Following the landmark decision in Radmacher v Granatino,(1) the High Court again considered in AH v PH(2) the weight that should be given to a nuptial agreement when exercising its discretion under Section 25 of the Matrimonial Causes Act 1973 and the essential ingredients of such an agreement if it is to be binding on the parties.
The three-part test to be applied when determining the weight of a nuptial agreement, as devised by the Supreme Court in Radmacher, is as follows:
"the Court should give effect to a nuptial agreement that is:
i) freely entered into by each party
ii) with a full appreciation of its implications
iii) unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
The parties were a Scandinavian couple (H and W) in their early 30s. W had moved to London on H's invitation, giving up her work to do so. Before their marriage, when W was pregnant with their first child, H and W entered into a Scandinavian marriage settlement intended to protect H's extensive inherited, settled wealth. It was common within H's family to enter into such agreements and W received independent legal advice from a practitioner in her country of origin. The marriage lasted for four years before W issued divorce proceedings in the English courts.
Justice Moor, in applying Radmacher, found that the marriage settlement was not contractually binding between the parties. This was because W did not have a full appreciation of the implications of the settlement, particularly on any claims that she might have in divorce proceedings outside Scandinavia.
The judge noted that the marriage settlement, compared with that in Radmacher, was a very basic document that contained none of the following clauses:
- a clause saying that it was in full and final settlement of all of W's claims;
- a severability clause;
- a clause granting the Scandinavian courts exclusive jurisdiction;
- a clause dealing with W's maintenance; and
- reference to the potential relevance of foreign law or the need for advice in that regard.
However, the judge was satisfied that after Radmacher the law remained that, even if non-binding, the very existence of the agreement will, in an appropriate case, be relevant. Here, the fact that the parties intended the marriage settlement to protect H's inherited wealth was one of the circumstances of the case. Therefore, H's inherited capital was to be used only so far as to ensure that W had adequate housing and maintenance. The judge stated that he would have reached the same conclusion in any case by reason of the short length of the marriage, the age of the parties and the origin of H's wealth.
Any successful pre-nuptial or post-nuptial agreement should be drafted to ensure that it covers the above points. In particular, this judgment makes clear that if parties wish their agreement to be upheld by the English courts, they must intend it to apply wherever they might be divorced and have a clause within the agreement to evidence this. Practitioners, in the role of independent legal adviser, must ensure that they apprise their client of all implications of the agreement if there is a realistic prospect that the marriage may end in divorce in another jurisdiction.
Of further interest, the judge clarified that in any case that does not involve the principle of sharing marital assets and is instead based primarily on the needs of one party, it is sensible, proportionate and cost effective for the other party to run the so-called 'millionaire's defence'. This allows for the party to disclose only a broad outline of his or her overall wealth, so long as the party concedes that he or she can meet any reasonable order that the court might make.
This case was decided before the February 2014 publication of the Law Commission's report on matrimonial property, needs and agreements. The report recommended legislation to introduce 'qualifying nuptial agreements' (QNAs), which would be enforceable contracts not subject to the scrutiny of the courts. For such agreements to be QNAs, certain procedural safeguards would have to be met which, among other things, would include the need for disclosure of material information about the other party's financial situation and legal advice for both parties at the time of signing the agreement. It would also be impossible for one spouse to use a QNA to contract out of providing for the financial needs of the other or of any children.
Such legislation would not have been directly relevant in AH v PH, which related to a Scandinavian agreement on which the parties did not receive English legal advice. Nevertheless, until legislation is passed to introduce QNAs into the law of England and Wales, cases such as this will continue to be important in determining the circumstances and extent to which matrimonial agreements signed in this jurisdiction and others will be enforced by the courts.
For further information on this topic please contact Catharine Bell or Emma Jordan at Wragge Lawrence Graham & Co LLP by telephone (+44 20 7379 0000), fax (+44 20 7379 6854) or email (firstname.lastname@example.org or email@example.com).The Wragge Lawrence Graham & Co LLP website can be accessed at www.wragge-law.com.
(1)  UKSC 42.
(2)  EWHC 3873 (Fam).