allowance, continuing as it does
after the husband's decease, and being independent of any
fluctations in the amount of his fortune, needed no
supplement. But the present objection of the husband to the
Court considering the matter at all in my opinion cannot
prevail “
Thus one sees the beginning of the concept that the court will, or
may, take into account as part of their conduct the agreement of
the parties and the circumstances in which it was reached which
was to develop later through cases like Edgar v Edgar in 1981 and
Brockwell v Brockwell [1975] Fam Law 46 and which showed that
the existence of an agreement, and the weight to be given to it, are
both factors to be taken into account in the overall balance when
the court is deciding (on the facts of the individual case) whether or
not to exercise its discretion under s 25 of the Matrimonial Causes
Act 1973 to make orders for financial provision under ss 23 and 24.
The courts have for some time given significance and weight to
agreements reached between the parties, with full disclosure and
independent advice.
In Edgar v Edgar (1981) 2 FLR 19 at p.25
Ormrod LJ said in relation to a post-separation agreement, but in
words which have some resonance in the context of pre-nuptial and
pre-separation agreements too:
Page 10
“To decide what weight should be given in order to reach a
just result, to a prior agreement not to claim a lump sum,
regard must be had to the conduct of both parties, leading
up to the prior agreement, and to their subsequent conduct,
in consequence of it. It is not necessary in this connection to
think in formal legal terms, such as misrepresentation or
estoppel, all the circumstances as they affect each of two
human beings must be considered in the complex
relationship of marriage. So, the circumstances surrounding
the making of the agreement are relevant. Undue pressure
by one side, exploitation of a dominant position to secure an
unreasonable advantage, inadequate knowledge, possibly
bad legal advice, an important change of circumstances,
unforeseen or overlooked at the time of making the
agreement, are all relevant to the question of justice
between
the
parties.
Important
too
is the
general
proposition that, formal agreements, properly and fairly
arrived at with competent legal advice, should not be
displaced unless there are good and substantial grounds for
concluding that an injustice will be done by holding the
parties to the terms of their agreement. There may well be
other considerations which affect the justice of this case; the
above list is not intended to be an exclusive catalogue.”
(emphasis supplied)
See also X v X (Y and Z intervening) [2002] 1 FLR 508 in which
Munby J held that an agreement between the parties (after the
breakdown of the marriage) was a very important factor in
considering what was a just and fair outcome. The court would not
lightly permit parties to an agreement to depart from it, and a
formal agreement, properly and fairly arrived at with competent
legal advice, should be upheld by the court unless there were good
and substantial grounds for concluding that an injustice would be
done by holding the parties to it. The court must, however, have
regard to all the circumstances, in particular to the circumstances
surrounding the making of the agreement, the extent to which the
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parties themselves attached importance to it and the extent to
which the parties had acted upon it
D. Things have changed since 1929
Since 1929 there has been profound social change, particularly in
the recognition that marriage is a partnership of equals and that the
role of man and woman within the marriage are commonly
interchangeable (look again by contrast at the wording of the 1925
Act set out above). Further (as Baroness Hale points out in MacLeod)
there is no longer an enforceable duty upon husband and wife to
live together – albeit that the decree of restitution of conjugal rights
was only abolished by the Matrimonial Proceedings and Property Act
1970. Against this background and at a time of increasing
international mobility and cross-border divorces it is becoming
increasingly argued that it is anomalous that in England and Wales
we deny parties that independence which we grant to parties in
commerce to make decisions about their own future.
As increasing international mobility results in married couples
bringing before English courts the agreements they have entered
into elsewhere, so the pressure will grow and is growing for the
courts here to recognise these agreements at some level. It is plain
that even in 1929 the fact of the agreement was recognised as a
relevant consideration in the discretionary function of the court.
Nevertheless, it is certainly also true that allowing a contractual free
for all without any protection given by the courts to those who
enter into agreements at a time of vulnerability, or without the
opportunity to review the appropriateness of agreements following
changes in circumstances (eg the birth of children), could lead to
great injustice. In MacLeod Baroness Hale (referring to Baron J’s
decision in NG v KR (pre-nuptial contract) [2009] 1 FCR 35 that the
variation power in s.35 of the 1973 Act that applies to separation
agreements does not apply to pre-nuptial agreements) makes the
point that if such agreements cannot be varied then it would be
unfair to render then enforceable. Any reform of the law, therefore,
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would surely have to accommodate some provision to protect
4
parties from such injustice .
We therefore need to look at how the law has developed and
establish what the current law is.
It will be seen that pre-nuptial agreements, at least in shorter
5
marriages, are beginning to have a more significant role . As we
have seen post-separation agreements will be given significant
weight. Post-nuptial but pre-separation agreements will now
(following MacLeod) also carry greater weight. Practitioners are
more likely to be called upon to advise upon or draft such
agreements and so it is essential that, to avoid the consequences of
later litigation against the lawyer, we have a clear idea of how far
one can go.
E. Pre-nuptial agreements: some case law
The development of the law in England and Wales has been slow
and not always consistent. It is important to distinguish the forum
shopping cases from the court’s attitude to the influence of a prenuptial agreement on the substantive exercise of the discretion
under the MCA 1973 and the s.25 exercise. The forum cases are
very fact dependent and largely turn on different considerations to
the s.25 principles which govern the granting of financial relief after
divorce in England and Wales. Their relevance therefore lies in the
obiter comments made by judges. The two cases below which most
clearly show the way in which a pre-nuptial agreement will be
applied by the courts are M v M and K v K. The recent case of
Crossley (the principles of which in respect of case management and
the use of a Notice to show cause were subsequently applied by
Eleanor King J in S v S (Ancillary Relief) [2009] 1 FLR 254) may show
the way forward.
4
5
in Florida the court can vary such pre-nuptial agreements.
See the observations of Baron J in NA v MA [2007] 1 FLR 1760 at para [12]
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F v F (Ancillary Relief: Substantial Assets) [1994] 2 FLR 45:
Thorpe J
The parties were German. The husband’s significant wealth derived
from his family’s business which he had sold before the marriage.
