For the past couple of years, since the landmark legal case of Radmacher v Granatino, the pre-nuptial (and pre-civil partnership) agreement has been seen as being as close to a binding agreement as the family courts will allow. The test for upholding an agreement entered into either before or during marriage as set out by the Supreme Court in that case is that: “the court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.
Circumstances which a court will consider when deciding whether, to uphold an agreement, and to what extent, include whether there has been coercion or pressure applied to one or other party to enter the agreement. Also, the presence or absence of full financial disclosure and legal advice goes to the question of whether each party has a full understanding of the consequences of the agreement. Whilst lack of legal advice or financial disclosure are not absolute bars to an agreement being upheld, we would not recommend anyone sign an agreement in their absence.
Finally, when considering whether it would be fair to uphold the agreement, a court will look at whether the children of the relationship would be adversely affected by it being enforced, whether they have been adequately provided for, and whether enforcement would leave one or other of the parties to the agreement in dire financial need. If children are left without provision, or one party left in real need, then the court will be less likely to uphold the agreement.
In a recent case, known as BN v MA, the High Court has upheld the terms of a pre-nuptial agreement in full. You can read a case summary and the full judgment here. This was a short marriage, lasting around 15 months, between an international couple who already had one child, and have another on the way. They had entered an agreement before marriage which set out very clearly the financial consequences of a separation. In examining the effect of the agreement in English law, the judge hearing the case said: “the principal object of the exercise in this case (as indeed in every case where a nuptial agreement is signed) is to avoid subsequent expensive and stressful litigation; and it is for this reason… that the law adopts a strict policy of requiring the demonstration of something unfair before it will open the Pandora’s Box of litigation where there has been an agreement of this nature.”
The wife had applied for the full range of matrimonial financial orders from the court, but was seemingly unable to make out a case as to why she should not be held to the agreement, especially as she had been advised and represented by experienced solicitors. The judge upheld the agreement, making an order for maintenance for the wife and children matching the terms of the agreement.
In a warning to people who may in future want to litigate to get out of nuptial agreements they freely entered into with the benefit of legal advice, the judge described the wife’s claim as speculative and “borderline irresponsible”, and ordered the wife to pay 75% of the husband’s costs – a rare sanction, when in most family finance cases the court expects each side to bear his or her own legal expenses.
Some may view this judgment as harsh. We view it as a positive reinforcement of the increasing autonomy of responsible adults who are capable of agreeing their financial arrangements themselves. With the courts being drastically overstretched, and the costs of litigation ever increasing, it is encouraging that the courts are moving towards respecting agreements freely made (we recently wrote about the President of the Family Division’s express approval of agreements and orders reached through collaborative law and family arbitration).
It has also been announced this week that the Law Commission’s long-awaited The Commission report on Matrimonial Property, Needs and Agreements is going to be published on 27th February 2014. The report will include a draft Bill, and it is generally expected that it will recommend that pre-nuptial agreements be given legislative force, subject to certain safeguards.
More and more people are seeking to take control of their financial affairs through agreements, in a bid to avoid the expense and uncertainty of litigation. There are several ways in which to go about this. Some people manage to agree the broad outline themselves then instruct solicitors to draw up a document to put into effect their plans. Others use the more traditional solicitor to solicitor negotiation.
We have found that collaborative law can be a useful process for getting an agreement drafted quickly and professionally. The advantage of this approach is that the couple and lawyers are all in the room together to talk things through, and any misunderstandings can quickly be ironed out, as well as the process being driven by the priorities of the couple but informed by the skills and experience of the lawyers. Many financial professionals are trained in the collaborative law process, and can be brought in to advise if the financial structures of the family are complex or require specialist input. As a collaborative meeting is a friendly environment in which to prepare a pre-nuptial agreement, we also think the collaborative law process minimises the risk of upsetting the, frankly more exciting, wedding plans!
If you would like to talk through the options for preparing any form of nuptial agreement, please give us a call on 01223 443333 to make an appointment.