Prenuptial Agreements in England and Wales
By Jeremy Posnansky *
I. The Current State of English Law
The attitude of the English courts to prenuptial agreements has always been that they are not enforceable.[1] They have been considered contrary to public policy for a number of reasons: First, they undermine the institution of marriage by contemplating or providing for divorce. Second, a public interest exists in ensuring that former spouses receive appropriate financial provision, assessed judicially if not agreed. Third, the jurisdiction of the courts cannot be ousted by the parties. In X v. X (Y and Z intervening),[2] a case about a financial agreement made in divorce proceedings but then disavowed by one party, Mr. Justice Munby made the following observations about prenuptial agreements:
It remains the rule that any agreement or arrangement entered into by a husband and wife, whether before or during the marriage, which contemplates or provides for the separation of husband and wife at a future time is against public policy and void. . . . A contract which purports to deprive the court of a jurisdiction which it would otherwise have is contrary to public policy. Thus, a spouse cannot validly agree, whether expressly or impliedly, not to apply to the court for maintenance or other forms of ancillary relief. Such a stipulation is contrary to public policy and unenforceable.[3]
But the fact that prenuptial contracts are not enforceable does not mean that they cannot be relevant and, in some cases, influential or very influential. The tide may well be turning in favour of attaching more weight to them, subject to the crucial assessment in each case of whether: the agreement was procedurally fair when it was made; the agreement was substantively fair when it was made; and, if its terms were enforced, the agreement would now provide fairly for both parties.
Section 25 of the Matrimonial Causes Act 1973 governs the court's decision and cannot be avoided. The court cannot ignore the matters in the section or be bound by the terms of a prenuptial agreement. The section imposes on the court the duty to assess: all the circumstances of the case,[4] and, among several other factors, the conduct of each of the parties, if that conduct is such that in the opinion of the court it would be inequitable to disregard it.[5] Plainly, a prenuptial contract could be relevant under either or both of these factors.[6]
As with so much else in ancillary relief cases under English law, the relevance and potency will largely depend on the facts. In relation to a prenuptial agreement, the facts will broadly divide into two areas: the facts at the time of and surrounding the making of the agreement, and the facts at the time of the ancillary relief application.
A good example of the courts' approach to prenuptial agreements-at least back in the mid-1990s-was provided by the case of F v. F (Ancillary Relief: Substantial Assets).[7] The husband and wife were both German. They had entered into prenuptial agreements (one according to Swiss and German law, the other according to American law) whereby if they divorced, the wife would receive an income for life fixed at the same rate as the pension payable to a retired judge of the Federal German Court. She had been a trainee lawyer when the parties began their relationship. On the face of it such an income might be thought to have provided for her reasonable needs (which before the landmark case of White v. White[8] was a major factor). In fact the family had lived at an astonishingly high level during the marriage. According to the husband's estimate they spent over £1.75 million per annum during the last years of the marriage. The wife had become used to a standard of living that could not begin to be sustained on a judge's income. Moreover there were three young children in her care, who would observe a startling disparity between the standard of living which the husband enjoyed and that of the wife unless the agreement was disregarded. The husband sought to rely on the prenuptial agreement and sought to adduce expert evidence on the effect of prenuptial agreements in German law.
In his Judgment Mr. Justice Thorpe, as he then was, stated:
The other special condition which has to be considered in this case, albeit briefly, is the existence of the ante-nuptial contracts. It is not in dispute that contracts of this sort are commonplace in the society from which the parties come. They are much emphasised by the husband in his affidavits, since, if strictly applied, they would have the ridiculous result of confining the wife to the pension of a German judge, whatever that may be. Equally in the affidavits, the wife is urgent in protesting the circumstances in which they came to be signed. I regard the protestations of both in relation to these contracts as having an urgency that the documents themselves do not demand. In this jurisdiction they must be of very limited significance. The rights and responsibilities of those whose financial affairs are regulated by statute cannot be much influenced by contractual terms which were devised for the control and limitation of standards that are intended to be of universal application throughout our society. It is said that these contracts would be strictly enforced against the wife in Germany. I have declined to enlarge the arena to allow evidence from German experts in that field. I cannot think that even in Germany the wife would not have the right to deploy a case either that there was some inequality of bargaining power, alternatively undue influence, or that they are inconsistent with social policy in Germany. For the purposes of my determination I do not attach any significant weight to those contracts.[9]
The same judge, but by then Lord Justice Thorpe, was also somewhat dismissive of prenuptial agreements in an observation he made in Dart v. Dart.[10] The wife had wanted the court to consider how much more she would have been awarded under the law of equitable distribution in the state of Michigan from which the parties came. Lord Justice Thorpe gave no encouragement to this line of argument and compared it to prenuptial agreements, implying that while both matters could be considered under section 25, neither carried much weight.
