What is the legal position of pre-nuptial agreements in England & Wales? To dispel a common myth, pre-nuptial agreements are not automatically binding in England & Wales. The decision in Radmacher v Granatino did, though, take a significant step in that direction.
Pre-nuptial agreements, however well drafted, cannot oust the jurisdiction of the court. The position remains that it is the court, and not the prior agreement of the parties, that will dictate what should happen to a couple’s assets and income following a divorce.
In other words, marrying couples cannot agree whatever they wish in a pre-nuptial agreement and be guaranteed that what they have agreed will happen upon divorce. Pre-nuptial agreements do not have contractual status in that sense. Instead, the court will continue to undertake its function to scrutinise the terms of prenuptial agreements. Where the object of the agreement is to deny the economically weaker spouse the provision to which [s]he would otherwise have been entitled, the court will re-write in whole or in part the terms of the agreement.
That said, Radmacher v Granatino introduced a presumption that courts would enforce pre-nuptial agreements. The onus is therefore on the party who wishes to extricate themselves from a prenuptial agreement to prove that its terms are in whole or in part so unfair that it would not be “fair” to hold the parties to it.
What does fairness mean?
Fairness is an elastic, subjective and indefinite concept. There is no one size fits all, and the courts have been keen to emphasise that whether a pre-nuptial agreement is fair will necessarily depend on the facts of the particular case.
In Radmacher v Granatino the Supreme Court provided some additional guidance as to what fairness means in the context of pre-nuptial agreements:
- A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family. This remains the bedrock of the statutory exercise in England & Wales.
- The failure to meet a party’s needs could render it unfair to hold the parties to the terms of a pre-nuptial agreement. However, the Supreme Court judgment did not define what was meant by “needs”. It therefore remains a moot point whether “needs” means “reasonable requirements, generously interpreted” or something more narrow than that. In any case, the point is that prenuptial agreements will need to meet the financially weaker party’s “needs” and provide for that party to be adequately compensated upon divorce for any relationship generated disadvantage, particularly where there are children.
- Where the agreement addresses existing circumstances and not merely the contingencies of an uncertain future, the court should be slow to interfere with the agreement simply on the basis that the court knows best. The corollary is that, where a prenuptial agreement attempts to address all of the future unknowns in married life, there is increased scope for what actually happens during the parties’ married life rendering the agreement unfair. It is therefore advisable to give careful consideration to reviewing pre-nuptial agreements in the event of a change in circumstances which could render the agreement unfair.
Examples of circumstances in which that might happen:
- Where a couple enter an agreement on the assumption that they would each run their own independent professional lives and keep their finances separate, but then find that this is impossible when they have children, especially if they have more than one child or one of them has special needs;
- Where an older couple enter into a pre-nuptial agreement thinking that it would be fair to preserve for themselves money each of them brought to the marriage, but then find that this is impossible when one has become the carer for the other or one will be left homeless if the grown-up children take priority despite their lack of need;
- Where a couple enter into a prenuptial agreement thinking that one will always be the breadwinner and one will be the homemaker, but then the homemaker’s career takes off and the roles are reversed.
- There is nothing inherently unfair about an agreement which distinguishes between wealth accumulated during the marriage and pre-marital property or property that one party expects to receive from a third party.
- The circumstances surrounding the making of prenuptial agreements will also affect the weight given to the agreement upon divorce. Certain factors surrounding the making of nuptial agreements will detract from its weight, some will enhance its weight and some that will amount to a knockout blow:
- If there is evidence of duress, fraud or misrepresentation then those factors will negate any effect the agreement might otherwise have and the agreement should in principle be ignored;
- Other “unconscionable conduct” such as undue pressure or exploitation of a dominant position falling short of duress will reduce the weight attached to the agreement, if not eliminate it altogether;
- The weight attached to the agreement may be reduced if the parties do not take sound legal advice and exchange full disclosure before signing the agreement. However, even in the absence of both, if the parties are fully aware of the implications of the agreement, and are indifferent to the detail of disclosure, the weight attached to the agreement need not necessarily be reduced. Best practice, however, would dictate the exchange, at least, of a schedule of assets and income prior to entering into an agreement;
- The parties’ ages, maturity, previous experience of relationships and marriage will be relevant to the weight attributed to the agreement as will the question of whether the marriage would have gone ahead without an agreement.
What will the Courts do if parts of the terms of a pre-nuptial agreement are held to be unfair?
The answer seems to be that the courts will not simply tear up the pre-nuptial agreement and start from scratch. Instead, Judges will “tweak” the agreement and bring it within the boundaries of “fairness”. This may mean that a lump sum payment under the terms of a pre-nuptial agreement will be increased or other provision may be ordered in addition to that provided for by the agreement.