Law Commission Report: Matrimonial Property, Needs and Agreement by Beth Mason13/03/14
On 27th February 2014 the Law Commission for England and Wales published its Report on Matrimonial Property, Needs and Agreements: the future of financial orders on divorce and dissolution. The stated intention of the Commission is to “render elements of the law more certain and predictable without jeopardising the protection that the law offers to those who are made vulnerable by family breakdown”. This article will examine in more detail how the Law Commission sees that goal being realised and the practical implications for parties considering pre-nuptial agreements.
As is well-known, pre- and post-nuptial agreements are not legally binding in the jurisdiction of England and Wales. Since the Supreme Court case of Radmacher v Granatino in 2010 far greater weight has been given to such agreements and they will generally now be upheld as long as they are freely entered into by each party, each party has a full appreciation of the implications of the agreement and has had legal advice on those implications, and the effect of the enforcement of the agreement is generally fair. However, the Court does retain a discretion and that discretion can lead to doubt and uncertainty for those wishing to enter into such agreements.
The Law Commission has recommended that legislation be enacted to introduce “qualifying nuptial agreements”. The Commission envisages these QNAs being enforceable contracts not subject to the scrutiny of the Courts. Such agreements would enable couples to make contractual arrangements about the financial consequences of the breakdown of their marriage in the certainty that those arrangements would be upheld. The Law Commission Report does, however, recognise that such certainty in agreements could lead to a lack of provision for the financially weaker spouse and, as such, it has recommended some procedural safeguards as well as a prohibition on parties contracting out of meeting financial needs.
The issue of “financial needs” is itself a focus of the Law Commission report. The Courts currently have a wide discretion in relation to the interpretation of financial needs which inevitably leads to a great variation in results from case to case and in different areas of the country. The Commission feels strongly that clear guidance is needed on the issue of financial needs to provide parties with a better understanding of the sort of outcome they are likely to face if their financial arrangements are to be decided by a Judge.
Whilst the Law Commission report recommends the introduction of legally enforceable nuptial agreements, it is clear that such agreements should not be able to override the needs of either party. The recommendation of the Law Commission is that qualifying nuptial agreements should not be able to deal irrevocably with future housing needs, childcare, income, or any other aspect of “financial needs”. In that respect, the proposed QNAs would appear to fit well with pre-nuptial practices in other European jurisdictions where contracts relate to ownership of property but not to issues of maintenance. QNAs would allow the parties to make agreements that would determine any issues of sharing, i.e. dividing of assets above and beyond those required to meet the parties’ needs. Although limited in scope, such agreements would provide a mechanism for the protection of inherited property in many cases and would no doubt be welcomed by couples with independent means, possibly embarking on a second marriage, who wished to protect their existing assets for children from a previous relationship.
The Law Commission report sets out several formal requirements for QNAs. Similarities can be seen between these formal requirements and the recommendations made in the case of Radmacher. The Law Commission recommends that in order to be considered a qualifying nuptial agreement the following requirements would have to be met:
a) the agreement must be contractually valid (able to withstand challenge on the basis of undue influence or misrepresentation, for example);
b) the agreement must have been made by deed and must contain a statement signed by both parties that he or she understands that the agreement is a qualifying nuptial agreement which will partially remove the Court’s discretion to make financial orders;
c) the agreement must not have been made within the 28 days immediately before the wedding or the civil partnership;
d) both parties to the agreement must have received, at the time of the making of the agreement, disclosure of material information about the other party’s financial situation; and
e) both parties must have received legal advice at the time that the agreement was formed.
Furthermore, the Commission recommends that it not be possible for a party to waive their right to disclosure and legal advice.
The Law Commission report recommendations are, currently, merely recommendations and not law. Therefore the position in English law regarding the enforceability of pre-nuptial agreements remains unchanged. If the Law Commission recommendations are adopted by statutory reform, pre-nuptial agreements will become enforceable, but only insofar as the procedural formalities are met and the needs of both parties are catered for.
If you would like any further information about pre- or post-nuptial agreements please contact the Family Department.