In the absence of authority I would have concluded that the circumstances to which the judge may have regard under s 25 are so unbounded that the scale of the award in a concurrent jurisdiction in waiting cannot be entirely excluded. In very broad terms it might be equated to prenuptial contractual arrangements made by the parties in their country of origin that did not contemplate the subsequent development of a London jurisdiction.[11]
In S v. S (Divorce: Staying Proceedings),[12] Mr. Justice Wilson said:
I am aware of the growing belief that, in the despatch of a claim for ancillary relief in this jurisdiction, no significant weight will be afforded to a prenuptial agreement, whatever the circumstances. I would like to sound a cautionary note in that respect. No one could have more profound respect than I for the observations of Thorpe LJ. In F v F (Ancillary Relief Substantial Assets) [1995] 2 FLR 45, 66G he said "In this jurisdiction [prenuptial agreements] must be of very limited significance. The rights and responsibilities of those whose financial affairs are regulated by statute cannot be much influenced by contractual terms which were devised for the control and limitation of standards that are intended to be of universal application throughout our society." There is a danger, however, that these words might be taken out of context. There is no doubt that, where the English court proceeds to determine an application for ancillary relief, s 25 of [MCA 1973] precludes any choice of foreign law, however vividly the circumstances of the case might protest its relevance. So the application is of English law and under s 25(1) regard must be had to all the circumstances of the case. In F v F itself, the result of a strict application of the effect of the prenuptial agreements would have been, as the judge said, "ridiculous." In those circumstances they inevitably constituted circumstances of negligible significance. But there will come a case-were I to refuse a stay, might this be it?- where the circumstances surrounding the prenuptial agreement and the provision therein contained might, when viewed in the context of the other circumstances of the case prove influential or even crucial. Where other jurisdictions, both in the USA and in the European Union, have been persuaded that there are cases where justice can only be served by confining the parties to their rights under prenuptial agreements, we should be cautious about too categorically asserting the contrary. I can find nothing in s 25 to compel a conclusion, so much at odds with personal freedoms to make arrangements for ourselves, that escape from solemn bargains, carefully struck by informed adults, is readily available here. It all depends. The matter must be left open . . . .[13]
In C v. C (Divorce: Stay of English Proceedings),[14] Mr. Justice Johnson decided that the existence of a French prenuptial agreement was a significant factor in favour of staying the English proceedings, which he duly did. In N v. N (Divorce: Ante-nuptial Agreement),[15] the wife sought to argue the specific enforceability of parts of a prenuptial agreement (relating to a Get) against the husband as a matter of contract. The argument was rejected by Mr. Justice Wall, as he then was, who said: "one cannot, in my judgment avoid the fundamental proposition that each [clause] is part of an agreement entered into before marriage to regulate the parties' affairs in the event of divorce. The public policy argument, therefore, continues to apply."[16] He confirmed that, as a matter of public policy, prenuptial contracts as a class are not specifically enforceable in English law. His judgment does, however, confirm that the existence of such an agreement may have evidential weight when the court is exercising its discretion under section 25.
