Qualifying nuptial agreements: A quick look at the current law and future developments

Traditionally in this country the use of nuptial agreements has been very limited on public policy grounds, both on the basis that agreements relating to a future and hypothetical separation were void because they offend the principle of the life long union of marriage, and secondly as such agreements could not remove the Court of its jurisdiction.

In recent years however such agreements have become more common if only in higher value cases, and practitioners will of course be aware of the Supreme Court’s decision in 2010 of Radmacher v Granatino which marked this shift in the Courts approach.

The most recent decision concerning pre-nuptial agreements came on 28th February 2014 when Mr Justice Holman gave judgment in Luckwell v Limata [2014] EWHC 502 (fam). In this case a pre-nuptial agreement executed by the parties was overridden, and the wife ordered to pay £1.2 million to enable the husband to meet his housing needs.

On 11 July 2005 Miss Luckwell and Mr Limata signed a ‘Pre-Marital Agreement’ reciting that both of them specifically acknowledge and agree that the marriage would not be taking place without such an agreement. When the husband signed the agreement he was found to be a mature man, of normal intelligence and mental stability and know exactly what he was signing. He was keen to demonstrate to his wife and her family that he was marrying her for love and not for her money, and when he signed the agreement he had every intention of abiding by it. The husband had independent legal advice at the time and accurate financial disclosure was made and summarised in the agreement itself. They married on 23rd July 2005.

In his judgment Mr Justice Holman, helpfully summarised the strands of law to be drawn from Granatino v Radmacher [2010] UKSC 42, [2011] 1 AC 534, he sets out.

1. It is the court, and not the parties, that decides the ultimate question of what provision is to be made.

2. The over-arching criterion remains the search for ‘fairness’, in accordance with section 25 as explained by the House of Lords in Miller & McFarlane (i.e. needs, sharing and compensation).

3. 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.

4. The weight to be given to an agreement may be enhanced or reduced by a variety of factors.

5. 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.

6. Whether it will ‘not be fair to hold the parties to the agreement’ will necessarily depend on the facts, but some guidance can be given:

i) A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children;

ii) Respect for autonomy, including a decision as to the manner in which their financial affairs should be regulated, may be particularly relevant where the agreement addresses the existing circumstances and not merely the contingencies of an uncertain future;

iii) There is nothing inherently unfair in an agreement making provision dealing with existing non-marital property

iv) The longer the marriage has lasted the more likely it is that events have rendered what might have seemed fair at the time of the making of the agreement unfair now, particularly if the position is not as envisaged;

v) It is unlikely to be fair that one party is left in a predicament of real need while the other has ‘a sufficiency or more’;

vi) Where each party is able to meet his or her needs, fairness may well not require a departure from the agreement.

Mr Justice Holman felt that very great weight should be given to Miss Luckwell and Mr Limata’s pre-nuptial agreement, especially as there were no vitiating factors such as duress or non-disclosure. However and observing that the wife had a net worth of over £6 million and that the husband had only debt, he concluded that the former husband was now in a predicament of real need, whilst the wife had a sufficiency or more, which therefore rendered their agreement unfair. On this basis he did not follow the pre-marital agreement and ordered the wife to meet the husband’s housing needs.

In their recently published report on Matrimonial Property, Needs and Agreements, The Law Commission has sought to give nuptial agreements legal status in legislation. They introduce binding nuptial agreements, which will be known as qualifying nuptial agreements, “QNA’s”.

The aim being that by entering into a QNA the parties will remove the discretion of the court to make orders that are inconsistent with the terms agreed by them, save for orders necessary to meet their needs. To be enforceable QNA’s will need to meet certain formal requirements, namely:

1. The agreement must be contractually valid and enforceable.

2. It must be made by deed.

3. It must contain a statement signed by each party that he or she understands that the QNA will restrict the court’s discretion to make financial orders.

4. The agreement must not be made during the 28 days ending with the day on which the marriage or civil partnership is formed.

5. At the time the agreement is formed both parties must have received disclosure of material information of each other’s finances and
independent legal advice.

QNA’s will only be appropriate for those couples where one or both have, or expect to acquire, assets that would exceed those necessary to meet the couple’s needs on divorce. The Commission envisages that QNA’s will be used to protect specific property, such as an inheritance or business enterprise or for older couples with children from previous relationships or financially independent childless couples. As with the current pre-nuptial agreements, QNA’s will not be of interest to all.

In relation to non-matrimonial property this could be included in QNA’s if the parties so desire but will continue to be subject to the overriding requirement of need. QNA’s are not intended to alter the established principle that non-matrimonial property may be ‘ring-fenced’, subject to certain considerations, and the remaining ‘matrimonial’ assets shared equally.

It is the Law Commissions intention that QNA’s will build on existing trends in family law whilst promoting certainty and clarity, recognizing that more and more people are managing without legal advice. They also hope to bring us into line with the majority of other jurisdictions where nuptial agreements are commonplace.

QNA’s will no doubt raise the profile of nuptial agreements which is likely then to result in a rise in their use, quite how fair they will take the individual above and beyond the current common law however remains to be seen.

William Hillier is a Barrister at Magdalen Chambers with a particular interest in financial remedies work.

 

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