Post-nuptial agreements can be legally binding

A financial arrangement agreed between a husband and wife while they are living together is enforceable after the split up, the Judicial Committee of the Privy Council has ruled.

It has allowed an appeal by multi-millionaire Roderick MacLeod against a High Court ruling in the Isle of Man in favour of his ex-wife, Marcia. The couple had originally made a pre-nup agreement which they then confirmed when they made a 'post-nup' agreement, with various changes, which Mrs MacLeod claimed should be disregarded.

The sole issue before the five judges was whether the housing needs of the wife and children should be catered for by £1.25 million as a lump sum, as ordered by the judge in the Isle of Man, or by a trust fund, as proposed by the husband.

The court concluded that the original judge was wrong in principle because the effect was to make further provision for the wife rather than to make proper provision for the children - which was the only principled basis for interfering with the agreement.

It said: "However lacking in generosity the provision made for the wife... there was no basis for interfering with it", and that provision for children "is to give them the best possible start in life, rather than to endow them for ever".

Peter Morris from law firm Irwin Mitchell said: "This was an eagerly awaited decision for family lawyers and their clients hoping that the court would move the law towards legally binding pre nuptial agreements. In fact, the court declared that this was a matter for Parliament to decide rather than the courts, but did recognise that post nuptial agreements drawn up during the course of a marriage can be legally binding. As a result, many more couples will now rely on post nuptial agreements if they want to regulate their own financial arrangements, particularly in cases involving assets generated before the marriage, inherited wealth or second families. If a pre-nup already exists, couples can update it during the marriage to take account of their current circumstances and that agreement can have the force of law as a result of the MacLeod judgment."