Pre and Post Nuptial Agreements

06 July 2016
Matrimonial finance, when is it not 50:50?

MacLeod v MacLeod [2008] UKPC 64

This case was about the validity and effect of a post-nuptial agreement made between a husband and wife while they were still living together.
It dealt with their financial arrangements both while they stayed together and in the event of a divorce.
The H & W were both brought up in the US. They married in Florida in 1994 & then moved to the Isle of Man. It was a second marriage for both of them. H was 49, W was 27.
When they married H had in excess of $10 million. H was substantially more wealthy than W.
Five sons, aged 7 to 13 at the point of divorce.
W had an affair. H issued divorce petition.
Unsurprisingly, wife said the court should ignore the post nup agreement.
Baroness Hale said agreements were enforceable subject to the court’s power of variation.
Any provision in the agreement seeking to oust the jurisdiction of the courts would be void.
She considered whether this agreement should be varied and concluded that it should be, as it did not make proper provision for the children.Radmacher v Granatino [2010] UKSC 42
The parties were married in London in 1998. H was French and the W German.
They entered into an pre-nuptial agreement in Germany three months before the marriage.
The agreement was subject to German law and provided that neither party was to acquire any benefit from the property of the other during the marriage or on its termination.
The husband, who at the time worked as a banker, declined the opportunity to take independent advice on the agreement.
After eight years of marriage, the parties separated. They had two daughters, born in 1999 and 2002.
H sought ancillary relief.
Court of Appeal held that the agreement should have been given decisive weight and the husband should be held to the terms of the agreement. It concluded, on its own assessment, that the husband should only be granted provision for his role as the father of the two children and not for his own long term needs.
Upheld by Supreme Court.WW v HW [2015] EWHC 1844
In 2002 H & W signed a pre nup in which they agreed that in the event of divorce neither would make a claim against the other.
“Yet, at the end of this hearing during which I have heard extensive evidence from each of them over more than three days, as well as from their former nanny, and heard submissions from their respective Leading Counsel for the best part of a further day, they have between them run up during the extent of these proceedings costs in the sum of c £1.77m. If ever there were a paradigm example of a case which demonstrates the need for more certainty in the law of financial remedies and nuptial agreements, this is surely it.”
W had significant inheritance – £27 million.
By their agreement, the parties acknowledged and agreed, amongst other provisions, that:
a. The marriage was conditional upon the agreement being executed.
b. The parties intended that the agreement should be legally binding.
c. They had each received independent legal advice and were fully aware of the rights that they each were acquiring or surrendering.
d. They had each fully and frankly disclosed their respective means and other relevant circumstances.
e. They each acknowledged that it was not possible to exclude the jurisdiction of the court to make orders under the Matrimonial Causes Act 1973.
f. Neither would make any claim against the other on dissolution of the marriage, and would enter into a consent order to that effect, without prejudice to their right to make such a claim in respect of a child.
g. Any real property jointly owned would be vested in joint names as tenants in common, and their respective proportions of ownership would be set out in a Declaration of Trust to be drawn up, and otherwise in accordance with their respective financial contributions to that property.
h. All pre-marital, gifted or inherited property should remain the parties’ respective ownership.
i. Neither would make any claim against the other’s separate property, or against any trust interest, in the event of dissolution of the marriage.
H had lied about his own financial position in entering pre-nup. Judge said “he was seeking as I find deliberately to mislead the W and her advisors as to his financial status, so that he could be assured that the marriage would happen”.
Court found H’s evidence to be “evasive, unhelpful and even untruthful”

Reminder of propositions of law :

  • It is the court, and not the parties, that decides the ultimate question of what provision is to be made;
  • The over-arching criterion remains the search for ‘fairness’, in accordance with section 25 as explained by the House of Lords in Miller/McFarlane (ie needs, sharing and compensation). But an agreement is capable of altering what is fair, including in relation to ‘need’;
  • An agreement (assuming it is not ‘impugned’ for procedural unfairness, such as duress) should be given weight in that process, although that weight may be anything from slight to decisive in an appropriate case;
  • The weight to be given to an agreement may be enhanced or reduced by a variety of factors;
  • Effect should be given to an agreement that is entered into freely with full appreciation of the implications unless in the circumstances prevailing it would not be fair to hold the parties to that agreement. ie There is at least a burden on the husband to show that the agreement should not prevail; . . .”
  • Significant weight afforded to the agreement in this case.
The Future
The Divorce (Financial Provision) Bill, a Private Member’s Bill, was introduced in the House of Lords by Baroness Deech in February 2014. It aimed to –
  • make prenuptial agreements binding, as long as the parties received independent legal advice, made full disclosure and entered into the agreement at least 3 weeks before the marriage.
  • make postnuptial agreements binding, thereby assisting couples whose marriages are ending and who wish to sort out their arrangements themselves.
Obiter dicta of Hoffmann LJ in Pounds v Pounds [1994] 4 All ER 777, [1994] 2 FCR 1055, [1994] 1 WLR 1535, 1550-1551:
“The result of the decision of this court in Edgar v Edgar [1980] 1 WLR 1410 and the cases which have followed it is that we have, as it seems to me, the worst of both worlds. The agreement may be held to be binding, but whether it will be can be determined only after litigation and may involve, as in this case, examining the quality of the advice which was given to the party who wishes to resile. It is then understandably a matter for surprise and resentment on the part of the other party that one should be able to repudiate an agreement on account of the inadequacy of one’s own legal advisers, over whom the other party had no control and of whose advice he had no knowledge.”
But would the alternatives – that such agreements were always binding or that they were never so, be any better?
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