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Nuptial Agreements: Where Are We Now?
Date: 24/11/2023 Type: Articles Topic: Private Client | Investment and HNWI’s |The Supreme Court decision of Radmacher v Granatino [2010] UKSC 42, handed down at the start of my family law career, has undoubtedly been the most significant decision of it so far. It saw Nicolas Granatino receive a much lower award than he had expected, and crucially, heralded a seismic change in the approach of judges and practitioners to nuptial agreements.
We know that 'The court will give effect to a 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.' [Para 75]
The Radmacher decision changed things for all nuptial agreements; pre-nups, post-nups and separation agreements. Since this decision, there has been an increasing number of couples looking for the protection and certainty that a nuptial agreement can offer. But do they work?
In order to determine whether an agreement is likely to be given effect, we need to look both at the circumstances when the agreement was reached, and also the circumstances when it comes to (potential) implementation.
Reaching agreement
Before signing an agreement, both parties should have a full understanding of its implications – they should know about each other's financial positions and understand the rights they may be giving up. If they provide financial disclosure, take legal advice and negotiate (rather than terms being presented as a fait accompli) and there are no vitiating factors such as mistake, misrepresentation or undue influence, the agreement is more likely to be determinative.
Operation
At the other end of the journey, the agreement, if implemented, must not leave either party in a 'predicament of real need'. The court is the final arbiter on what is a fair outcome, and if it does not consider an agreement meets a party's reasonable needs, that party will not be held to it. However, 'needs' is an elastic concept (described by Mostyn J in Cummings v Fawn [2023] EWHC 830 as a set of bookends in between which is a 'discretionary range') and the bar for someone to prove their needs are not met can be high. The extent to which circumstances have unexpectedly changed since the agreement was signed may also have an impact.
What the cases say
Every case turns on its facts, but it is helpful to look at some recent decisions to see how judges are applying these principles.
MN v AN [2023] EWHC 613 saw a nuptial agreement given considerable weight by the court. The parties had been married for 18 years and had 2 children, aged 15 and 14. The nuptial agreement was reasonable and had been negotiated between 'first rate' law firms. The wife argued that she had not entered into the agreement willingly and that it did not meet her needs. Mr Justice Moor took a robust approach: 'Litigants must realise that it is a significant step to instruct top lawyers to prepare a pre-nuptial agreement prior to marriage. It is highly likely they will be held to these agreements in the absence of something pretty fundamental that vitiates the agreement. …. Litigants cannot expect to be released from the terms that they signed up to just because they don't now like what they agreed.'
Similarly, in Backstrom v Wennberg [2023] EWFC 79 the judge was clear that the parties' agreements carried full weight. It was a short marriage, the husband was aware of the wife's wealth, and had benefitted from it during the marriage. It would be paternalistic and patronising to override their agreement simply on the basis that the court knows best. The judge did, however, consider his income needs, deciding that he should continue to receive maintenance, which was a 'necessary and realistic' concession made by the wife. The judge capitalised it at £350,000 (based on £60,000 for 6 years) and also made an order for child maintenance.
There are few cases where agreements are disregarded in their entirety. In S v H [2020] EWFC B16, HHJ Booth was clear that there the agreement should be ignored; there were vitiating factors at the time the agreement was entered into: no independent legal advice, signed 5 days before the wedding and insufficient understanding of the financial position. Furthermore, the agreement did not meet the husband's needs. The judge determined the case independently of its terms, and according to his needs.
Signing a continental marriage contract can be quite a different beast, in the English court's eyes, from a negotiated 'bells and whistles' English pre-nup. In AD v BD [2020] EWHC 857 and XW v XH [2017] EWFC 76, the continental marriage contracts were not upheld. In AD v BD the judge found that the wife had not properly understood its implications, she was under pressure as her father had been diagnosed with a terminal illness and she had not had the time or support to make a decision freely. In XW v XH, the judge found that the parties had not agreed their claims would be governed by Italian law and that the wife did not understand the agreement might have wider effect. Yet the English courts will uphold marriage contracts if the judge finds the parties understood the implications: In CMX v EJX [2022] EWFC 136, the couple (both French nationals) received legal advice jointly from a notary two weeks before their wedding. The marriage contract was upheld, and importantly, because of the level of wealth in the case, Moor J considered the wife's needs were met by her entitlement under its terms.
Often a nuptial agreement will influence rather than determine absolutely the outcome – for example:
- reducing the entitlement (HD v WB [2023] EWFC 2),
- redefining what would otherwise be a reasonable need (KA v MA [2018] EWHC 499),
- restricting to needs rather than sharing (Z v Z (No 2) [2011] EWHC 2878).
We need to remember that the reported cases are those considered worth litigating. It is clear from the case law post-Radmacher that taking the time to enter into a carefully considered, negotiated, fair and straightforward agreement, is the best way not just to reduce potential claims upon a divorce, but also to reduce the time, emotional and financial cost of litigation.
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