The parties settled in England. W applied for interim maintenance. H
sought to rely upon antenuptial contracts drawn up in Germany, the
effect of which would be to provide the wife with a sum restricted
to the equivalent of the pension of a German judge.At 66G Thorpe J
said:
The other special condition which has to be considered in
this case, albeit briefly, is the existence of the antenuptial
contracts. It is not in dispute that contracts of this sort are
commonplace in the society from which the parties come.
They are much emphasised by the husband in his affidavits,
since if strictly applied they would have the ridiculous result
of confining the wife to the pension of a German judge,
whatever that may be. Equally, in the affidavits the wife is
urgent in protesting the circumstances in which they came
to be signed. I regard the protestations of both in relation to
these contracts as having an urgency that the documents
themselves do not demand. In this jurisdiction they must be
of very limited significance. The rights and responsibilities of
those whose financial affairs are regulated by statute cannot
be much influenced by contractual terms which were
devised for the control and limitation of standards that are
intended to be of universal application throughout our
society. It is said that these contracts would be strictly
enforced against the wife in Germany. I have declined to
enlarge the arena to allow evidence from German experts in
that field. I cannot think that even in Germany the wife
would not have the right to deploy a case either that there
was some inequality of bargaining power, alternatively
undue influence, or that they are inconsistent with social
policy in Germany. For the purposes of my determination I
do not attach any significant weight to those contracts.
Page 14
S v S (Divorce: Staying Proceedings) [1997] 2 FLR 100: Wall J
It was the wife's second marriage and the husband's third. The
husband who was born in Austria was also a national of Turkey and
Israel and had enormous wealth. His business was managed from
New York. He held a US work permit and his status there was a
non-resident alien. He had permission to reside in the UK indefinitely
but was resident in Bermuda for tax purposes. The wife was
Swedish and had lived in New York since 1974 with her first
husband by whom she had had two children. After the divorce
proceedings in 1984 the wife and her daughters left New York to
live in London. The parties had met in 1983 and by 1986 were
discussing marriage, but the husband who had children from his
previous marriages was not prepared to marry again without
protecting his estate by limiting her rights against him in the event
of divorce or death. During the negotiations the wife was
represented independently. The prenuptial agreement was executed
in the State of New York on 17 November 1986. The agreement
provided, inter alia, that it was governed by the laws of the State of
New York; provision was made for the wife whereby the husband
was obliged to set up a trust fund which was to be released to the
wife in the event of divorce. After the marriage, the parties lived
together in New York and London but the wife was primarily based
in London. In 1996 there were marital difficulties and the wife
decided to petition for divorce in England and her petition was filed
on 8 November 1996. the husband applied for it to be stayed. He
had meanwhile started proceedings in New York.
Wall J said:
“I am aware of a growing belief that, in the despatch of a
claim for ancillary relief in this jurisdiction, no significant
weight will be afforded to a prenuptial agreement, whatever
the circumstances. I would like to sound a cautionary note in
that respect. No one could have more profound respect than
I for the observations of Thorpe LJ. In F v F (Ancillary Relief:
Substantial Assets) [1995] 2 FLR 45, 66G he said:
‘In this jurisdiction [prenuptial agreements] must be
of
very
limited
significance.
The
rights
and
Page 15
responsibilities of those whose financial affairs are
regulated by statute cannot be much influenced by
contractual terms which were devised for the control
and limitation of standards that are intended to be of
universal application throughout our society.'
There is a danger that these wide words might be taken out
of context. There is no doubt that, where the English court
proceeds to determine an application for ancillary relief, s 25
of the 1973 Act precludes any choice of foreign law,
however vividly the circumstances of the case might protest
its relevance. So the application is of English law and under s
25(1) regard must be had to all the circumstances of the
case. In F v F itself, the result of a strict application of the
effect of the prenuptial agreements would have been, as the
judge said, 'ridiculous'. In those circumstances they inevitably
constituted circumstances of negligible significance. But
there will come a case - were I to refuse a stay, might this be
it? - where the circumstances surrounding the prenuptial
agreement and the provision therein contained might, when
viewed in the context of the other circumstances of the case,
prove influential or even crucial. Where other jurisdictions,
both in the USA and in the European Union, have been
persuaded that there are cases where justice can only be
served by confining parties to their rights under prenuptial
agreements, we should be cautious about too categorically
asserting the contrary. I can find nothing in s 25 to compel a
conclusion, so much at odds with personal freedoms to
make arrangements for ourselves, that escape from solemn
bargains, carefully struck by informed adults, is readily
available here. It all depends.”
Wall J’s observations were described by Thorpe LJ in Ella v Ella
(below) thus:
“All those observations were interesting in their day, and
remain interesting, but they are essentially obiter to the
judge's fundamental decision on forum.”
Page 16
This decision in which the parties’ agreement was an important
consideration in identifying the appropriate forum may be
contrasted with R v R (Divorce: Stay of Proceedings) [1994] 2 FLR
1036 (Ewbank J) where the parties were Swedish, married in
Sweden and entered into marriage contracts registered in Sweden
(effecting an opt out of Swedish community of property law). They
came to England and lived here and W intended to remain here. H
returned to Sweden and sought to stay W’s English petition. The
judge dismissed the application holding that considerations of
fairness dictated England as the appropriate forum not least because
W would be restricted in what she could obtain in Sweden by the
agreements.
Contrast N v N (Foreign Divorce; Financial Relief) [1997] 1 FLR 900
another Swedish case, where Cazalet J found that H should not
have leave to pursue a financial claim against W in England. The
connection with England post-dated the divorce in Sweden.
Although there was a prenuptial agreement (reached in Sweden), it
would be no more than a material consideration under s.25 in
determining an application for financial relief in England. It would
not conclude the matter here but would be binding in Sweden. He
saw H as seeking, in effect, to circumvent the consequences of that
agreement.
More recently the CA has considered the question of forum
following a prenuptial agreement in:
Ella v Ella [2007] 2 FLR 35 (CA)
This case should not be regarded as providing much guidance on
the agreement’s effect on substantive relief under the MCA 1973.
