Reach for the StaRs!
The debate on prenuptial agreements continues in earnest although the government shows no sign of addressing the complexities and pitfalls in relation to their enforceability. During his address to the University of Bristol Law Club on 22 March 2017, Supreme Court Justice Lord Wilson of Culworth raised the topic of prenups once again, suggesting that the current state of affairs may be inappropriately intrusive and in need of government review.
Prenups (and postnups) can be an important consideration for those with significant inheritance prospects, previously acquired wealth or for those who are remarrying. They appear to be growing in popularity, and it is for this reason that clarity in the form of legislation would help to ensure a greater chance of enforceability. However in the meantime, ensuring that prenups are undertaken with careful planning should be a priority, and may prove crucial further down the line if the relationship was to break down.
While we await further legislative clarification on the position of prenups, here is a reminder about their current status under English law.
There is no specific legislation about prenuptial agreements, so their status has been determined by case law – most notably in the landmark Supreme Court case of Radmacher v Granatino (of which see more below).
As the law currently stands, prenuptial agreements are not automatically legally binding in England and Wales. However, it is not all bad news – if done properly, prenuptial agreements should be upheld in the future and can be used to protect pre-acquired wealth, family assets or future inheritances, or simply to provide the couple with certainty about what would happen if their relationship was to break down.
The case of Radmacher v Granatino  UKSC 42 provided the first significant judgment about the status of prenuptial agreements. The Supreme Court set out the following three factors that increase the likelihood of a prenuptial agreement binding the parties:
I have explained what each of these factors mean in practice below.
The Supreme Court has confirmed that the concept of fairness in financial remedy applications follows three principles: need, compensation and sharing. The very existence of a prenuptial agreement is capable of altering what is seen as fair in the circumstances.
It will not be seen as fair to allow a prenuptial agreement to prejudice the reasonable requirements of a child of the family. That being said, the autonomy of the individuals who entered into the agreement should also be respected, and the courts have held that there is nothing inherently unfair about an agreement which seeks to ring-fence non-matrimonial property.
A number of our international couples will have entered into prenuptial arrangements abroad (sometimes also known as ‘matrimonial property regime’) before coming to the UK, or they may be considering an agreement which encompasses a number of their foreign assets. In these instances, it is very important to consider jurisdictional issues and potentially include both clauses choosing your jurisdiction and law. Again, the aim is to provide certainty in the future, in this case over how (and where) the agreement will be interpreted by a court.
In the case of DB v PB , the High Court was restricted in its discretion by the existence of valid prenuptial agreements (in this case the parties had two signed in Sweden and one signed in America). The prenups contained clauses confirming that the Swedish courts would have jurisdiction. While the judge deemed the agreement unfair to the wife, he stated that it should not simply be “ripped up” as the courts should respect the parties’ autonomy. He was also unable to make a maintenance order (as the English court did not have jurisdiction) and the terms of the prenup did not allow him to make a sharing award.
In February 2014 the Law Commission published its report on Matrimonial Property Needs and Agreements (see our blog on the topic here). The Commission recommended the introduction of qualifying nuptial agreements and even appended a draft Nuptial Agreements Bill to the report, which would give nuptial agreements the status of enforceable contracts, provided certain procedural safeguards were met. Importantly however, qualifying agreements could not be used by parties to contract out of meeting the financial needs of each other and of any children. The Government acknowledged the recommendations, but as yet have not got any further in implementing any reform. The case for reform may have now been overtaken by the changing landscape that Brexit will bring to the family law arena, but it is important that practitioners do what we can in order to ensure that it remains on the agenda.
If you have any questions about the issues covered in this blog, please contact a member of our family team.
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