Despite this view, expressed by the Church of England and others, the Law Commission has nevertheless recently published a report recommending that “qualifying” nuptial agreements (which is a nuptial agreement capable of excluding the courts discretionary powers to award separating couples financial remedies) should be binding in court, provided that the agreement provides for both parties’ financial needs (ie, not allowing one of them to get the mansion and an income from a share portfolio, while the other rots in a rat-infested council flat).

Background

Prenuptial agreements are nothing new. The Ketubah, an ancient Hebrew marriage contract that sets out what a husband must pay on divorcing his wife, goes back 2000 years. Medieval dynasties, which viewed marriage as a political act of alliance, were likewise careful to safeguard the rights of both husband and wife in elaborate agreements before a wedding.

In the 18th century, marriage contracts were de rigueur among the landed classes, so much so that they were satirised by Hogarth in “Marriage à la Mode”. This series of engravings tells the story of Earl Squander’s son’s contracted marriage to the daughter of a mean city merchant (who ends up running off with Silvertongue, the lawyer advising on the contract).

Congreve’s play, “The Way of the World”, also satirizes marriage contracts and includes a prenuptial agreement between Mirabel and Millament. What Millament wants is to be able to “dine in my dressing room when I’m out of humour, without giving a reason”, and “wherever I am, you shall always knock on the door before you come in”. Mirabel demands: “I covenant that your acquaintance be general; that you admit no sworn confidant or intimate of your own sex; no she-friend to screen her affairs under your countenance; and tempt you to make trial of a mutual secrecy.”

However, the modern marital agreements that the Law Commission have in mind have nothing to do with legislating for behaviour within a marriage, but who gets what if it ends in divorce.

In the middle of the 19th century, the courts established a public policy that the law should resist recognising nuptial agreements, on the grounds that they might encourage separation or divorce (Cocksedge v Cocksedge (1844) 14 Sim 244). Later, in Hyman v Hyman [1929] AC 601,629, a second public policy ground was established that separation agreements, which dealt with the consequences of future separations (and had been enforced by 19th-century judges), should not be able to override the court’s jurisdiction to order financial provision.

These public policy rules remained in place until the Privy Council in MacLeod v MacLeod  ([2008] UKPC 64; [2010] 1 AC 298), ruled that the first public policy ground no longer prevents postnuptial separation agreements from being enforceable on the basis that ss 34 and 35 of the Matrimonial Causes Act 1973 gave them statutory jurisdiction to do so, and because postnuptial agreements were considered safer than prenuptial agreements as they don’t put people off marriage; “a prenuptial agreement is no longer that price which one party may extract for his or her willingness to marry” (Baroness Hale at para 36).

Radmacher v Granatino

Then in the recent case of Radmacher v Granatino [2010] UKSC 42, the Supreme Court did away with the second public policy rule, making it possible for prenuptial agreements to be enforceable, provided that the parties understood the implications of the agreement. In Radmacher, the court stated in relation to Mcleod: “We wholeheartedly endorse the conclusion...that the old rule that agreements providing for future separation are contrary to public policy is obsolete and should be swept away...But...this should not be restricted to postnuptial agreements. If parties who have made such an agreement, whether antenuptial or postnuptial, then decide to live apart, we can see no reason why they should not be entitled to enforce their agreement.”

Radmacher went onto say: “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 the circumstances prevailing it would not be fair to hold the parties to their agreement.”

Since the decision in Radmacher, the courts have been acknowledging prenuptial agreements to the extent that they are “fair”. So why the need for a change in the law?

Law Commission proposals

The Law Commission believes that the concept of “fairness” is too loose to constitute a legal definition and that it would lead to uncertainty as to what “fairness” means in practice. Its recommendation is that it should be possible for parties to enter into a “qualifying nuptial agreement”, which would provide parties with certainty to the division of assets in the event of divorce, providing that the agreement made provision for each parties financial needs.

