Prenuptial Marital Agreements

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This essay highlights the aspect of prenuptial marital agreements. A pre-nuptial agreement is an contract made by a couple before they get married or enter into a civil partnership, which assorts how they desire their assets to be shared if they should divorce or have their civil partnership dissolved. Such agreements are divided into three categories. First are the Pre-nuptial agreements which are made before marriage. Second are the post-nuptial agreements which are similar to pre-nuptial agreements but would be prepared after marriage or civil partnership. Lastly, we have the separation agreements and these are made after separation and in expectation of a forthcoming divorce or dissolution. This piece aims to review how the law has adopted changes over the time period. It will analyse the developments and any recommendations that can be pondered over will be discussed. Pre-nuptial agreements are legally binding in numerous countries including the United States of America and Australia. However, they are not automatically enforceable in courts in England and Wales. In a landmark ruling in the case of Radmacher v Granatino the Supreme Court said “that courts should give effect to a pre-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”.[1] The essay revolves around this case and leading scenarios. A couple may decide between themselves how to split their possessions on divorce. They will often seek legal advice and the awareness that courts will more or less make the same decision if the matter was to be presented in front of them. Their contract will be then approved by court. When this is not possible such as where dispute between parties arise, an application for ancillary relief will be decided by the court. Financial provision might be granted to either party to the marriage, subject to the facts of the individual case as every case has different circumstances. According to the section 25 of the Matrimonial Causes Act 1973, the court has very extensive discretion concerning the division of assets on divorce however the court must acknowledge all the related circumstances of the case, importance should be given to the welfare of a minor which is of any child of the family who has not reached the age of eighteen. The court must also deliberate whether it is likely to make a “clean break”.[2] Similarly in the case of a civil partnership, The Civil Partnership Act 2004 s.5 (5) sets out related requirements in relation to financial provision applications on dissolution of a civil partnership.[3] The essay will tend to look at the law before the impact of Radmacher v Granatino. The courts have believed what could be labelled as a paternal attitude to the granting of ancillary relief ondivorce. Inthe past case of Hyman v Hyman(1929) Lord Buckmaster said that “The Wife’s right to maintenance is something she cannot barter away.”[4] Courts have given a lot of importance to its jurisdiction. The impression that the court is the wise one is still mostly leading. Even in the Radmacher case it is specified that “the parties cannot by agreement, oust the jurisdiction of the court.”[5] It was protected in statute first by the Maintenance Agreements act of 1952 and then combined by the Matrimonial Causes Act 1973 which assists the judge to consider the related circumstances of the case. However, there have been amendments to how the appropriate circumstances can be measured. In the case ofEdgar v Edgar[6]it was acknowledged thatseparation agreementswould generally be given weight. More recently it had been decided that post-nuptial agreements should also be given weight if they were fair and just. This idea was lately supported by the Privy Council inMacleod v Macleod. However, pre-nuptial agreements have been constantly viewed as outside these relevant issues. The requirements for dividing assets are located in second part of the Matrimonial Causes Act 1973. The court has a very extensive discretion as to what commands to make on an application for ancillary relief. Yet there is a definite pressure between the strategy of hopeful settlement and the outdated view that the state has an important concern in safeguarding that any settlement is just and reasonable considering the welfares of both parties involved. The revolutionary case on division of marital assets on divorce is White v White in which the House of Lords gave a breakthrough conclusion and said that in great valued asset cases the law has been incorrectly interpreted by the Courts for the previous thirty years. Previously a wife was limited to seeking her fundamental needs such as a house or some maintenance costs labelling to be awarded according to reasonable requirements. Now the approach has taken a different road. There is no difference between the husband and wife and the idea of equality prevails between the breadwinners and the homemakers. Focusing on the statements of equality, The Courts must deliberate carefully over section 25 of the MCA 1973 feature and fairness must be the main objective of the Court. When reached on a conclusion, the result must be measured against the yardstick of equal division. Failure in these steps can violate the issue of fairness. It’s quite clear that mainly these cases and scenarios are only from high net worth couples. However, the main priority is the care of a minor. The beginnings concerns the welfare of a minor child of the family as the court’s first attention, secondly the need to accomplish a fair conclusion. This idea was also supported in Miller v Miller[7] and McFarlane v Macfarlane[8]. The idea of equal Davison of assets kept lingering for some time until Radmacher v Granatino. Prenuptial agreements got a real acknowledgment after this case. InCrossley v Crossley[9] Thorpe LJ stated that, “based on the particular facts of that case, the pre-nuptial agreement was a factor of magnetic importance”. Other factors that should be satisfied in this case were that weight should be given to a PMA only if there Full & frank disclosure of all the assets between parties, the issue of Equality of bargaining power, Each party had independent legal advice