The parties had strong connections with Israel, but also with
England where they lived. W got pregnant before marriage and was
very keen to have the baby within wedlock. The marriage was in Tel
Aviv but immediately before the marriage the parties entered into a
prenuptial contract which provided that the law of Israel should
apply to any questions affecting property as between the spouses,
that its provisions would apply in any place or at any time and that
Page 17
separation of property would apply. The agreement was reached at
a time of considerable emotional turmoil for the parties, the wife
was not independently advised and the contract was drawn up by
the notary who had acted for the husband for some time. The CA
upheld the decision that English proceedings be stayed, the prenuptial agreement being a major factor making Israel plainly the
appropriate forum (and given that if the wife did not there receive
"substantial justice", she could seek remedy here by application
under Matrimonial and Family Proceedings Act 1984, Part III). It was
important to appraise the relevance of the prenuptial agreement to
the determination not of the wife's potential application for ancillary
relief but of the entirely different issue as to forum
N v N (Jurisdiction) [1999] 2 FLR 745: Wall J
This was not a financial claim (there had been a consent order) but
is relevant in establishing that a pre-nuptial agreement is not
specifically enforceable in English law (even where part performed).
Before their marriage in 1996, the Orthodox Jewish parties entered
into an antenuptial agreement which dealt primarily with property
matters, but which also required them to attend and comply with
the ruling of the Beth Din in the event of any matrimonial dispute.
The short marriage which produced one child failed and although a
decree absolute of divorce was granted under the Matrimonial
Causes Act 1973 in 1998, H did not apply to the Beth Din for a get
(a bill of divorce in Jewish law). A consent order was made in
relation to ancillary relief and the contact dispute remained
outstanding. According to Jewish law H and W remained married
and this had particularly serious consequences for W. She sought to
compel H to initiate the get by asserting that he was in breach of
both the terms of the antenuptial agreement and his agreement,
recited in the contact order, to progress the obtaining of the get
expeditiously. H argued that the court had no jurisdiction to grant
such relief and applied to strike out the summons. Wall J dismissed
W’s summons on the basis that the court lacked jurisdiction to grant
the relief she sought. On the basis of public policy, he held
antenuptial agreements as a class are not specifically enforceable in
English law. The existence of an agreement and its evidential weight
are factors to be taken into account when the court is deciding
whether or not to exercise its discretion under s 25 of the
Page 18
Matrimonial Causes Act 1973 to make orders for financial provision
under ss 23 or 24. Each individual clause is unenforceable on public
policy grounds and there is no power in any statutory provision to
compel the parties to implement part of the agreement.
M v M (Prenuptial Agreement) [2002] 1 FLR 654: Connell J
The parties, both Canadians, entered into a prenuptial agreement
very shortly before their marriage in Canada. W was pregnant, and
anxious to get married; H, who had been very distressed by the
breakdown of a previous marriage, was not prepared to marry again
without a prenuptial agreement. The agreement signed by both
parties provided that, in the event of marital breakdown, H would
pay W £275,000. After 5 years of marriage the couple separated
and W sought relief for herself and the 5-year-old child of the
marriage. She argued that she should not be bound by the
agreement, having been pressured into it at a time when she was
very vulnerable, and that she was entitled to a lump sum of
£1,300,000. W’s total net worth was about £300,000, including the
value of a property occupied by her mother, H’s net worth was
about £7,500,000. By the date of the hearing, which followed a
complex forum dispute, W had incurred costs of £326,888 and H
had incurred costs of £442,092. The judge awarded W a lump sum
of £875,000, and an order for periodic payments for the child of
£15,000 pa plus school fees and expenses. He held that it did not
matter whether the court treated the prenuptial agreement as a
circumstance of the case or as an example of conduct which it
would be inequitable to disregard; under either approach, while the
court was not in any way bound by the terms of a prenuptial
agreement, the court should look at it and decide in the particular
circumstances what weight should, in justice, be attached to the
agreement. This agreement did not dictate W’s entitlement, but had
been borne in mind as one of the more relevant circumstances of
the case and had tended to guide the court to a more modest
award than might have been made without it. It would have been
as unjust to H to ignore the existence of the agreement and its
terms as it would have been to W to hold her strictly to those
6
terms . Other relevant factors in departing from equality were the
6
It appears she had been advised against signing by independent lawyers, there had not been full
disclosure by H and expert evidence before the judge suggested she would not have been held to the
agreement in the courts of British Columbia.
Page 19
comparative shortness of the marriage and the fact that H had
created the family wealth.
K v K (Ancillary Relief: Prenuptial Agreement) [2003] 1 FLR 120:
Roger Hayward-Smith QC
The husband and wife, who had one child, separated after 14
months of marriage. Prior to the marriage the wife discovered she
was pregnant and the mother exerted pressure on the husband to
marry her. The husband had wanted a long engagement but the
couple agreed to marry and entered into a pre-nuptial agreement at
the instigation of the wife's father. The wife had assets of about £1
million, most of which were held in trust, and the husband had
assets of at least £25 million. Before signing the agreement the
couple received independent financial advice and the solicitors were
informed of the pregnancy. At an earlier directions hearing, the
court refused to allow the wife to inquire into the husband's
financial affairs on the ground that he would be capable of meeting
any order that the court might make. The wife sought a lump sum
of £1.6 million and periodical payments of £57,000 pa for herself in
addition to the agreed £15,000 pa maintenance for the couple's
child. The husband offered a lump sum of £120,000 plus a further
£600,000 in trust to provide a home for the wife and child until the
child finished full-time education. According to the pre-nuptial
agreement, if the couple were to dissolve their marriage within 5
years of the date of the agreement, the wife was to receive
£100,000 from the husband (to be increased by 10% pa
compound) and the husband was to make reasonable financial
provision for any children. No valuations of the husband's assets
were given during the negotiations relating to the agreement. The
agreement made no reference to periodical payments for the wife.
The judge looked at the consequences of the agreement on capital
and on income differently, largely governed by the effect of the
birth of the child.
