The Role of Prenuptial Agreements And The Extent To Which They Can Be Enforced In England And Wales
English family law has traditionally been adverse to pre-nuptial agreements. This is based on the ecclesiastical idea that marriage is a sacred covenant. Therefore, if parties are going to pre-empt a break up of the marriage and make provisions for it, then the law suspects that the parties do not respect the marriage contract. The common law rule that pre-nuptial agreements were against public policy because they contemplated the parties breaching their duty to live together, has not survived the 1970s legislation. The public policy exception that the court's jurisdiction may not be ousted applies to all contracts.[1] Consequently, pre-nuptial agreements may be taken into account pursuant to the court's exercise of discretion under Section 25 of the Matrimonial Causes Act 1973.
However, the Supreme Court decision in Radmacher v Granatino[2] has changed this position. Nevertheless, the extent to which pre-nuptial agreements are legally binding and recognised remains unclear and the parameters are open for challenges in future cases. This may encourage a barrage of litigation in the courts. In particular, this essay will critically examine the merits of the judgment of the Supreme Court and the guidelines that it proffered. In particular, the contractual approach that the courts adopted in this case and whether this approach legitimately recognises the intentions of the parties and protects the position of the parties in practice will be discussed. This essay will also analyse the arguments, which supports the validity of pre-nuptial agreements and the aftermath of the Supreme Court decision with respect to certainty in the law.
The weight of authority under the common law is opposed to the validity of pre-nuptial agreements. The common law is heavily influenced by the view that a woman and a man are united in holy matrimony. Therefore, as a corollary, a woman on her own is incapable of entering into a contract, much less with her husband. This in itself invalidates pre-nuptial agreements. Secondly, as Baroness Hale explained in Radmacher, pre-nuptial agreements encourage the marriage parties to live separately and be independent. This may have the effect of encouraging a marriage break up.[3]
The Supreme Court decision in Radmacher
After repeated attempts to change the law, the Supreme Court in Radmacher finally overruled previous case laws and held that a pre-nuptial agreement is in principle valid and the validity of such agreements are to be determined based on contract principles. The defining ratio of the judgment was captured in the following terms:
“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”[4]
Given this decision, this paper will now explore the arguments for and against the validity of pre-nuptial agreements. Whilst the common law rationales maybe defensible in historic terms and even perhaps virtuous in religious sentimentality, it is, a fact that the present social circumstances surrounding marriages has changed. In the past, a marriage party could only divorce on grounds of insanity or if a matrimonial offence was committed, such as adultery. Today, parties can petition for divorce by consent and the grounds for divorce have expanded considerably.[5] This means that with or without the pre-nuptial agreement, divorces in marriages is commonplace. The courts and legislature cannot stop its citizens from divorcing, certainly not by maintaining a well intentioned but archaic law that invalidates pre-nuptial agreements. [6]
In view of the nature of pre-nuptial agreements, it is also argued that the validity of pre-nuptial agreements is not necessarily inconsistent with the traditional common law principle that marriage is sacred. This is because pre-nuptial agreements deal essentially with an individual’s wealth pre-marriage. One may argue that, if the parties are able to arrange the distribution of their wealth in the event of a possible future break up of the marriage, then this will help to instill more belief and conviction in the union as a whole. This is because the parties no longer have unrealistic expectations of a huge inheritance or payout if the marriage breaks down. Of course, the converse may also work when the pre-nuptial agreement makes provision for a huge payout but even in such circumstances, a clearer expectation will allow the parties to focus on the more important aspects of keeping the marriage healthy. Therefore, if this argument is correct, pre-nuptial agreements are not necessarily in conflict with the common law rationale of continuity in a marriage.[7]
Secondly, pre-nuptial agreements constitute a way of saving the courts time and resources when deciding a distribution of property post-marriage. The balancing exercise in section 25, Matrimonial Causes Act 1973 is admittedly a tricky one and involves a lot of uncertainty. When this is translated in practice, this can cause sufficient stress to the parties and potentially the ugly situations of a prolonged conflict in court. This creates a lot of room for resentment. A judge’s determination pursuant to section 25 hardly pleases the parties in practice. In this respect, a pre-nuptial agreement helps to pre-empt this conflict and allows the parties to reach an amicable solution vis-à-vis the distribution of their property in the hypothetical event that the marriage breaks down.[8] This is not to be equated as the common law purists argue that the marriage will breakdown or that such agreements encourage the parties to not take their marriage seriously as a direct result of such agreements. If any, a pre-nuptial agreement helps the parties remove the financial motivations out of the equation.[9]
The third argument in favour of such agreements and one that the Supreme Court emphasises is the need to respect the autonomy of the parties. The rationale of this argument is that if the parties to a marriage are agreeable to having an agreement such as a pre-nuptial govern their financial interests, why then should the court intervene and invalidate such arrangements.[10] This is based on the freedom of contract analysis of laissez-faire whereby the courts simply gives effect to contractual agreements in the absence of any vitiating factors.[11]
This argument is also analogous with the harm principle that is advocated by John Stuart Mill whereby it is argued that the state should not routinely intervene into the lives of private citizens unless there is a strong justification for doing so. If the citizen does not engage in any act that harms others living in society, then any intrusion is illegal because it infringes on the human rights and civil liberties of the citizen. In other words, the state should not adopt a paternalistic attitude to direct its citizens what to do based on its own conception of what is morally right.