regarding the terms and the Terms were fair. Just as each party has a responsibility to make full revelation of all material realities to the court hearing an ancillary relief application, each party has a duty to make full and frank revelation of all material facts to the other party throughout discussions which can result in a consent order. This was explained in the case of Livesey v Livesey[10]. Radmacher was the first time when this matter appeared before the Supreme Court. There is one thing quite important that if the facts of the case continue to be of vital importance to the decision of the court regarding pre-nuptial agreements then it seems practical that the facts of the Radmacher case must be obviously displayed in order to clarify the decision of the court. The ruling of this case has a great impact on the reform of law which will be discussed further. The importance of this can be sensed from the statement ofJane Keir, law firm Kingsley Napley LLP, said: "Qualifying nuptial agreements should be enforceable whilst limiting a judge's discretion over any change to the intended outcome. Never before has English law gone quite so far. We urge parliament not to miss this opportunity to allow couples greater certainty and pre-agreed financial control should their relationship disintegrate." The Labour Government printed a consultation paper in 1998 called Supporting families[11], which measured the useful steps which can be acquired to support families. The paper recognized that couples might be disheartened from making pre-nuptial agreements because there was no obligation for the courts to take any account of such agreements in determining how to divide property on divorce. One of the suggestions being deliberated at that period was to see that is it a good idea to make a written pre-nuptial agreement about the distribution of money and property legally binding. Previously, pre-nuptial contracts were unenforceable as being in contradiction of public policy as it was measured that they might weaken the organization of marriage and attempt to restraint the discretion of the courts to grant property on divorce. In F v F, Thorpe J set the very inadequate worth of pre-nuptial agreements: “The rights and responsibilities of those whose financial affairs are regulated by statute cannot be much influenced by contractual terms which were devised for the control and limitation of standards that are intended to be of universal application throughout our society”.[12] It can be seen that recently courts have been ready to assign weight to a pre-nuptial arrangement as one of the applicable conditions to be taken into consideration in working out their discretion under section 25 of the Matrimonial Causes Act 1973. In X v X the judge held that “the fact that the parties have made their own agreement is a 'very important' factor in considering what is the just and fair outcome. The amount of importance will vary from case to case”. He continued: “The court will not lightly permit parties who have made an agreement between themselves to depart from it. The court should be slow to invade the contractual territory, for as a matter of general policy what the parties have themselves agreed should, unless on the face of it or in fact contrary to public policy or subject to some vitiating feature ... be upheld by the courts".[13] In 2003, court supported a pre-nuptial agreement on the foundation that the wife knew that the pre-nuptial contract was correctly counselled as to its terms, and signed it freely without pressure. Hence, it was decided that the contract should be considered by the court as one of the situations of the case under section 25 of the Matrimonial Causes Act 1973 and that admission into the contract established behaviour which it would be unfair to disrespect.[14] However, not in all cases the prenuptial agreements have been successful in getting valued. In Z v Z Moor J said, “This was undoubtedly a case for equal division of assets absent the French agreement. The issue was whether the marital contract took the case out of 'sharing'. There was no dispute that the agreement was entered into freely and with full understanding of its implications. No formal advice was given by thetwo notary witnesses and there was no formal disclosure. This did not matter as we knew exactly what the agreement entailed and each party new the financial position of the other”.[15] Later on in 2008, in MacLeod v MacLeod[16], the Privy Council deliberated whether a pre-nuptial agreement was binding. The Privy Council held that it was not up to them to mess with famous rule that pre-nuptial agreements were conflicting to public policy and on these basis they are not binding in the promised sense, and said that the matter was more suitable to law-making body than judicial development but post-nuptial agreements which provided for a upcoming parting could be given weight by the courts. The law standing in this situation can be weighed according to different scales. The upside of not having a prenuptial agreement is the presence of flexibility. The court’s jurisdiction can be advantageous and the courts can use their power to maintain fairness and justice. However, this scenario can be the slope down for couples looking for clarity in law. Couples with high net worth can’t secure their belongings due to the ambiguity in law. Looking at this there is a clear pathway needed for safeguard of assets and property upon divorce. To resolve this issue the law commission have been in the race. The Law Commission began a plan in 2009 to observe the position and enforceability of marital property agreements. In January 2011 it opened a discussion, revising the present law of marital property agreements and discussing choices for improvement. The scheme was stretched in 2012 to cover two additional matters of financial provision rising on divorce or the dissolution of a civil partnership. It was decided with the Ministry of Justice that the possibility of the scheme should be extended to comprise an assessment of two features of financial provision on divorce and the dissolution of a civil partnership namely financial needs and non-matrimonial property. The