“Needs” is a much debated concept in family law. As with “fairness” there is no clear legal definition of “needs”. This is because each case is fact-specific and dependent on the standard of living experienced in the marriage. What constitutes needs in one case will be perceived as a luxury in another; the courts must use their discretion to establish what are the needs in each case.

More worryingly, what constitutes “needs” has tended to vary depending on which region your case is heard in.

The Law Commission believes this should be clarified: “We recommend that the Family Justice Council prepare guidance as to the meaning of financial needs, encouraging the courts to make orders that will enable the parties to make a transition to independence, to the extent that that is possible in the light of choices made within the marriage, the length of the marriage, the marital standard of living, the parties’ expectation of a home and their continuing responsibilities.”

The Law Commission also recommends that the guidance should be produced in a plain English format for the benefit of litigants in person, who crop up more and more often in the family courts as legal aid becomes harder to get. They suggest covering three areas:

(1) What are needs?

(2) At what level should needs be met?

(3) The duration of provision for needs and the transition to independence.

 

In the first instance, there will be an expectation that children’s needs are met and that they should be securely housed along with their primary carer, which could mean that they remain in the former matrimonial home. If the primary carer is restricted by childcare from working, then maintenance payments may be necessary. Where there are no children, both parties will need to be housed, but one party retaining the former matrimonial home will be less of a priority.

The Law Commission is of the clear view that the objective in financial settlements and awards should be to enable a party to make the transition to independence. This means that maintenance payments should not be lifelong. However, this will depend on the age of the parties, whether they have children, and also their ability to return to the labour market.

The Law Commission further recommends that a marital property agreement should not be a qualifying nuptial agreement, unless it is a valid contract. It is also important that the contract is not the result of undue influence, such as a bullying spouse. Because it is hard to prove “undue influence”, as it can be quite subtle, there is a presumption in the family courts that the party against whom it is raised is required to disprove it.

The Law Commission “recommends(s) that the law relating to undue influence be reformed, for qualifying nuptial agreements only, through an express provision to the effect that a presumption of undue influence will not apply to qualifying nuptial agreements”.

This is somewhat controversial in that, while it is possible to presume that an element of undue influence could be found in every case of a prenuptial contract, it will be hard for the party raising undue influence to prove its existence at all, especially if, as the Law Commission recommends as a condition of a qualified nuptual agreement, both parties have received independent legal advice as to the pros and cons of entering the agreement. (Worryingly, from the lawyer’s point of view, this heightens the chance of being sued for negligence for failing to give appropriate advice).

Rising demand?

Since the report was published, law firms have received a substantial increase in inquiries about prenuptial agreements, and not just from the super-rich out to protect their millions. The Law Commission gives examples of couples that might be interested in entering into qualifying prenuptial agreements, including high-earning professionals who wish to protect specific assets, and older couples with children from a previous marriage who wish to protect a property for the benefit of those children. It is clear that a prenuptial agreement in those instances would save the couples protracted litigation and heartache should their marriage or partnership not work out.

And in a world where 43% of marriages end in divorce, it would seem prudent to insure against an unnecessarily combative end to the relationship.

There is also a school of thought that the process of entering into a prenuptial agreement will cause a couple to consider the realities of their marriage in far greater detail than simply blindly walking up the aisle with the hope that romance will carry them through till death do they part. The fact that, as the Law Commission recommends, they will have to disclose their financial assets to one another, may cause some parties to pause for thought. But it will not be possible to legislate for behaviour, as Millament and Mirabel tried to.

Lady Hale, in her dissenting judgment in Radmacher, provides a more circumspect approach to prenuptial agreements, recommending the Law Commission report on the issue, as it has done now. Whether she would agree to its proposals is unclear, as she states at para 135: “...some may think it permissible to contract out of the guiding principles of equality and non-discrimination within marriage; others may think this a retrograde step likely only to benefit the strong at the expense of the weak.”

We wait to see whether the government adopts the Law Commission’s proposals.