As to capital W had understood the pre-nuptial agreement, was
properly advised as to its terms and signed it willingly without
Page 20
pressure. There had not been full disclosure, but the husband did
not exploit his dominant financial position. Both parties entered into
the agreement in the knowledge that the wife was pregnant with
their child, and there had been no unforeseen circumstances arising
since the agreement which would make it unjust to hold the parties
to it. The meaning of the agreement was clear as to capital provision
for the wife and there were no grounds for concluding that an
injustice would be done by holding the parties to its terms. This was
a short marriage and the wife had contributed nothing towards the
husband's wealth. The husband had been pressurised into the
marriage by the wife's family, and had agreed to marry her on the
understanding that her capital claim in the event of the swift
breakdown of the marriage would be governed by the agreement.
The agreement should, therefore, be considered by the court as one
of the circumstances of the case under s. 25 of the Matrimonial
Causes Act 1973. Entry into the agreement constituted conduct
which it would be inequitable to disregard under s. 25(2)(g) of the
Matrimonial Causes Act 1973. The wife should receive a lump sum
of £120,000 in accordance with the agreement and the husband's
offer and should have no further capital claims upon him for herself.
However, as to income, even if the pre-nuptial agreement were to
be construed as precluding a claim for maintenance by the wife, it
would be unjust to the wife to hold the parties to that part of the
agreement because of the on-going contribution she was making in
caring for the child of the marriage. Given the time she must invest
in bringing up the child, and the prejudicial effect this would have
on her earning capacity, it would be unjust to the wife to suggest,
either because of the short duration of the marriage or because of
the pre-nuptial agreement, that she should have no maintenance.
The judge carried out a detailed analysis of all the circumstances.
The wife was 28 years old, with limited earning capacity. Her income
from all sources was likely to be around £40,000-£50,000 pa. In the
circumstances (including the length of the marriage, the pressure
put on the husband to enter into the marriage, the interference of
the wife's father in manipulating the wife's finances, the wife's postseparation spending spree, the husband's substantial wealth, the
disparity between the financial position of the parties, the lack of
Page 21
contribution of the wife to acquisition of the husband's wealth, the
wife's present and future contribution in bringing up their child, and
the likely return the wife would achieve on her capital) it would be
fair to expect the husband to pay the wife periodical payments to
enable her more easily and more comfortably to bring up their child.
The husband should pay an additional £15,000 pa during the child's
lifetime, or until he ceased full-time education, or until further order.
Interestingly, and again reflecting the existence of the child, the
judge then mitigated the effect (on W) of his capital order, to
provide accommodation during the child’s dependency. The child of
parents between whom there was great disparity of wealth was
entitled to be brought up in circumstances which bore some sort of
relationship to the current resources and standard of living of the
wealthier parent. The length of the marriage was irrelevant in this
context. It was not unreasonable of the wife to want to live in an
expensive area, nor were her objections to the properties proposed
by the husband entirely unreasonable. The husband should pay £1.2
million to provide a home and furniture for the wife and their child
until the child ceased to be in full-time education. On that event, the
capital should revert to the husband. This figure was not out of line
with the value of properties the couple had lived in in the past, and
would not be too great a burden on the husband's finances
J v J (Disclosure: Offshore Corporations) [2004] 1 FLR 1042:
Coleridge J. In a case of substantial wealth in which H had hidden
his assets in a “complex corporate undergrowth” and where the
judge found H’s credibility to be damaged by his conduct of the
proceedings, he had this to say about a pre-nuptial agreement on
which H relied:
“[41] I should also, as a preliminary point, deal with the
prenuptial agreement. I mention it only to put it to one side
in this case. Nowadays, occasionally, their existence can be
of some significance but not in this case. This contract was
signed on the very eve of the marriage, without full legal
advice, without proper disclosure and it made no allowance
for the arrival of children. It must, in my judgment,
Page 22
therefore, in this jurisdiction fall at every fence, quite apart
from the fact that the terms were obviously unfair,
preventing the wife from claiming against the husband's
assets.”
Obvious lessons can be learned from these damning words.
Crossley v Crossley [2007] EWCA Civ 1491 is a recent and
interesting decision. Thorpe LJ with whom Ken and Wal LJ agred held tha there is a discretionary power in a judge to
require a party to show cause why a contractual agreement should
not rule the outcome of an ancillary relief claim, not just when the
contract is made post-separation and in contemplation of an
application, but also when the contract has been made prenuptially
or postnuptially but before the breakdown of the marriage.
The facts were that H was 62 and had an independent fortune
declared to be £45 million in December 2001. W was 50 and her
declared fortune was £18 million. H had been married once before
and had four children. W had been married three times before and
had three children. The parties met in June 2005 and became
engaged
in
September.
There
were
negotiations
between
experienced lawyers to settle a prenuptial agreement. The prenuptial
agreement was dated November 16, 2005 and provided essentially
that each party should walk away with what he or she had brought
in and that neither party should apply for any order for financial
provision. They married in January 2006 but by March 2007 they
had separated. In August 2007 W petitioned for divorce and then
issued Form A. H promptly issued a summons which sought an
order for the wife to show cause why the claims should not be
resolved by reference to the prenuptial agreement. Bennett J
ordered that the parties did not have to produce the customary
documentation annexed to their Forms E, on disclosure of assets in
ancillary relief proceedings, and neither party was to prepare a
questionnaire pursuant to rule 2.61B(7)(c) of the 1991 Rules.
Instead, he ordered the W's solicitor to write a detailed letter setting
out the W's case concerning alleged non-disclosure of other assets
by the husband. W appealed submitting that: (i) the judge erred in
directing the husband's summons to be heard as a preliminary issue;
Page 23
(ii) the judge erred in failing to apply the 1991 Rules, which were
mandatory; (iii) the judge was wrong to find the overriding objective
in rule 2.51D permitted him to ignore rule 2.61B, and (iv) the judge
was wrong to prevent W from filing a questionnaire.
On grounds (ii) and (iii) Thorpe LJ was wholly unpersuaded that
these individual rules were intended to be some sort of straitjacket
precluding sensible case management. “I would particularly stress
the overriding objectives that govern all these rules, carefully and
fully drafted in Rule 2.51D…. It is very important that the judge in
dealing with the case should seek to save expense. It is very
important that he should seek to deal with the case in ways
proportionate to the financial position of the parties. It is very
important, more so today than it was when these rules were
drafted, that he should allot to each case an appropriate share of
the court's resources, taking into account the need to allot resources
to other cases. In his general duty of case management he is
required to identify the issues at an early date and particularly to
regulate the extent of the disclosure of documents and expert
evidence so that they are proportionate to the issues in question.”