In N v. N (Foreign Divorce: Financial Relief),[17] Mr. Justice Cazalet observed that in that case a prenuptial agreement "would be binding in Sweden as against being no more than a material consideration for this court under s 25 of the Matrimonial Causes Act 1973."[18] In 2001, in M v. M,[19] Mr. Justice Connell said,
The circumstances of this case illustrate vividly that the existence of a prenuptial agreement can do more to obscure rather than clarify the underlying justice of the case. . . . [He referred to some of the facts.] In my view it would be as unjust to the husband to ignore the existence of the agreement and its terms as it would be to the wife to hold her strictly to those terms. I do bear the agreement in mind as one of the more relevant circumstances of this case, but the court's overriding duty remains to attempt to arrive at a solution which is fair in all the circumstances, applying s 25 of the Matrimonial Causes Act. Accordingly I pass to consider the various subparagraphs of subs (2).[20]
His award then provided the wife with a lump sum payment of £875,000, whereas the agreement specified £275,000. It had been a short, five year, marriage beset with problems. There was a five year old child. The husband's net assets were £6.5 million; The wife's were approximately £300,000. The award, therefore, was substantially more than provided for by the agreement, but rather less than had there not been one.
More recently, in K v. K,[21] Rodger Hayward-Smith QC, sitting as a Deputy High Court Judge, largely, but not wholly, held a wife to the terms of the agreement. It was a very short marriage: fourteen months to separation. The husband was very wealthy, with assets of at least £25 million. The wife's father was wealthy and she herself had trust assets of approximately £1 million from which she enjoyed an income. The marriage followed an unintended pregnancy and much subsequent discussion-negotiation, even-about whether there should be a marriage or a termination of the pregnancy. Under pressure from the wife's father, the husband agreed to marry the wife with, as suggested by the wife's father, a prenuptial agreement. The husband sufficiently disclosed his assets and each had independent legal advice. The wife sought to avoid the prenuptial agreement which provided that in the event of divorce within five years she would receive £100,000 to be increased by 10% per annum compound. In the circumstances, it would give her £120,000. The agreement did not provide maintenance for the wife, a draft provision having been deleted in the negotiation process. The prenuptial agreement was signed the day before the marriage, which had been moved forward because her father did not want visible signs of pregnancy.
The deputy judge held the wife to the capital provision of the prenuptial agreement, i.e., £120,000, and rejected her request of £1.6 million. In doing so, he held (among other things) that the wife understood the agreement, was properly advised, under no pressure to sign, signed with knowledge that there would soon be a child, and that there had been no unforeseen change of circumstance that would make it unfair to hold her to the agreement. The judge also held that an injustice would be done to the husband if the court ignored the agreement about capital, and considered the agreement both as part of "all the circumstances of the case" and as "conduct which it would be inequitable to disregard." The judge also observed that, in the light of S v. S[22] and M v. M,[23] he was not breaking new ground.
The judge also held, however, that the agreement did not preclude a maintenance order, but said that if it did, it would be unjust to the wife to hold her to that aspect of the agreement. He awarded £15,000 per annum, having taken into account the wife's investment income and other lesser income. He considered capitalisation under section 25A, but held that it would be contrary to the prenuptial agreement to award the wife any capital in addition to the stipulated lump sum. The judge also decided that the husband should provide housing for the child and the wife. He provided for its purchase via a trust, with reversion to the husband. In so doing, he balanced section 25(1) and the interests of the child against the terms of the prenuptial agreement and the shortness of the marriage.
II. Home Office Consultation Document
In 1998 the Government produced Supporting Families: A Consultation Document.[24] This was the first time any government had published a consultation document on the family. The purpose of the document was to raise a debate on a number of measures which, it was hoped, might strengthen the family. The Government at that stage was actively considering whether there would be advantage to allowing couples to make written agreements before marriage which would be legally binding on divorce. The thinking behind the measure was that it would give people more choice and allow them to take more responsibility for ordering their own lives, helping them to build a solid foundation for their marriage by encouraging them to look at financial issues they may face as husband and wife and reach agreement before they get married.
The document suggested that providing greater security on property matters would more likely cause some people to marry, rather than simply live together. It might also give couples in a shaky marriage greater assistance about their future. It might also afford greater protection for children of first marriages who can often be overlooked. The paper emphasised there would be no question of written agreements being mandatory, the government would ensure that the interests of parties to an agreement in an economically weaker position would be protected, as would children.