Nevertheless, on the other hand, the adoption of a contractual approach in a non-commercial setting such as a marriage causes concern. As Baroness Hale herself recognises in another related area of family law, namely the distribution of real estate interest in the event of a break up of cohabitation, when the parties are in a relationship of a mutual trust, love and affection, the law would be wrong in principle to adopt a formalistic approach measured solely by financial contributions[12]. In the landmark ruling of Stack v Dowden[13], her Ladyship gave a list of factors that the court should consider and none speaks of a contractual analysis. Hence, it is hardly a consistent approach in developing family law principles when the law reneges on this arguably fairer stance and pursue a formalistic policy based on contract when it comes to pre-nuptial agreements.
Further, pre-nuptial agreements also cause concerns because unlike a commercial setting whereby a contract is designed to achieve certain commercial objectives, the same cannot be said of a marriage. Hence, by having an agreement that essentially distributes wealth is inconsistent with the institution of a social union that by nature and practice is based on selfless feelings of love and affection. In this respect, the reasoning of the law advocated by the Supreme Court in Radmacher loses force.
It distorts the marriage institution and transforms the entire ecclesiastical view of marriages into a secular concept, namely that the marriage is merely a convenient union of two people which may be terminated at any time and when that happens, an agreement governs. This makes the marriage institution a business-like arrangement or at least encourages one to view the marriage lightly in such a way. As such, this perception caused by the seemingly financial-minded parties is not necessarily healthy in preserving marriages.[14] This affects the state’s interest in a way because its family laws are no longer coherent because it has laws that encourage a union between two people but also has norms that encourage the breakup of the union, directly or indirectly. By having pre-nuptial agreements, this may make matrimonial arrangements too flexible and facilitate the parties to be money-minded when marrying. The financial expectation that the parties have is the very evil that pre-nuptial agreements present that the common law wishes to extinguish. As such, this is clearly not in the state’s interests since a law that potentially encourages divorces is hardly reflective of the successes of its social policies. Society, overall, will be the biggest loser if this occurs.[15] This seems to lie at the heart of the public policy rationale that invalidates pre-nuptial agreements.[16]
Notwithstanding the questionable commercial approach and although pre-nuptial agreements are inherently unromantic gestures in a marriage, they do have the effect of avoiding litigation in court. This is an invaluable practical benefit especially when there are numerous family law battles that are bitterly fought out in the courts. Having said that, the common law purists should understand that we live in a real society where financial considerations, more or less permeate into the marriage equation. It is a plain social fact truth and anyone who argues otherwise, is either not respectful of the truth or is in deliberate ignorance of realities. Either way, it does not help to understand the matter. Therefore, if financial considerations are part of a marriage, if not necessarily evolving into full-blown disputes, then surely the courts should not prevent the parties from pre-empting the dispute by formulating certain understandings that are legally enforceable.
As Rix LJ held in Radmacher,
“If the parties to a prospective marriage have something important to agree with one another, then it is often much better, and more honest, for that agreement to be made at the outset, before the marriage, rather than left to become a source of disappointment or acrimony within marriage”[17]
Further, as statistics show, when divorces happen, financial disputes are the hardest fought issues in court besides the custody of the children. Of course, one can agree that pre-nuptial agreements are not the end all solutions but they can constitute a very useful tool for resolving disputes.[18]
The criticisms of the commercial approach adopted by the Supreme Court in Radmacher should also not be exaggerated because the court did qualify the validity of pre-nuptial agreements. In other words, there is no absolute validity to pre-nuptial agreements and the courts will analyse each case based on its individual facts. As the courts recognize, the resolution of validity of such agreements in principle leave “the difficult question of the circumstances in which it will not be fair to hold the parties to their agreement”. This means that there is a measure of uncertainty in the law and this decision will only serve to increase the coffers of family law practitioners who are responsible in drafting pre-nuptial agreements, as it is important for the parties to be properly advised and have their agreement documented in detail with utmost care.[19]
In particular, the element of equality of bargaining strength when agreeing to such terms is crucial because fairness is an essential part to the court’s consideration towards validity. In the words of the Privy Council in MacLeod v MacLeod[20], “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”.
