Nuptial agreements in England & Wales provide an opportunity for couples to set out in a bespoke way how they think it would be fair to divide their marital assets and non-marital assets in the context of a future divorce or dissolution. They are primarily focused upon what happens in the event of a separation but are not binding upon the courts in a divorce. Such uncertainty may be unfamiliar to lawyers in civil law jurisdictions where the election of a marital property regime or the application of a default regime can provide an element of clarity in respect of the treatment of finances both during a marriage and on divorce, without the need for bespoke drafting. The below summarises how the English family courts treat both English nuptial agreements and marital property regimes upon divorce/dissolution.
Nuptial agreements
The law relating to nuptial agreements in England has a clear starting point in the Supreme Court decision of Radmacher v Granatino[1]. In the judgment from April 2010, the Supreme Court recommended that a court should uphold prenuptial and postnuptial agreements unless to do so would be unfair or would prejudice the interests of any minor children of the family. It was hoped that legislative change might soon follow, giving statutory force to such agreements but this has not happened. More than a decade on, the law remains as set out by Lord Phillips at paragraph 75 of Radmacher: “The court should 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.”
Over the years, this judgment has in practice been broken down to provide a series of safeguards which are familiar to family lawyers practicing in this jurisdiction. Best practice for advising clients on nuptial agreements will include the following:
- The agreement should be freely entered into. There must be no evidence of duress, undue influence, fraud, misrepresentation or mistake;
- The agreement should be signed well in advance of the wedding (although the courts have shied away from suggesting a particular timeframe, many family lawyers will aim to ensure the agreement is signed at least 28 days before the wedding – a timescale which has its roots in a 2014 Law Commission Consultation paper which has not been adopted into law – to avoid any suggestion of undue pressure where an agreement is negotiated very close to the wedding);
- Each party must receive all information and documentation material to their decision to sign the agreement. In practical terms, this usually involves each party disclosing their financial position (including any expected future inheritances and interest under trusts) in a schedule which is appended to the agreement;
- Both parties should receive independent legal advice from a specialist family lawyer. Whilst not essential, this is recommended and certainly desirable to establish that both parties had a full appreciation and understanding of the implications of the agreement;
- The agreement must meet needs and must not prejudice the reasonable requirements of any children of the family.
If all of these safeguards are met, it is likely that a court will uphold the nuptial agreement if it is challenged in the future. However it is important to remember that the case of Radmacher does not create a presumption that nuptial agreements are binding. No agreement can oust the jurisdiction of the family court in England & Wales. These safeguards instead provide a clear framework for those preparing and advising on nuptial agreements as to the factors that make it more likely that an agreement would be followed. The overall aim is to provide the couple with autonomy over marital finances in the event of a future divorce or separation while ensuring the court retains an oversight role guided by the need to achieve fairness. The real strength and benefit of a nuptial agreement is that, if these safeguards are met when the agreement is signed, the court will usually give considerable weight to the terms of the agreement , and this can result in the court making a different award to what would have been made on divorce had no such agreement been in place.
In the absence of a nuptial agreement, or in circumstances where the court elects to give little or no weight to any agreement, the court will make such financial provision on divorce as it considers fair and reasonable, taking into account the factors set out in the relevant statute, and principles arising from case law. This will involve consideration of all of the relevant circumstances at the time of the breakdown of the relationship. Given the discretionary nature of English family law, this can lead to an element of uncertainty about the likely level of future financial provision on divorce/dissolution, which some couples find unsatisfactory, particularly where they may have connections to another jurisdiction which offers the freedom to elect a marital property regime agreement.
Matrimonial Property Regimes: treatment in England
A matrimonial property regime is not a concept of common law, where marriage does not affect property ownership or give rise to liability for debts. These are dealt with in other ways. The English family courts are however increasingly confronted with civil law matrimonial property regimes, particularly in divorce proceedings involving couples with European connections. Importantly, in England & Wales, the court will only apply English law in relation to divorce and finances. It can often come as a surprise to couples with international connections who are divorcing in this jurisdiction to learn that their marriage contract may not be binding on the English family court, particularly if it would have been binding in the country where they signed it. Whether or not a foreign nuptial agreement will be upheld in England often depends on the circumstances, including consideration of the extent to which the safeguards outlined above have been met, and also whether the terms of the agreement are considered to be fair with reference to English legal principles.
There are a number of recent cases where the English family court has considered the weight that a matrimonial property regime should be given where the parties subsequently divorce in this jurisdiction.
In Z v Z[2] the parties had entered into a marriage contract under the separation de biens regime in France, before two notaries and in accordance with French law, approximately one week before the wedding. There was no dispute that the agreement had been entered into freely by both parties, was in the proper form and would have been binding if the divorce had proceeded in France. It was also accepted that the husband would not have married the wife had the agreement not been entered into. At the time of the divorce, all the assets (c£15m) were characterised as matrimonial property which would, but for the agreement, have been equally shared. It was found that when entering into the agreement the wife did fully understand the expectations of it. The court gave effect to the election of the matrimonial property regime in France in disapplying the sharing principle. On account of the agreement, the court confined the wife’s award to her needs, generously assessed at £6m (40% of the overall assets). The court expressed the view that the requirement of “a full appreciation of its implications” did not carry with it a requirement to have received specific advice as to the operation of English law on the agreement in question. It was noted that were this the case, then every agreement made at a time when living in England & Wales was not on the horizon would be discarded. It was said that for an agreement to have influence in this jurisdiction, it must mean that the parties intended the agreement to have effect wherever they might be divorced, and most particularly were they to be divorced in a jurisdiction that operated a system of discretionary equitable distribution. The court sounded a note of warning though that usually the parties will need to have received legal advice to this effect and will usually need to have made mutual disclosure for the agreement to have influence.
