Pre Nups: Worth The Paper They Are Written On?

26.06.2012

They have long been the subject of much discussion as to whether they carry any legal weight, but the widely reported 2012 Supreme Court landmark decision in Radmacher v Granatino was a radical change in the law relating to pre-nuptial agreements. Martin Loxley, Head of Family Law talks though the implications.

The widely reported 2010 Supreme Court landmark decision in Radmacher v Granatino was a radical change in the law relating to pre-nuptial agreements. Such agreements had previously been considered by the judiciary to be contrary to public policy. While the Court did not go as far as stating that pre-nuptial agreements were enforceable per se, it did conclude that they should be given effect so long as they are entered into by both parties freely with a full appreciation of their consequences unless it would not be fair to do so.

In recent months there have been four High Court cases concerning pre-nuptial agreements which expand on the principles of Radmacher.  In particular they deal with how much weight which should be given to pre-nuptial agreements. 

The recent cases highlight a number of interesting points: 

1. The question arose in one of the cases as to whether a pre-nuptial agreement had been orally varied by the husband by allegedly stating, during the marriage, that in the event of divorce he would not rely on the pre-nuptial agreement. 
The Court held that there was a heavy burden on a party alleging the agreement had been varied orally.  No definitive answer was given as to whether a pre-nuptial agreement could ever be orally varied.  In light of this we would advise anyone seeking vary their pre-nuptial agreement must do so in writing having had the benefit of legal advice. 
2. In two of the cases the wife had not had proper legal advice on the agreement or been given comprehensive disclosure of the husband’s finances.  The agreements in both cases were still given weight by the Court as in the circumstances it did not render the agreements unfair as the wives were aware of the purpose of the agreements and honestly, freely and knowingly entered into them.  However, in the third case the agreement was given no weight due to the material lack of understanding by the wife and disclosure by the husband.  It was stated that only in unusual cases would an agreement be given weight where there had been no independent legal advice and full disclosure. 
It therefore seems that there are different schools of thought amongst the judiciary about the importance of both parties receiving independent legal advice and having full disclosure.
3. In the cases where the agreements were given weight, the terms on the agreement were not strictly applied.  Rather, the Court awarded the husbands a greater share of the assets than would otherwise have been ordered had there been no pre-nuptial agreement.  
4. In Radmacher it was said that an agreement which left one party in “real need” was unlikely to be fair and therefore would be given less or no weight at all.    Guidance on what constitutes ‘real need’ has recently been given by Mostyn J.  He stated that real need “may be interpreted as being that minimum amount required to keep a spouse free from destitution”.  This suggests that real need is a very low threshold.  However, it is clearly not a definitive statement and it seems likely that what constitutes real need in a ‘big money’ case would be a significantly higher threshold than in a modest asset case.     

It has been expressly stated that a pre-nuptial agreement is an important factor to be considered by the judge when considering the level of the award that should they should make.  It has also been accepted that a pre-nuptial agreement can justify an award different from one that would have been made had it not been entered into.  There is still uncertainty surrounding the law relating to pre-nuptial agreements which is likely to be developed over the coming years.  What is clear is that the Courts will not uphold any agreement without giving careful thought to its terms.  It is by no means guaranteed that the terms of a pre-nuptial agreement will be applied.  Two of the agreements in the four recent cases were given no weight at all.  However, given the change in the approach by the judiciary over the last two years, it is likely that we will see an increase in the number of individuals entering into such agreements.  

If your require advice on this issue, or any other Family matter, please visit the Family Department webpage or contact our team on 0370 1500 100.