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Prenuptial Agreements Be careful what you wish for

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The orthodox approach to pre-nuptial agreements in England and Wales is that they are void on public policy grounds and cannot be enforced. Such marital agreements cannot oust the court's jurisdiction in respect of matrimonial property; however, they can be given consideration by the courts when exercising their discretion under s. 25 of the Matrimonial Causes Act 1973, which lists the factors that the court must take into account when making an award of ancillary relief. Due to the fact that pre-nuptial agreements are not specifically listed under s. 25 the courts have found great difficulty in attempting to declare with any certainty the level of significance that they should attach to pre-nuptial agreements under this discretion. But, in the recent decision of the Court of Appeal in Radmacher v Garantino [2009] EWCA Civ 649, [2009] 2 FLR 1181 the judiciary have shown strong support for reform and a move away from the orthodox approach. The Orthodox Approach It was in the government green paper Supporting Families that the orthodox approach to pre-nuptial agreements was spelt out, suggesting that they should not be legally binding where: • the parties have not obtained independent legal advice; • one party has not made full financial disclosure; • there has been no provision made for any children; • the pre-nuptial agreement does not comply with general contract law; • the pre-nuptial agreement is considered unjust; or • the pre-nuptial agreement is made less than 21 days prior to the marriage Following this the courts became very reluctant to enforce pre-nuptial agreements, the consensus of opinion such that these agreements were of very limited significance. The decision in K v K [2003] F.L.R. 120 marked the first time in English law that a court partially upheld a pre-nuptial agreement. It was held that should the figures in the pre-nuptial agreement be in the range of awards the judge felt reasonable then he or she may make an award along the lines of that contract; but if the judge believed those figures to be unreasonable then he or she will not follow them. The case law following this decision showed a clear trend towards pre-nuptial agreements being considered as a factor of the case under s. 25, and therefore encouraged judges to give them greater influence where it was thought that it would be fair to do so. The judgement in K v K also provided a helpful checklist, based on the government green paper, to which the court should have regard when deciding whether a pre-nuptial agreement should be influential in the exercise of their discretion under s. 25. The list included the following: • Did both parties understand the agreement? • Were both parties properly advised as to its terms? • Did one party put the other under any pressure to sign it? • Was there full disclosure? • Was either party under any other pressure? • Did they willingly sign the agreement? • Did either party exploit a dominant position, financially or otherwise? • Was the agreement entered into in the knowledge that there would be a child? • Had any unforeseen circumstances arisen since the agreement was made, such as to make the agreement unjust to hold the parties to it? • What does the agreement mean? • Does the agreement preclude an order for periodical payments for the other party? • Are there any grounds for concluding that injustice would be done by holding the parties to the agreement? • Is the agreement one of the circumstances to be considered under s. 25? • Does the entry into this agreement constitute conduct which it would be inequitable to disregard? Decisions over the last decade have continued the gradual but increasing trend favouring the enforcement of pre-nuptial agreements to some extent, but it is the recent decision of the Court of Appeal in Radmacher v Garantino that should be held above the others as of particular importance as it signifies a considerable departure from the traditional approach of the courts towards pre-nuptial agreements. Radmacher – The Facts In the case, a German woman, from an extremely wealthy family, married a Frenchman, who at the time was a successful investment banker working for J P Morgan. The marriage lasted for 8 years over the course of which they had two children. When they divorced the husband sought ancillary relief contrary to the pre-nuptial agreement that had been agreed prior to the marriage, which stated that upon any breakdown of the marriage he would receive no maintenance support whatsoever. At first instance the husband argued that the pre-nuptial agreement should be disregarded completely on the grounds that he had not received independent legal advice, there had not been full disclosure by the wife of her financial position and that no provision had been made for any children or the husband's needs. Baron J. followed the orthodox approach spelt out in the green paper and held that pre-nuptial agreements were not enforceable per se in English law. However, it was thought that the husband, as a man of commerce, was fully aware of the effect of the agreement when he agreed to sign it and therefore it would be unfair and unjust to ignore the agreement completely. The award made was thus reduced according. Following the decision of the High Court the wife applied for permission to appeal. Permission was granted and the appeal was allowed on the basis that Baron J. had not given sufficient weight to the pre-nuptial agreement as a factor under s. 25. The Court of Appeal also disagreed with Baron J.'s reliance on the parties' failure to adhere to what had previously been seen as the essential prerequisites for a pre-nuptial agreement, as set out in K v K. It was held that neither disclosure of the full extent if the wife's financial position nor independent legal advice would have made a difference to the husband signing the agreement, and therefore their absence was immaterial. "The task of the court was to apply the overarching principle of fairness, which in this case demanded giving effect to an agreement that the parties had entered into freely and knowingly and had expected to be binding." Therefore the court held that the only award that could be made would be in respect to his paternal role. As a result the Court of Appeal substituted the first instance order by limiting the extent of the award to the duration of the husband's parenting responsibility for the children; the house to be held on trust until his parental duties were fulfilled and the maintenance award recalculated to cater only for his needs as a carer of the children, rather than a spousal award for life. What now? Thus, it appears that in the wake of the decision of the Court of Appeal in Radmacher the courts have made a clear statement of intention that "agreements between spouses and private autonomy"3 will in the future take a much greater role in determining the extent of ancillary relief. Further, it is evident that the court no longer considers the elements listed in K v K and the government green paper as a prerequisite for a pre-nuptial agreement. Rather they are now but one factor to consider in assessing the fairness of an agreement, and "their absence cannot per se render an agreement unfair".3 The decision of the Court of Appeal marks the latest word on this hugely debated topic, but the case has now moved to the Supreme Court with a judgement due in October 2010 closely followed by the publication of a paper on the subject by the Law Commission. There are no guarantees that the Supreme Court will endorse the decision from the Court of Appeal and there remain many concerns over the fairness of enforcing such agreements that attempt to regulate an unknown future. In particular Dr Jens Scherpe, Lecturer and Fellow of the University of Cambridge Faculty of Law, comments that the more time that passes between the making of the pre-nuptial agreement and the divorce, the more likely it is that the original agreement will become unsuited or even unfair.3 Further to that point there concern that if a man of commerce such as the husband, familiar with such commercial agreements, can willingly sign up to such a pre-nuptial agreement, then what chance does a less adept or worldly individual have of resisting the same temptation. By providing a means for enforcing such pre-nuptial agreements the courts run the risk of removing the very protections in place to protect the weaker, more vulnerable, parties. Therefore, for the time being, it becomes of huge importance that legal practitioners and the individual parties concerned consider the potential ramifications, come the final decision from the Supreme Court, when contemplating the signing of a pre-nuptial agreement. Matrimonial law in England and Wales now sits on the cusp of a dramatic change in the law regarding the enforceability of pre-nuptial agreements making it essential that parties are aware of what they are agreeing to, and the precise implications of any such agreement, as come October they might end up getting just exactly what they bargained for. 1. List obtained from Article by Lisa Carkeek (N.L.J. 2010, 160(7404), 213) 2. List obtained from article by Ellie Foster (P.C.B. 2010, 2, 128-135) 3. Dr J. Scherpe, 'Pre-nups, private autonomy and paternalism', C.L.J. 2010, 69(1), 35-37 4.See Ashley Murray article entitled 'Radmacher – Where now?' available on familylawweek.co.uk If you require any further information or wish to arrange a free initial & confidential consultation. please call us on 01245 228106 The above is not legal advice; it is intended to provide information of general interest about current legal issues.

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