On the issue of the pre-nuptial agreement H’s counsel accepted that
the court must conduct the section 25 exercise by reference to all
the statutory criteria. He accepted that the existence of the
agreement cannot oust the court's obligation to apply section 25.
He accepted that a prenuptial agreement is only one aspect of the
case. However, he emphasised that this was a childless marriage of
very short duration, for a substantial portion of which the parties
were living apart. The marriage was between mature adults, both of
whom had been previously married and divorced; both parties had,
and had prior to the marriage, very substantial independent wealth.
The prenuptial agreement provided for the retention by each of the
parties of their separate properties and division of joint property if
any, and finally that there was no such joint property. Thorpe LJ
observed:
Upon those facts Mr Turner, correctly in my view, adds that
the combination of these factors gives rise to a very strong
Page 24
case that a possible result of the section 25 exercise will be
that the wife receives no further financial award…… All
these cases are fact dependent and this is a quite exceptional
case on its facts, but if ever there is to be a paradigm case in
which the court will look to the prenuptial agreement as not
simply one of the peripheral factors in the case but as a
factor of magnetic importance, it seems to me that this is
just such a case.”
Radmacher v Granatino [2008] EWCA Civ 1304
The wife sought permission to appeal the orders made by Baron J in
NG v KR (Pre-nuptial contract) [2008] EWHC 1532 (Fam) [2009] 1
FCR 35. The marriage had been celebrated in England between the
French H (who had very limited assets) and the German W who had
inherited a substantial amount of wealth which provided her, the
trial judge found, with an income of £2 million per annum. She had
at least £54m liquid. The marriage lasted 8 years. 4 months prior to
marriage the parties had entered into a pre-nuptial agreement in
Germany to which the judge had, in the Court of Appeal’s words,
given ‘very limited weight’. It had provided that the husband would
not benefit after any divorce. The judge made lump sum and
periodical payments orders. Baron J gave five reasons for giving little
weight to the agreement:
1.
the husband had had no independent legal advice prior to his
entry into the contract.
2.
the wife had given no (or no full) disclosure of the extent of
her resources prior thereto.
3.
there had been no negotiations between the parties or their
representatives prior to entry into it.
4.
that, in the events which had happened, it would be
manifestly unfair to hold the husband to its terms.
5.
that the arrival of the couples two daughters had so changed
the landscape as to require it to be put to one side.
Baron J compared the facts in the case with the six safeguards set
out in the Green Paper Supporting Families (see below) and found
them wanting.
Page 25
The judge did, however, recognise, in the light of the expert
evidence before her that both in Germany and in France the
contract would be fully enforced against the husband so as to
preclude any financial recovery for himself. She said that in awarding
a lump sum of £5,560,000 she had reduced the award to allow for
the agreement.
Wilson and Lawrence Collins LJJ allowed the application for
permission because, they found, the wife had a
reasonable
prospect of success and the case raised an important point of
principle regarding how the contract should influence any awards
made. Thorpe LJ has indicated an intention to preside. However, the
Court attached conditions to the permission, as allowed under CPR
52 because of the ‘compelling reason’ that the wife had to date
sought to evade payment of any of the orders made by Baron J. The
Court therefore ordered that the wife pay in the lump sum as
security, and make the periodical and other payments outstanding,
including security for costs. Whether she will do so remains
doubtful.
F. Post-nuptial agreements: some case law
Hyman was, of course, such a case (see above) and the classic later
cases such as Edgar v Edgar (1981) 2 FLR 19 (see above) are well
known. Both Hyman and Edgar were post separation agreements. In
Edgar there was a valid and enforceable separation deed (but the
court had still to decide its influence on the wife’s ancillary relief
claim). In cases such as Xydhias and X v X (Y and Z Intervening the
court was concerned with agreements to compromise court
proceedings.
In NA v MA [2007] 1 FLR 1760 Baron J considered the effect of a
post-nuptial agreement drafted by the husband after he discovered
W had committed adultery with his best friend. He had not provided
full disclosure of his assets, and had made clear that W must sign or
the marriage was at an end. Attendance notes of her solicitors
showed she was greatly distressed and signed against advice. The
judge found that W had been placed under undue influence (the
Page 26
law on which she reviews) but held that even if the agreement were
not overturned the court must be satisfied that it was fair. She held
the agreement was not premised on fairness, and it would not be
fair even to use its terms as a starting point with which to assess the
fairness of any award.
The importance of the existence of concluded agreements has been
stressed not only in Edgar and X v X (Y and Z Intervening) (see above
at page 10) but also recently in the Court of Appeal in Soulsbury v
7
Soulsbury [2008] 1 FLR 90 , and most recently by Eleanor King J in
S v S (Ancillary Relief) [2009] 1 FLR 254. However as Eleanor King
J pointed out in S v S (at para [23]) the case law establishes that the
agreement is only one of the s.25 considerations and even where it
is of ‘magnetic importance’ the court should only ever consider it
against the backdrop of all the s.25 factors. It is of course trite law,
now, that no agreement can oust the jurisdiction of the court.
MacLeod v MacLeod [2008] UKPC 64, [2009] 1 All ER 851.
The Privy Council judgment in MacLeod appears to give a concluded
post-nuptial agreement, reached with appropriate disclosure,
independent advice and absent any of the other factors vitiating the
validity of a contract, a weight of even greater significance.
The facts were that both parties were American and had been
married before, but there was a significant difference in their
wealth. They married in Florida in 1994 and on the day of the
wedding they entered into a pre-marital agreement to be constued
according to Florida law. Under Florida law this agreement was valid
and binding. This agreement was subsequently reviewed on two
7
In Soulsbury the wife agreed (orally by telephone) to refrain from claiming maintenance (there
had been a previous joint lives order) if H left her £100,000 in his will. The agreement was not
approved by a court. He executed the will but remarried on the day of his death thereby
revoking the will. The second wife refused to make the payment but the court upheld the
agreement holding that it was not an agreement to oust the jurisdiction of the court, nor a
compromise of an ancillary relief claim (which would have to be enshrined in an order) but a
unilateral contract which bound his estate.