In view of the Supreme Court’s decision in Radmacher, one can conclude that the law is more in accord with social reality of marriages when it recognises the validity of pre-nuptial agreements in principle rather than drawing a blanket exclusion of such agreements in all circumstances. The Supreme Court is well justified in adopting a balancing exercise of sort, which now puts the burden on the parties to ensure that their agreement is drafted with care and fairness in terms of bargaining strength being clearly demonstrated. In this aspect, the contractual approach excels although its adoption in a non-commercial setting gives rise for concern. Nevertheless, this should not be exaggerated because pre-nuptial agreements can encourage honesty so that the parties can be more forthcoming in their marriage relationship rather than be hypocritical about their financial expectations and leave the matter for the court to determine in a full-blown family battle in the event of a divorce. Hence, prevention is better than cure in this respect.
Another key in-built protection that the Supreme Court built into the legality of pre-nuptial agreements in principle is the emphasis that the parties should obtain independent legal advice before consenting to the terms of such an agreement. This is designed to ensure that the weaker party to the contract shall not be unduly prejudiced. Further, it utilizes the application of the contractual doctrine of duress and undue influence as possible unfair factors that may vitiate consent and the legality to pre-nuptial agreements. The Law Commission in its report that introduced the concept of ‘Qualifying Nuptial Agreements’ also supports this position.[21] The Report argued that if parties to a pre-nuptial agreement received independent legal advice and there is full financial disclosure, then the law should in principle recognise the legality of pre-nuptial agreements.[22] However, whilst the idea of independent legal advice is to be applauded, the Supreme Court did not elaborate on the degree of advice to be given in order to satisfy the court that the agreement is fair. Secondly, although the Court held that a material full and frank disclosure is required, this again was not defined. Hence, there exists a measure of uncertainty in the law.
From a holistic perspective and the traditional common law suspicion of pre-nuptial agreements, this paper highlights the changing social conditions as a primary reason as to why an outright exclusion of such agreements is losing force in the argument. Men today are no longer the breadwinners of the family unit. There are many instances when the women in the household earn more than the men. Hence, any reliance on gender stereotypes when outlawing pre-nuptial agreements can no longer hold.
In addition, the British society has become increasingly secular and less religious, for better or for worse. Society is also becoming more educated with full knowledge of their legal rights. Today, many parties to a marriage no longer enter into a marriage relationship with blind adherence to religious principles of love, security and affection. In many circumstances, if not all, the parties have considered in detail their respective interests and this usually includes their financial interests. Therefore, the law should recognize this independence to marital arrangements. There are now fewer reasons as to why the courts should intervene based on protecting the weaker party to the marriage. In any event, the Supreme Court decision safeguards the position of the weaker party by highlighting the need for the parties to obtain independent legal advice.
Secondly, the current law on financial settlement is plagued by too many complexities and uncertainties. This is compounded by the fact that judges have a wide discretion under section 25, Matrimonial Causes Act 1973 to make an order on financial settlement. Hence, when the law adopts a differential treatment towards pre-nuptial[23] and post-nuptial agreements[24], this introduces a certain measure of incoherence in the law because post-nuptial agreements would also in principle breach the ecclesiastical view that a man and his wife are one and therefore they cannot enter into an agreement with each other. Therefore, if the traditional common law reasoning in invalidating pre-nuptial agreements is applied, this necessarily means that post-nuptial agreements must also be invalidated. Hence, the current law adopts fictional distinctions that lack any real substance. This differential treatment only serves to make the law more complicated. Consequently, the judicial consideration becomes unnecessarily convoluted. In this respect, when the courts switch to a contractual approach, this introduces a more functional criterion with which the law can measure legality.