A. Suggested Protection
The Supporting Families paper suggested that protection would be afforded through six suggested safeguards:
If one or more of the following circumstances was found to apply, the written agreement would not be legally binding:
B. Responses to the Consultation Document
The Ministerial Working Group produced a summary of responses to the Consultation Document. The numbers were close: 80 of the 157 responses were in favour of allowing binding prenuptial agreements, while 77 were against. The President of the Family Division and all other judges of the Family Division approved a response, written by Mr. Justice Wilson to the Consultation Document.[26] In that response two questions are canvassed: (1) What effect should the law give to prenuptial agreements when they give rise to results which are different from the product of ordinary principles (under the MCA 1973); and (2) Should the law encourage prenuptial agreements?
The Judges stated unanimously:
We have reservations about whether the law should strive to encourage prenuptial agreements. We all still believe strongly in the institution of marriage as a source of personal and social stability and wonder whether the prenuptial agreement conditions the couple to the failure of their marriage and so helps to precipitate it. This deserves research.[27]
(Note that in the later case of M v. M, above, Mr. Justice Connell was not so doubtful. He said: "The public policy objection to such agreements, namely that they tend to diminish the importance of the marriage contract seem to me to be of less importance now that divorce is so commonplace."[28])
There then followed a divergence of opinion:
Some of us feel that the institution of marriage is devalued if, while entering it, a couple can elect to sever some of its most important, if contingent, legal effects. Others of us consider, hesitantly, that marriage is made for mankind, not vice versa, and that, subject to obvious limits, adults should be allowed to cast their relationships in their own way. We are at one that it is profoundly difficult terrain.[29]
In their response, the judges placed some importance on a requirement of full financial disclosure and separate legal advice on each side. Any ground under which a contract is void or voidable at common law would also apply. The judges gave the example of a prenuptial agreement which cast responsibility for financial support for family members on the state. The judges expressed concerns that people are likely to be signing prenuptials at an emotional and susceptible time in their lives. The judges reserved particular emphasis for the significance of the relevance of a child:
The child of the family, whether or not yet born, is not a party to the nuptial agreement and his rights cannot thereby be eroded ... If as we think, the presence of a child should deprive the nuptial agreement of much if not all of its effect, the role of the agreement in the law is much circumscribed.[30]
The majority view of the judges was stated thus:
The majority of us are of the view that slightly, but only slightly, greater prominence might be given to the prenuptial agreement in the law of ancillary relief. To be specific, the majority view is that an additional matter might be added into s25(2), at (i), namely the terms of any agreement reached between the parties in contemplation of or subsequent to their marriage. There would be no need to spell out the elementary requirements (i.e. of disclosure, separate advice and of the common law) or the saver for the interests of the child or any general power to make different provision where justice plainly required: this would be all accommodated in the weight-giving exercise.[31]
The minority view was as follows:
A minority of us would go a little further. Despite our unanimous lack of enthusiasm for the prenuptial agreement, the provisional view of the minority is that, where there is an agreement, whether pre- or post-nuptial, which satisfies the elementary requirements, the shape of the law should be that it be enforced "unless . . . ." The minority feels that the current law of ancillary relief has inherited a paternalistic strain, rather too hostile to contract . . . and in this respect rather too jealous of its own discretion, for the protection, in effect, of the downtrodden wife, and that, while she still exists, she may no longer be apt as a governing stereotype . . . the overall balance needs gentle redress but, by means of the "unless" clause, making enforcement subject to the interests of the child and to a residual discretion to depart in the plain case.[32]
This lukewarm response resulted in the possibility of any legislative change being put on the back burner.
III. The Future of Prenuptial Agreements
Specific, focused legislation appears unlikely. There are no votes in the issue. But if the Matrimonial Causes Act 1973 is reviewed, amended or replaced,[33] surely prenuptial agreements will need to be, at least, considered by Parliament.
