Wednesday, 26 February 2014

Is Romance Dead? The Media and Mostyn have spoken (but what will the Law Commission have to say about it)?

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.