Pre-nuptial agreements “should be legally binding in divorce cases”

Recent press coverage of the Law Commission’s recommendations has excited couples and lawyers alike.  The recommendations have sent a clear message to the Government that pre-nuptial agreements should be legally binding in divorce cases.

Pre-nuptial agreements provide a way for couples entering marriage to manage and define by contract what they would like to share or retain in the event that they divorce.

Historically, in England and Wales pre-nuptial agreements have not been binding upon the court, and in fact, as little as around 20 years ago, they were virtually unheard of in English law.  However, over recent years and quite specifically following a court case in 2010 involving the German heiress Katrin Radmacher, who sought to protect her £106 million fortune in the event of divorce, the English court has attached increasing weight to pre-nuptial agreements, and has considered that parties can be expected to be held to the terms of such an agreement unless it would be unfair to do so.

As the law stands, in considering whether to uphold the agreement or what weight should be given to any or all of its terms, the court will consider a number of factors concerning how the parties entered the agreement.  It will look at the timing of the agreement, how the parties’ circumstances have developed and how their assets were treated after the agreement.

The Law Commission’s proposals appear to draw upon this evolving situation and the existing approach of European jurisdictions, where such contracts are common in respect of the parties’ assets, leaving only the issue of maintenance within the jurisdiction of the court.

Essentially, the Law Commission recommends that pre-nuptial agreements should become legally binding, provided certain conditions are met; for example, that the parties have disclosed their finances and received legal advice before entering the agreement, and that both parties’ financial needs have been met in terms of housing and maintenance issues and any financial responsibilities towards children.  A valid pre-nuptial agreement will not therefore remove the ability of the parties to seek court relief for their financial needs.  The Law Commission has called upon the Family Justice Council to give guidance on how such financial needs might be assessed, to assist parties in resolving their financial responsibilities, as there is presently no specific formula to enable the courts to calculate maintenance, which sometimes leaves this aspect open to extensive dispute upon divorce.

The recommendations would bring English law into line, not only with most of Europe, but also with some US states such as New York.  Perhaps the phrase coined for London as ‘the divorce capital of the world’ — alluding to what in context seem generous awards given to wives from their husband’s significant wealth — may need some adaptation (although, if the recommendations are passed into law, London will still be an attractive forum for wives, given the safeguards proposed to address financial needs).  Realistically, dispute is still quite likely to arise in certain cases on the validity of the agreement, the fairness of the agreement and, indeed, the very disclosure of assets.  The courts already see many cases where one party makes complicated attempts to hide assets in order to avoid the other party’s financial claims.  However, on the whole the legal profession sees the recommended changes as welcome and positive — and possibly overdue.

It will remain to be seen whether and when the recommendations are acted upon.  Parliament has been traditionally slow to change matrimonial law and has left this to the courts to establish new approaches through case decisions.  It seems unlikely that the recommendations will become law before the next general election; however, it is evident that the Government is being urged from all sides not to miss the chance to deal with this specific mechanism.

If you are considering entering a pre-nuptial or post-nuptial agreement and would like further information and advice, please contact our Family team at: Family@blasermills.co.uk