Thirdly, even if one subscribe to the common law reasoning that pre-nuptial agreements inadvertently encourage the breakup of marriages, the countervailing argument is that by outlawing pre-nuptial agreements all this while, the divorce rate does not get any less. In fact, divorce rates of married couples are increasing more than ever even when the law outlaws pre-nuptial agreements.[25] Hence, the evidence speaks for itself and there is no need for the archaic common law reasoning to hoodwink one into thinking that by not entering into pre-nuptial agreements, parties will become more loyal to each other. At best, such blanket exclusion is a neutral factor that does not contribute to preserving marriage integrity. At worst, it encourages more uncertainty and room for disputes when a marriage relationship breaks down when and if that happens. Indeed, by having a carefully drafted pre-nuptial agreement, the parties are able to pre-empt the lengthy judicial considerations and help to circumvent the multitude of disputes.
In conclusion, based on the reasoning in the case laws above, the time is ripe for the common law regarding pre-nuptial agreements to be modernised. There can be no longer any room for sentimental attachments to idealised versions of traditional marriages, which no longer reflects the contemporary reality of today’s society. Whilst the law should not undermine the institution of marriages, the law should also recognize the importance of pre-nuptial agreements in reducing the amount of disputes with respect to financial settlements during a divorce. To this end, the Supreme Court’s working guidelines in Radmacher represents a step forward although it is important for the court in future to clarify the contractual approach towards the legality of pre-nuptial agreements as clearly as possible.
The information provided in this article is not intended to constitute legal advice and you should take full and comprehensive legal advice on your individual circumstances by a fully qualified Solicitor before you embark on any course of action.
0333 344 454 8
Bibliography
[1] See Hyman v. Hyman [1929] A.C. 601; Kelley v Corston [1997] 4 All ER 466, per Butler-Sloss LJ [2] [2010] UKSC 42 [3] see Re Johnson's Will Trusts [1967] 1 All ER 553; see also the overview in Mark Harper and Lucie Alhadeff, ‘Crossley v Crossley: are pre-nuptial agreements now binding in England?’ (2008) 38 Fam. Law 334-337 [4] Ibid., at para [75] [5] Section 1(1), Matrimonial Causes Act 1973 [6] see also Section 20, Matrimonial Proceedings and Property Act 1970 which abolishes the decree of restitution of conjugal rights. [7] See Brigitte Clark, ‘Prenuptial contracts in English law: capricious outcomes or legislative clarification?’ (2010) 32 Journal of Society and Welfare & Family Law 237-245 [8] see Janice Montague, ‘Family law: divorce - ancillary relief - pre-nuptial agreements’ (2010) 15 Coventry Law Journal 49 [9] see J. Turner, ‘Radmacher v Granatino: Preliminary Thoughts on the Decision of the Supreme Court’, available online at http://www.familylawweek.co.uk/site.aspx?i=ed68527 [10] see Jens Scherpe, ‘Marital agreements; private autonomy and fairness’ (2011) 70 Cambridge Law Journal 29 [11] see Anna Sanders, ‘Private autonomy and marital property agreements’ (2010) 59 International and Comparative Law Quarterly 571 [12] see Lloyds Bank v Rosset [1991] 1 AC 107, per Lord Bridge [13] [2007] 2 AC 432 [14] see Cocksedge v Cocksedge [1844] 14 Sim. 244 [15] see A Diduck and F Kaganas, ‘Family Law, Gender and the State: Text, Cases and Materials’ (3rd edn., Hart Publishing 2012) [16] see Cartwright v Cartwright [1853] 3 De GM & G 982 [17] see Crossley v Crossley [2008] 1 F.C.R. 323 [18] see Caitlin Jenkins, ‘Are pre-and post-marital agreements finally worth the paper they are written on?’ (2011) 1 Private Client Business 30 [19] see Judith Bray, ‘Pre-nuptial agreements under scrutiny’ (2009) Denning Law Journal 131 [20] [2010] 1 AC 298 [21] see Law Com No. 343, Matrimonial Property, Needs and Agreements. [22] see Kremen v Agrest [2012] 2 F.L.R. 414; see also Paul Pavlou, ‘Pre-nuptial agreements: back where we were? Kremen v Agrest’ (2012) 42 Fam. Law 957-962 [23] see S v S (Divorce: Staying Proceedings) [1997] 1 WLR 1200; M v M (Prenuptial Agreement) [2002] 1 FLR 654; K v K (Ancillary Relief: Prenuptial Agreement) [2003] 1 FLR 120; and Crossley v Crossley [2007] EWCA Civ 1491; [2008] 1 FLR 1467. [24] see MacLeod v MacLeod [2008] UKPC 64 [25] see the ‘Report by the Office of National Statistics, ‘Divorces in England and Wales, 2012’; see also ‘Divorce rates data, 1858 to now: how has it changed?’, available online at < http://www.theguardian.com/news/datablog/2010/jan/28/divorce-rates-marriage-ons>