With Valentine’s day 2014
firmly behind us and the mother’s day and Easter promotional bunf starting to
dominate well…everywhere, one might think that romance is no longer high on
anyone’s agenda. But this is a big week for romance as the outcome of the long
anticipated Law Commission report on Matrimonial Property, Needs and Agreements, is due out on Thursday, 27 February 2014. The focus of the report is
expected to be the recommendations on pre-nuptial agreements. Arguably nothing
can kill the romance of “Will you marry me?” quite like “I want a pre-nup.”
However, it is difficult to argue with the latest information from the Office of National Statistics which says that 42% of marriages are expected to end in
divorce.
The media seems to have already
made up its mind about what the report will say, with some papers reporting
that such agreements will become binding several weeks ago. There was unfortunately little discussion on
what “binding” would mean and more focus on which celebrity couples had signed
pre-nups. One must keep in mind that many of those celebrity couples signed
their pre-nups in other jurisdictions, such as the United States, where such
agreements are more accepted and the terms are more likely to be upheld without
too many questions asked. New York is a notorious
jurisdiction for upholding pre-nups no matter how unfair the outcome might be
which was one of the reasons why the decision in Cioffi-Petrakis v Petrakis was so usual and so widely reported on. It is highly unlikely that the Law Commission
will be looking to recommend that UK law align itself with the wider
international community on this issue but rather will be looking to codify what
has become a fairly well defined position through case law which was confirmed in
the seminal decision of Radmacher v Granatino in 2010. The position is not
overly complicated and can be summarised in a single sentence which can be found at
paragraph 75 of the Supreme Court judgement:
“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.”
Further guidance on the
application of this principle was given in the judgement and it is on the
application and interpretation of the principle which has dominated the case
law since then. There have been two recent cases on prenuptial agreements both
decided by Mr Justice Mostyn. The first case of BN v MA [2013] EWHC 4250 (Fam)
which related to interim financial arrangements the pre-nuptial agreement was
upheld and the wife (who was asking for more) was ordered to pay the husband’s
costs.
The second case of SA v PA [2014] EWHC 392 (Fam) where again a wife was trying to argue that she should not be
held to the terms of a pre-nup, is more intriguing. In deciding whether a party
has freely entered into a pre-nup with a full appreciation of its implications
the circumstances surrounding when and how the agreement was signed will be of
key importance. For example, there must not be undue pressure on one party to
sign and both parties should have independent legal advice. Using the Radmacher
test the circumstances would suggest that the wife had a good case for saying
that she should not be held to the terms of the pre-nup. The agreement was prepared in the week running
up to the wedding and was only signed by the parties the day before the
ceremony. Only the husband’s notary was instructed with no independent
representation provided to the wife. Despite this Mostyn emphatically found, on
the evidence presented to him, that the Wife understood exactly what she was
signing and was not put under any pressure to sign it. What is even more
curious is that, despite his findings, he disregarded the terms of the pre-nup and
instead went on to consider in detail the compensation principle from McFarlane v McFarlane [2009] 2 FLR 1322 and with only a cursory nod to the factors set
out in section 25 of the Matrimonial Causes Act 1973 in his final paragraph
resulting in a final award which seems heavily weighted in favour of the wife. Arguably
this judgement is ripe for appeal but after spending over £160k on legal fees it
is unlikely that the husband will have the appetite for a further fight. We
will have to wait and see.
For anyone who practices
family law they will know that the Courts will always prefer it when a couple
can reach an agreement and the sooner that happens the better as it often
avoids acrimonious and expensive litigation. There appears to be no objection
in either legislation or case law that suggests that the fact that the
agreement was reached prior to the marriage itself is a reason why the parties
should not be held to that agreement. It will be interesting to see what
conclusions the Law Commission has reached on this subject and remember that it
is important to look beyond the media headlines to see whether their recommendations
would change the current position significantly or at all.