Query whether England and Wales can ignore what is so common in other countries, including Commonwealth and European Union countries. The influence and impetus might come from the E.U.[34] The judges of the Family Division and the Court of Appeal also have a potential role. The likelihood is that a case will arise where the prenuptial agreement was fairly negotiated and would provide a fair result, when the court will not only make an order that follows the agreement but will send a more supportive message.
In a lecture to family lawyers in mid-October 2002, which principally dealt with property rights on family breakdown, including non-marital cohabitation, Lord Justice Thorpe signaled an apparent change in his attitude to prenuptial agreements. Having previously been less than enthusiastic,[35] he said this:
If Parliament were to introduce a responsibility on unmarried cohabitants to order their financial relationship by express declaration, the pressure to legislate a new role for the prenuptial contract would intensify. . . .
Pending its arrival I hold to my view as to the shape of s 25 reform. My basic conviction is that the Government's proposals set out in the White Paper (Supporting Families) were well pitched. More emphasis should be placed on self-ordering by elevating the effect of the prenuptial contract in any straightforward situation. This elevation would be reflected in a clearer definition of the judicial task with the clearly stated over-arching objective of fairness to be achieved by the application of a series of prioritised principles. This is not to change the world but rather to make apparent the existing judicial approach (save, of course, in relation to post-nuptials[36]), an approach well understood by specialists and perhaps capable of discovery by a keen student of the body of case-law.[37]
Even if no legislative change or major judicial influence occurs, no doubt prenuptial agreements will be-indeed, already are-of increasing importance to matrimonial lawyers and their clients in this jurisdiction. What was once a rarity is now a common part of the practice of family law in England and Wales. Solicitors (and barristers) are called upon increasingly to advise on and draft such agreements. As they embark on marriage, before any matrimonial breakdown, engaged couples in this jurisdiction, both bride and groom, increasingly seek the protection and the certainty, so far as they can be achieved, that a prenuptial agreement may provide. Whether this is because recent judicial decisions have proved somewhat alarming,[38] or because the law is in a state of flux, or because now in a greater number of marriages at least one party is from a country where such agreements are common, the trend is clear.
IV. Factors to Consider in Ancillary Relief Cases Where There Was a Prenuptial Agreement
Consideration of how an existing, prior prenuptial agreement will be regarded in a current ancillary relief application may be useful not only in such a case but also in shaping the approach to negotiating and drafting new prenuptial agreements in other cases. Three main, broad questions arise during the review of a prior agreement: (1) Was the agreement procedurally fair when it was made? (2) Was the agreement substantively fair when it was made? (3) Would its terms, if enforced, now provide fairly for both parties?
As to more specific aspects, no definitive list exists and no hierarchy of circumstances to take into account: "all the circumstances" means exactly that, including matters set out under section 25 of the Matrimonial Causes Act. However, where one party seeks to rely upon an agreement it is likely that a court may wish to consider the following matters:
- Receipt of independent legal advice at time of the agreement.
- Full and frank disclosure prior to the agreement.
- Any inequality of bargaining power.
- How close before the date of marriage the agreement was made.
- Any undue pressure or duress at the time of the agreement.
- Whether the agreement was objectively fair at the time it was reached.
- The existence of a child (whether or not alive at the time of the agreement). The presence of a child may provide a strong reason for attaching little or less weight to the agreement,[39] and the requirement to give first consideration to the welfare of minor children of the family.
- The passage of time since the agreement: was it a short marriage and, therefore, a recent agreement; or was it a long marriage and an agreement made many years ago and in different circumstances?
- Whether the prenuptial agreement provides for the "needs" of the other party.
- Whether imposition of the agreement now would cause hardship.
- Any important change in circumstance unforeseen at the time the agreement was reached.