aim of the scheme was to bring clarity to the existing law. On 11 January the Law Commission sprung a public talk on marital property agreements, due to the result of Radmacher v. Granatino. The Law Commission was looking for views on the attractiveness of possible choices for reforming the law of prenuptial, postnuptial and separation contracts made by couples before or throughout their marriage or civil partnership that are planned to oversee their financial provisions if the relationship finishes. Finally in 2014, the final law commission paper came out with detailed recommendations, proposals and strategies to reform the law regarding prenuptial agreements. The main reform proposals are listed below. First and foremost The Family Justice Council should clarify the law relating to “financial needs”. This would safeguard the law and make sure that it is applied reliably by the courts and strengthen judicial repetition. With the guidance people can acknowledge the position of law and their objectives without any legal help. Secondly, it should explore the likelihood of whether assistance to control of “financial needs” could be planned. And the most important one is to familiarise with the concept of “qualifying nuptial agreements”. These would be enforceable contracts which would allow couples to make binding provisions for the financial forfeits of divorce or dissolution. However, to make a qualifying nuptial agreement, certain practical precautions would have to be met. The agreements would be enforceable as agreements but would apply only after both partners' financial needs, and any financial duties towards children, have been satisfied. And they would be binding only if at the period of signing, both parties had revealed material statistics about their financial stateand both gotlegal advice. Looking at the present law, it is now possible for couples to make pre- and post-nuptial agreements. Legalising prenuptial agreements can bring positive a vibe to the legislature. One of the key benefits of a prenuptial agreement is that it can give certainty on what assets are taken into deliberation in a divorce. These agreements can act as a shield for people of high net worth especially in the case second or more marriages where there are children from the existing marriage. A properly conveyed agreement provides a better grade of certainty. It gives the couple a level of autonomy and freedom from judicial interference in what should happen to their assets ondivorce. As Resolution vice-chair Jo Edwards expresses her feelings, "Guidance on needs should encourage consistency, dispel myths and manage expectations. This will help anyone going through separation, even if they don't have access to legal advice and support, or are trying to reach agreements on their own, during a very traumatic time." [17] In the case of a wealthy partner it can limit their obligation to the less wealthy spouse. A prenuptial agreement can also distinguish assets collected prior to marriage, gifts and legacy as separate to joint wealth. These agreements also highlight the importance of autonomy as they let people make their own choices. This idea was also supported by Professor Elizabeth Cooke the Law Commissioner for property, family and trust law, said: "Pre- and post-nuptial agreements are becoming more commonplace but the courts will not always follow them and lawyers are therefore not able to give clear advice about their effect. Qualifying nuptial agreements would give couples autonomy and control, and make thefinancialoutcome of separation more predictable”.[18] However, if we consider the preceding statement then it clashes with the main theme of the essay. As it is can be taken from the dissenting judgement of Lady Hale, which states that Pre-nuptial agreements deny the economically weaker spouse an entitlement of the rights they are supposed to get. She also emphasises on the issue of reform of the law. Deliberating upon the strengths and weaknesses can lead to an easy conclusion that introduction to such agreements can be beneficial for both judiciary and public. Keeping in front of us that legalising prenuptial agreements are the most appropriate thing to do, there is an alternative that can be pondered upon. This the idea of no fault divorce. In this scenario the fault in relationships which leads to divorce is extinguished. However, if no-fault divorce cancels marriage after the occasion, prenuptial agreements can do can play a good role in undermining it earlier. The idea of marriage is that it’s destined to be a lifetime affair and the clue here is that ‘til death do us part’ and the idea of prenuptial agreements is that they create provision for the thing finishing before it even gets started. People are setting their resources out of the reach of the spouse in advance. Having considered all possible scenarios here, it can evidently be concluded that legalising the aspect of prenuptial agreements can be a revolutionary change in the history of England. It can provide a clear template for couples to follow and binding rules and regulations can be provided when needed. If anyone wants to enter a contract of such sort, they will know that efficient legal advice is needed which can be helpful when there are guidelines set to be followed. This will allow the lawyers and academics to have a clear transcript to study and advice their clients.
[1] Radmacher v Granatino [2010] UKSC 42; [2010] WLR (D) 260 [2] Matrimonial Causes Act 1925 section 25A [3] Civil Partnership Act 2004 schedule 5, part 5, para 23(2) [4] Hyman v Hyman [5] Radmacher v Granatino [6] Edger v Edger [7] Miller v Miller [8] Macfarlane v Mcfarlane [9] Crossley v Crossley 2007 [10] Livesey v Livesey [11] Supporting families 1998 [12] F v. F (Ancillary Relief: Substantial Assets) [1995] 2 F.L.R. 45 at 66 [13] X v X (FD) [2002] 1 FLR 508 at 537 (Munby J) [14] K v K (Ancillary relief: prenuptial agreement) [2003] 1 FLR 120 (Roger Hayward-Smith QC (sitting as a Deputy High Court Judge) [15] Z v Z [16] Macleod v Macleod [17] http://www.familylawweek.co.uk/site.aspx?i=ed127909 [18] http://www.familylawweek.co.uk/site.aspx?i=ed127909
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