Page 27
occasions, the second being in 2002 by which time they had 5
children and had lived in the Isle of Man since 1995. The 2002
agreement confirmed the 1994 agreement but made substantial
variations to it in W’s favour, but made no express provision for the
children (who would be dealt with separately under Florida law). The
Deputy Deemster in the Isle of Man found that W entered the
agreement freely, voluntarily, with a full understanding and having
had proper legal advice which she chose not to follow. H had
complied with his obligations under the agreement (transferring
property to W and making various payments to her). The marriage
however broke down by August 2003. W sought to resile from the
agreement but H sought its enforcement (save that he proposed
that W should have a housing fund during the children’s minority
which would revert to him on their majority). The Manx court
ordered an outright payment to W of a larger sum than H had
proposed. When the case reached the Privy Council the sole
question was whether the housing needs of W and children should
be met by an outright lump sum or a by a trust, as proposed by H,
with the reversion to him. The Privy Council upheld the agreement,
found for H on the trust fund and remitted the case for the drafting
of the trust deed.
The Board concluded that a post nuptial agreement (here, the 2002
agreement) was very different from a pre-nuptial agreement:
“The couple are now married. They have undertaken
towards one another the obligations and responsibilities of
the married state. A pre-nuptial agreement is no longer the
price which one party may extract for his or her willingness
to marry.” (para [35]).
The Board believed that the public policy grounds for ruling that a
post-nuptial agreement was null and void, because it provided for
the consequences of a future separation, should disappear since the
enforceable duty of spouses to live together no longer exists.
Therefore, unless the agreement is invalid for the usual contractual
reasons (absence of intention to create legal relations, absence of
Page 28
consideration [overcome by the execution of a deed],
illegality,
misrepresentation, undue influence, etc) it will be valid and
enforceable.
However, such an agreement falls within the meaning of a
‘maintenance agreement’ within the meaning of s.34(2) MCA 1973
8
and as such is subject to the court’s power under ss.35 and 36 to
vary or revoke any financial arrangements contained in it, or to
insert in it financial arrangements for the benefit of one of the
parties to the agreement or of a child of the family
Further, by s.34(1) any provision in an agreement purporting to
restrict any right to apply to a court for an order containing financial
arrangements is void, although any other financial arrangements
contained in the agreement shall not thereby be rendered void or
unenforceable and shall, unless they are void or unenforceable for
any other reason (and subject to sections 35 and 36), be binding on
8
“maintenance agreement” means any agreement in writing made,
whether before or after the commencement of this Act, between the
parties to a marriage, being—
(a) an agreement containing financial arrangements, whether made during
the continuance or after the dissolution or annulment of the marriage; or
(b) a separation agreement which contains no financial arrangements in a
case where no other agreement in writing between the same parties
contains such arrangements;
“financial arrangements” means provisions governing the rights and
liabilities towards one another when living separately of the parties to a
marriage (including a marriage which has been dissolved or annulled) in
respect of the making or securing of payments or the disposition or use of
any property, including such rights and liabilities with respect to the
maintenance or education of any child, whether or not a child of the
family.
Page 29
the parties to the agreement.
Moreover, s.35(6) specifically
preserves the right of a party to such a maintenance agreement to
apply to the court for an order making financial provision.
9
Where the court is considering an application for ancillary relief
under Part II of the Act, and applying s.25 in considering the weight
to give to the agreement, it should apply the same tests and
principles as in a variation application – viz looking for a change in
circumstances in the light of which the financial arrangements had
been made, such as would make those arrangements manifestly
unjust; or for a failure to make proper provision for a child (and see
s.35(2)).
A further public policy gloss was imposed (an echo of Hyman – see
above) that even if there were no change in circumstances, it would
be contrary to public policy if the agreement cast upon the public
purse an obligation which should properly be shouldered within the
family.
The Board also agreed that the circumstances in which the
agreement was made may be relevant to an ancillary relief claim,
and endorsed the observations of Ormrod LJ in Edgar (see pages 9
and 10 above) about effect of the conduct of each party and that
“all the circumstances as they affect each of two human beings
must be considered in the complex relationship of the marriage”.
In the circumstances of the instant case, although there had been a
change of circumstances in that the parties had separated, this was
plainly contemplated and provided for, but the agreement had not
made proper provision for the children (as opposed to the mother).
9
s.35(6) provides:
For the avoidance of doubt it is hereby declared that nothing in this section or in section 34
above affects any power of a court before which any proceedings between the parties to a
maintenance agreement are brought under any other enactment (including a provision of this
Act) to make an order containing financial arrangements or any right of either party to apply for
such an order in such proceedings.
Page 30
The Manx court, by ordering the lump sum for the wife, had made
additional provision for the mother, so the Board accepted H’s
proposal for a trust fund which would revert to him after the
children’s need for housing had ended.
G. The Case Law summarised
-
Neither pre-nuptial nor post-nuptial agreements can
exclude the jurisdiction of the court
-
They will be taken into account as either a relevant
circumstances under s.25(1) or as a matter of conduct
under s.25(2)(g) MCA 1973
-
They will not be the sole consideration as the court must
consider all factors under s.25
-
Pre-nuptial agreements (entered into before the parties
have committed to the marital relationship, and often at
times of vulnerability, but in particular because they are
legislating for “an uncertain and unhoped for future”)
remain contrary to public policy and thus not valid or
binding in the contractual sense.
-
The weight to be given them will be entirely fact
dependent – as Wilson J said in S v S (and it remains true
to-day) – “It all depends”.
-
The rule as to public policy which affects ante-nuptial
agreements does not apply to post-nuptial agreements
-
There is an increasing inclination to give effect to the
informed
agreement
between
parties
of
equal
bargaining power to arrange their own affairs.
