04th Mar 2014

Do pre-nuptial agreements offer as much certainty as you would like?

– or are the benefits of pre-nuptial agreements being over-stated?

Much has been written recently about how pre-nuptial agreements can provide certainty.  It is said that  they minimise the risk of future litigation should the marriage end and that they enable couples to plan in the best of times for the worst of times.

For all of that, however, there seems to be no shortage of reported cases currently coming through the courts where hundreds of thousands of pounds have been spent on litigation even though the couples had pre-nuptial agreements in place.

This week there have been two such reported cases, the combined costs of which amount to more than a million pounds.

Perhaps the benefits of certainty and avoiding legal costs and struggles are being over-stated.

What is more, the much anticipated recommendations of the Law Commission for England and Wales on needs based matrimonial financial claims and the regulation of pre-nuptial agreements have now been released.  The recommendations are underwhelming and, as we shall see, may well do little to minimize the potential for contested proceedings even if they have a pre-nuptial agreement.

The two contested pre-nuptial cases.  

There are two new pre-nuptial case reports this week; SA v PA [2014] EWHC 392 (Fam) and Luckwell v Limata [2014] EWHC 502 (Fam).  Those two cases cost £367,000 and £657,000 in legal fees respectively.

In the former case, the wife tried to argue against the validity of the pre-nuptial agreement.  She denied having met with the lawyer involved with the drafting and signing of the document.  It followed, if she was believed (and she was not) that the purported pre-nuptial agreement was flawed and, presumably, fraudulent.

So we can see that the certainty of pre-nuptial agreements falls to be attacked by the party who would benefit from having it set aside attempting to argue that it is, somehow, fatally flawed in the manner it came into being.

The court dismissed her evidence as fanciful – “I was not impressed by her evidence.”  As a result the agreement was found to be valid;

“In my judgment the parties plainly intended the agreement to apply wherever they lived and wherever they might divorce.” Para 60 Mostyn J

In the second case the attempt to deviate from what had been agreed prior to the marriage, and re-asserted on two occasions within the marriage, was successful.

Even though it was found that the agreements were properly constructed and would normally be binding the court made clear that it still had the discretion to order something different to that which had been agreed.

In this case the husband had fallen on very hard times.  He was massively in debt and relying on moving from room to room at his mother’s bed and breakfast, depending on which room was available from night to night.  He was also working there on minimum wages in a futile effort to make ends meet.

The wife was provided for by her parents, including a very comfortable home and financial support amounting to about £80,000 per year.

The court reviewed the current state of pre-nuptial thinking and focused on the following safe-guard provision from the earlier case of Granatino v Radmacher;

“It is … needs… which can most readily render it unfair to hold the parties to an…agreement.”

As a result the court did deviate from what was agreed. 

They ordered that the wife must provide a housing fund of £900,000 for the husband, later reducing to £450,000 when the children of the marriage reached 22.  In addition the wife was to pay a further lump sum of £292,000 for other needs the husband had. 

It should be noted that the court also stated that if the agreement had not been in place that the husband would have got a much better outcome.  The agreement was not completely disregarded therefore and still had some influence on the final outcome.

Will pre-nuptials become more certain in the future?

You can draw your own conclusions based on these following excerpts from the newly released Law Commission’s recommendations.

Paragraph 1.28 of the Executive Summary states;

“Qualifying nuptial agreements, which we recommend would be enforceable as contracts without being subject to the courts’ assessment of fairness, offer predictability. The concept of qualifying nuptial agreements was broadly welcomed on consultation and there is also research evidence to show that many people would welcome the introduction of a legal tool that offered them more autonomy and control.”

So far, so good it would appear.  However in the very next paragraph, while embracing the sentiment expressed above, we find the following limitations;

`…that spouses and engaged couples should not be able to make contractually enforceable agreements that deal irrevocably with their future needs for housing, childcare, an income, or any other aspects of “Financial needs”.’

On that basis, just how much certainty do you think there is and what challenges can you see in the future?  The continued potential for future litigation seems to be only slightly curtailed, if at all.

You can find the full recommendations here.

How can we help?

It is clear that this is an area of law that continues to develop.  It is essential that you get careful legal advice on the current and likely future developments.

Here at Family Law in Partnership, divorce lawyers in London, we have several leading practitioners who have had to deal with contested nuptial agreements and also `maintenance as compensation’ claims – another key part in the SA v PA case referred to above. 

If you are thinking of getting married, get in touch with us and see what you can do to make things as certain as they can be.

Alternatively, if you are coming to the end of a relationship and are anxious about being tied to an agreement you have already signed, or want advice on whether your pre-nuptial agreement is robust enough, contact us on 020 7420 5000 or email us with your questions on hello@flip.co.uk.