A. White v. White
In White v. White,[40] the House of Lords considered the provisions of section 25 of the Matrimonial Causes Act. The court held that the objective implicit in the Act was to achieve a fair outcome in financial arrangements. Fairness required the court to take into account all the circumstances of the case. A number of implications for prenuptial agreements flow from the decision in White. Courts in considering prenuptial agreements will be particularly mindful of the need to make an order which can properly be described as "fair." Provisions of an agreement which are not "fair" are likely to have little, if any, weight with a court. Conversely, it would not be "fair" to attach no weight or little or limited weight to a prenuptial agreement which was fairly negotiated and entered into by two adults of sound mind, properly advised and with full understanding. One other consideration is a "quasi-estoppel" idea: what if, as sometimes is the case, the agreement said (and it was the case) that the husband would not have agreed to marry the wife if she had not made the agreement and promised to be bound by it?
What follows are a list of
B. Points to Considered When Drafting or Agreeing a Prenuptial Agreement
A number of initial considerations arise: Is it in your client's interest to have one? What if your client says "No"? If the parties agree on a prenuptial agreement, it must of course be "bespoke," both as to quantum and contents. However, some typical clauses will be common to most such agreements; the Solicitors Family Law Association publishes precedents.
Points to consider and/or include:
- Independent legal advice. Arrange it early, for both sides.
- Where appropriate, take advice from and liaise with foreign lawyers.
- Full disclosure. Schedules or summaries can be annexed to the agreement.
- Allow plenty of time to negotiate, consider and draft. Avoid last minute deals. If necessary, advise postponing the wedding.
- Is there a child or is the bride pregnant?
- Recitals; set the scene and explain why a prenuptial agreement is advisable.
- Add a "No coercion, [etc.]" clause.
- Consider if it benefits your client to add a "No PNA, no marriage" clause.
- Clarity about the financial terms.
- Separation of property?
- Consider terms which allow for and reflect (i) duration of marriage, and (ii) the birth of children.
- Do the parties intend that the agreement is reviewable? If so, when and on what basis?
- Consider adding provisions regarding the death of the parties.
- Add a severability clause.
- Perhaps add a confidentiality clause.
- Consider adding a choice of law clause.
- Consider adding a choice of forum clause.
- Provide tax advice, for both parties.
- Use plain English, if possible!
* QC, 1 Hare Court, Temple, London EC4Y 7BE.
[1] See, e.g., N v. N [1999] 2 F.L.R. 745; see also Hyman v. Hyman [1929] App. Cas. 601. This is correct for prenuptial agreements of the type discussed here. However, some agreements made prior to marriage are enforceable, e.g., ante-nuptial settlements, deeds of gift, etc.
[3] Id. at 530, ¶ 79, 531, ¶ 81.
[4] Matrimonial Causes Act 1973 § 25(1).
[6] See also Edgar v. Edgar [1980] 1 W.L.R. 1410.
[8] [2000] 3 W.L.R. 1571. See generally A.S. Bruce, Premarital Agreements Following White v. White, 31 Fam. L. 304 (2001); E. Cooke, White v. White: A New Yardstick for the Marriage Partnership, 13 Child & Fam. L.Q. 81 (2001).
[9] F v. F (Ancillary Relief: Substantial Assets), [1995] 2 F.L.R. 45.
[24] Home Office, Supporting Families: A Consultation Document (1998)
[26] [1999] Fam. L.J. 29 (159).
[28] [2002] 1 F.L.R. 654, at ¶ 21.
[29] Nicholas Wilson, Response o the Judges of the Family Division to Government Proposals (made by way of submission to the Lord Chancellor's Ancillary Relief Advisory Group), [1999] Fam. L.J. 29 (159).
[33] See, e.g., Cowan v. Cowan, [2001] 2 F.L.R. 192.
[34] See, e.g., Brussels II, Council Regulation (EC) No. 1347/2000 (May 29, 2000).
[35] See, e.g., F v. F, [1995] 2 F.L.R. 45; Dart v. Dart, [1996] 2 F.L.R. 286.
[36] Query the application to prenuptials.
[37] Lord Justice Thorpe, Property Rights on Family Breakdown-An Address to the Family Law Conference, October 2002, [2002] Fam. L.J. 32 (891).
[38] See, e.g., White v. White, [2000] 3 W.L.R. 1571; McFarlane v. McFarlane; Parlour v. Parlour [2004] 2 F.L.R. 893.