-
The mere fact that one party might have done better by
going to court is not of itself generally a ground for
permitting that party to resile from what was agreed
-
10
The passage of time, changes in circumstances and (in
particular) the arrival of children in a relationship may
have significant consequences upon what is fair.
10
See eg per Munby J in X v X (Y and Z Intervening)at p.536.
Page 31
H. Pre-nuptial agreements and ante-nuptial settlements
distinguished
Pre-nuptial agreements are not to be confused with ante-nuptial
settlements. An ante-nuptial settlement is an instrument made in
contemplation of marriage and settling property (including both
income and capital) of which the parties to the marriage (or their
children) are the beneficiaries. Such settlements (assuming they are
in contemplation of the marriage of the husband and wife whose
marriage is in question) have been variable since the Matrimonial
Causes Act 1859 (s.5) and remain so now under s.24(1)(c) of the
1973 Act. Such a jurisdiction involves the exercise all the
conventional considerations of the court’s discretion.
A pre-nuptial agreement for current purposes, on the other hand,
involves an agreement in contemplation of the failure of the
relationship, seeking to legislate for the manner in which the parties’
financial resources should be disposed, what limitations should be
imposed upon the parties to apply for the exercise of the court’s
discretion or what jurisdiction or forum they should submit to.
Wall J in N v N (Jurisdiction) [1999] 2 FLR 745 put it this way:
The difference between an antenuptial settlement and an
antenuptial contract or agreement is that the former seeks
to regulate the financial affairs of the spouses on and during
their marriage. It does not contemplate the dissolution of the
marriage. By contrast, an agreement made prior to marriage
which contemplates the steps the parties will take in the
event of divorce or separation is perceived as being contrary
to public policy because it undermines the concept of
marriage as a life-long union.
I. The position elsewhere
In nearly every other jurisdiction outside England and Wales (and
perhaps Eire where divorce is a relatively new concept in any event)
agreements between spouses have significantly greater weight than
Page 32
here. In Australia parties entering upon marriage may make binding
financial agreements (Family Law Amendment Act 2000) but the
statute sets out the circumstances in which such agreements may be
set aside. In most European jurisdictions the property consequences
of divorce are dealt with by marital property regimes. Further afield
in China by art 19 of the marriage law of 2001 the parties to a
marriage may make binding arrangements about the property
regime of their marriage.
11
In most jurisdictions where such agreements have a significant role
there are nevertheless provisions enabling the court to set aside the
agreement (eg) for failure to disclose all assets, or if there is evidence
of fraud, duress, unfairness, or lack of representation at the time of
signing the agreement. Further, for instance in Florida, the courts
have power to vary ante-nuptial agreements (see MacLeod at para
[35])
In England and Wales in 1998 the government produced a Green
Paper “Supporting Families” in which it was proposed that written
pre-nuptial agreements should be binding for those wishing to use
them (but not obligatory). However, the proposals were set about
with qualifications to protect the interests of an economically
weaker party and the interests of children so that the agreement
would not be binding where:
-
there is a child of the family
-
where the general law of contract would make the
agreement unenforceable
-
where one or both parties had no independent advice
-
where the court considered enforcement of the
agreement would cause significant injustice (to one or
both parties or a child)
-
where there was not full disclosure
-
where the agreement was made less than 21 days
before the wedding.
11
See J. Posnansky at [2007] Fam Law 444.
Page 33
The Law Commission, which is addressing the status and
enforceability of agreements made between spouses and civil
partners (or those contemplating marriage or civil partnership)
concerning their property and finances (see: Tenth Programme of
Law Reform, Law Com No 311 (2008) para 2.17), is currently
advertising for someone to join their Property, Family and Trust Law
to work on the marital property agreement project. The post is
initially for 3 years with a closing date for applications of 1 May
2009. It follows that it would seem unlikely that there will be any
final recommendations for some time!
J. Straws in the wind?
In Miller v Miller; McFarlane v McFarlane [2006] 2 WLR 1283 the
House of Lords addressed the question of how the courts should
deal with “non-matrimonial property” which the parties bring to the
marriage either from before its inception or by inheritance – take for
example the inherited estate or farm which is expected to be
handed on down the generations, or family heirlooms. One of the
factors referred to by Lord Nicholls (para 25) as a relevant matter, in
addition to the matters to be taken into account set out in White, in
his view was the way the parties organised their financial affairs.
However, in Miller Baroness Hale does make a point which is of
importance to prenuptial agreements and resonates with the
principle which derives from White (that the origin of wealth
becomes less relevant the longer the marriage) that “What seems
fair and sensible at the outset of a relationship may seem much less
fair and sensible when it ends.” Circumstances change and unless a
prenuptial agreement provides for changing circumstances there is a
real danger of injustice arising.
In Charman v Charman [2007] EWCA Civ 503 Sir Mark Potter, giving
the judgment of the Court of Appeal, ended the judgment with a
section on law reform in this field including a plea for considering a
greater role for pre-nuptial agreements and the ability of the parties
to govern their own affairs. At para 124 he said:
Page 34
……..Almost uniquely our jurisdiction does not have a
marital property regime and it is scarcely appropriate to
classify our jurisdiction as having a marital regime of
separation of property. More correctly we have no regime,
simply accepting that each spouse owns his or her own
separate property during the marriage but subject to the
court's wide distributive powers in prospect upon a decree
of judicial separation, nullity or divorce. The difficulty of
harmonising our law concerning the property consequences
of marriage and divorce and the law of the Civilian Member
States is exacerbated by the fact that our law has so far
given little status to pre-nuptial contracts. If, unlike the rest
of Europe, the property consequences of divorce are to be
regulated by the principles of needs, compensation and
sharing, should not the parties to the marriage, or the
projected marriage, have at the least the opportunity to
order their own affairs otherwise by a nuptial contract? The
White Paper, "Supporting Families", not only proposed
specific reforms of section 25 but also to give statutory force
to
nuptial
contracts.
The
government's
subsequent
abdication has not been accepted by specialist practitioners.
In 2005 Resolution published a well argued report urging
the government to give statutory force to nuptial contracts.
The report was subsequently fully supported by the Money
and Property Sub-Committee of the Family Justice Council.