This can be contrasted with the outcome in B v S[3] which concerned a Catalonian matrimonial regime of separate property adopted by the parties on their marriage, where the court did not give effect to the election of the matrimonial property regime. In considering the correct approach, the court referenced the Law Commission Consultation Paper No 198 “Marital Property Agreements” (11 January 2011) and its conclusions with respect to civil law systems (para 5.38). The Law Commission’s view was that any analogy to the European civil law system with respect to prenuptial agreements was flawed. Their rationale was that in jurisdictions with a system of immediate community of property or of deferred community, marriage agreements are made against the background of a default matrimonial property regime taking place automatically on their marriage, albeit with a choice to adopt another regime. However, in contrast, for common law agreements, there is no default regime and by entering into an agreement at all, the couples are making a conscious choice to opt out of a discretionary regime and into certainty. It was noted that in Radmacher the prenuptial agreement was a bespoke agreement for that marriage, which went much further than a mere election of a particular property regime. It was thus an agreement which had much more in common with a bespoke “common-law prenup”. The court found that neither party in B v S had been aware of the full implications of the agreement or the default matrimonial regime under which they married, and distinguished civil law matrimonial property agreements from negotiated “common law” prenuptial agreement. As a result, the agreement was disregarded entirely in the court’s assessment of the award.
In XW v XH[4] the parties had signed an Italian ‘separazione dei beni’ agreement at the time of the marriage. The court agreed with and adopted the observations made in B v S in respect of a civil law matrimonial property agreement being different in character and objective to a “common law” prenuptial agreement. The court accepted that there would be cases where it would be appropriate for the court to uphold an agreement contained in the election of a matrimonial property regime, but considered that in many more cases it would not be fair to hold the spouse to such an agreement. In this particular case, the court was satisfied that the wife understood in basic terms the nature and effect of the separazione dei beni regime. However, it was not satisfied that she understood the legal implications on divorce of her election into the regime and found that she was unfamiliar with the language of the regime when it was entered into. The court held that in the circumstances it would be manifestly unfair to hold the wife to the agreement and therefore attached no weight to the agreement in determining the division of the matrimonial assets.
In the case of Versteegh[5] however, the court preferred the analysis on matrimonial property regimes in Z v Z rather than in B v S and upheld the Swedish pre-marital agreement. The parties signed a Swedish marital agreement the day before the parties’ wedding in Sweden. The wife had not received legal advice before signing the pre-marital agreement and submitted that she had not even read the agreement in advance of the wedding. The judge at first instance found that the wife knew “full well” the effect of the agreement. On appeal, the Court of Appeal recognised that the pre-marital agreement was signed in a country where they are commonplace, usually simply drafted and generally signed without legal advice or indeed disclosure. They held that in those circumstances, when an English court is presented with such an agreement, it cannot be right to add a gloss to Radmacher to the effect that a spouse will be regarded as having lacked the necessary appreciation of the consequences absent legal advice, simply because some of the countries in which they may choose to live during their married life may operate a discretionary system. The Court of Appeal emphasised the “sea change” that Radmacher had represented when it came to the English family court’s approach to prenuptial agreements: not only are prenuptial agreements no longer considered contrary to public policy in England & Wales, but where a party has a full appreciation of its implications, the court should now give effect to such an agreement, unless it would be unfair to do so.
These cases and the contrasting outcomes highlight the uncertainty surrounding the treatment of civil marital property regimes when the parties divorce in England & Wales, and much will turn on the circumstances in which the agreement is made. Key to the court upholding a marital property regime agreement is that the spouses understood the full implications of the agreement. For this understanding to be found to exist, both parties do not necessarily have to have legal advice and in particular do not have to have been advised on the implications of the agreement in a different jurisdiction where they might live during their marriage. Furthermore, where the agreement is signed in a country where the signing of such agreements is commonplace, drafted simply and commonly signed without legal advice or disclosure, the decision in Versteegh suggests that they are likely to be upheld.
On a practical level, it is likely to assist with establishing that both parties understood the full implications of the agreement if it is drafted in a language that both parties are familiar with and understand, as noted in XW v XH. Ensuring that both parties also have at least a general understanding of the other person’s financial position will also assist to demonstrate that they understood how the agreement would apply.
In addition, while it appears following Radmacher and Versteegh that a lack of legal advice will not necessarily be fatal to an English court upholding a civil law marital agreement, it cannot be escaped that the receipt of independent legal advice will provide clear evidence of a full understanding and is advisable wherever possible.
Finally, and perhaps most fundamentally to try to ensure that any issues can be addressed in advance, in cases where the parties have international connections, specialist advice should be sought at an early stage in each relevant jurisdiction to advise on the impact of any agreement and the implications for the parties in the event of divorce.
By Hannah Minty, Russell-Cooke, London
[1] Radmacher v Granatino [2010] UKSC 42
[2] Z v Z (No. 2) [2011] EWHC 2878 (Fam)
[3] B v S (Financial remedy: Marital property regime) [2012] EWHC 265 (Fam)
[4] XW v XH [2017] EWFC 76
[5] Versteegh v Versteegh [2018] EWCA Civ 1050