In Crossley v Crossley Thorpe LJ made these similar general
observations:
I would classify, in the circumstances of this case, the
contract into which the parties entered in December 2005 as
in many respects akin to a marital property regime into
which parties enter in civil law jurisdictions in order to
provide for the property consequences of a possible future
divorce. It can be categorised as something akin to a
contract for the separation of goods within the French legal
system. It does seem to me that the role of contractual
Page 35
dealing, the opportunity for the autonomy of the parties, is
becoming increasingly important. As counsel have pointed
out, the possibility of legislation for prenuptial contracts was
raised by this government in I think 1998, and although the
responses to the white paper consultation were few in
number, there was certainly not in any way a disincentive to
further progress. Since then Resolution has formulated a very
convincing paper for the legislation of prenuptials, and much
of the debate concerning possible reform of section 25 of
the Matrimonial Causes Act has emphasised the opportunity
for some statutory acknowledgment of the importance of
prenuptials. There is in my judgment an even stronger
argument for legislative consideration, given the resolution
of the European Union to formulate some regulation to
tackle the difficulties that arise from different approaches in
the member states. There is an obvious divide between the
provisions of the civil law jurisdictions and the absence of
any marital property tradition in the common law systems.
Undoubtedly there would be some narrowing between this
European divide if greater opportunity were given within our
justice system for parties to contract in advance of marriage,
to make` provision for the possibility of dissolution. The
approach that Bennett J took in this case seems to me to
accord with a developing view that prenuptial contracts are
gaining in importance in a particularly fraught area that
confronts so many parties separating and divorcing.
The fact that the Court of Appeal so readily granted permission for
the wife to appeal in Radmacher v Granatino notwithstanding the
wife’s persistent and continuing contempt of court, and that Thorpe
LJ had indicated a wish to preside, suggests (perhaps) that the Court
of Appeal is eager to continue to stress the relevance of ante-nuptial
agreements, but at the very least it is clear that it is regarded as an
area on which more needs to said judicially at an appellate level.
However, it is equally clear from MacLeod that a clear message has
been given (albeit obiter) that ante-nuptial agreements remain (in
Page 36
the absence of legislation) contrary to public policy and thus not
valid or binding in the contractual sense. Moreover, it is to be
observed that Baroness Hale expressed no disapprobation for Baron
J’s decision in Radmacher 12 .
As for post nuptial agreements, the decision in MacLeod has now
provided authoritative guidance, and it is plain that subject to the
Court’s powers to vary to obviate a manifestly unjust outcome (or to
ensure that appropriate provision is made for a child) the courts will
uphold valid agreements.
K. What considerations are essential to give the best chances
of a pre- or post-nuptial agreement being effective?
It will be more effective after a short marriage than a long one, and
where there are no children. Following from NG v KR it is clear that
the Green Paper Supporting Families is a good starting point.
There must be:
-
full disclosure
-
independent competent legal advice
-
a sensible gap between the agreement and the wedding
(at least 21 days)
There should be:
-
no disparity of bargaining power, but if this is
unavoidable, then manifestly no exploitation of it by one
over the other and certainly no pressure by one party on
the other;
-
a recital to the effect that the parties wish to enter into a
legal agreement with the intention to enter legal
relations which will be treated as binding on them;
-
a recital setting out why the parties are entering the
agreement (eg to provide security and a reasonable
home for W and children, to protect inherited assets, to
12
NG v KR [2009] 1 FCR 35
Page 37
limit the expectation of the parties if the marriage does
not last more than (say) 5 years, etc);
-
a recital setting out why the agreement is regarded as
fair, perhaps identifying the limits of the parties’ mutual
dependence, and recording that independent advice has
been obtained, full disclosure has been given and so on,
with a schedule of assets and resources attached;
-
definition of any property regarded as non-matrimonial
property (unmatched contributions, discrete business
assets, inherited property etc);
-
provision for regular (say 5 yearly) reviews and in
particular reviews following the birth of children, absent
which there must at least be provision in the event of
children being born. It is, of course, essential that such
reviews do occur, and there should be provision made
for what is to occur if the reviews do not occur. If the
parties divorce after fifteen years, and ten years after the
last review, and circumstances have changed significantly
without any significant change in the original terms, the
agreement may be regarded as having limited value.
However, in light of the decision in MacLeod, and since
the reviews, if they give rise to new agreements, will
have been conducted after the parties are married, such
post-nuptial agreements will have significantly more
weight and a better chance of being enforced.
When such factors are satisfied, then even an agreement entered
into prior to the commitment of marriage is likely to be a ‘magnetic
factor’ in the exercise of the s.25 discretion. However, it is very clear
that an agreement that provides that the weaker party shall receive
nothing will be of little or no value.
Given that the financial circumstances of parties may change from
the situation when the advice was first given, and additional wealth
may accrue, there may be some practical value in a) ensuring that
professional indemnity insurance is adequate at the outset when
Page 38
drafting such agreements, and b) that at least while one remains in
a professional relationship with the client, that the relevance and
appropriateness of any such agreements are kept under review.
L. Conclusion
There can be little doubt that there is a distinct inclination amongst
at least some of the senior judiciary to give greater weight to
decisions taken by adults, properly informed and advised, to
regulate their own financial futures. However, there are also those
who recognise that there is immense potential for exploitation,
perhaps even unconscious exploitation, of a position of emotional or
financial strength at times of great potential vulnerability when love
or the stress of separation blind parties to the advice they are given,
or even the need for such advice. It is noticeable that it is judges like
Baron J who deal with the raw emotion at first instance who
perhaps most keenly recognise this.
Manifestly, therefore, while it seems probable that properly
prepared agreements, especially those entered into after marriage (it
will take legislation to change the position in respect of pre-nuptial
agreements), will take an increasingly important role, it is essential
to remember that any decision in an ancillary relief case will be
taken after considering all relevant factors under s.25, that the
circumstances in which an agreement was entered into will be
carefully examined, and that the court will, in its search for a fair
outcome, jealously guard its right to adjust the terms of agreements
which produce (in the circumstances as they have developed)
manifest injustice or inadequate provision for children.
CFS QC
10.04.09

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