Pre-Nuptial Agreements - Family Law Solicitors
Simon Thomas
Posted on 14 Oct 2014

The Michelmores Debate

Pre-nuptial agreements

"This house believes that nuptial agreements provide an opportunity for sound financial planning and are not a bullies' charter."

On 6 October 2014 The Honourable Mr Justice Baker, Family Division Liaison Judge for the Western Circuit, chaired a highly topical debate on nuptial agreements at Michelmores' Exeter office. 

With a full house of delegates including lawyers, accountants, financial planners, bankers and many more, the purpose of the debate was to discuss proposed legislative changes (the draft Nuptial Agreements Bill) which would make 'qualifying nuptial agreements'  legally enforceable, and to highlight the key issues which could  affect clients.  

Background

A pre-nuptial (or pre-marital) agreement is an agreement made by a couple before they marry or enter into a civil partnership, setting out how they wish their assets to be divided in the event that the relationship breaks down.  Currently, pre-nuptial agreements are not automatically enforceable by the courts in England and Wales. 

However, in a landmark ruling in 2010 in the case of Radmacher v Granatino, the Supreme Court upheld the terms of the couple's pre-nuptial agreement. Crucially, it also set out a number of guidelines for couples and for legal practitioners, starting from the premise that pre-nuptial agreements should be upheld unless certain conditions or criteria had not been met.

The case altered the weight to be attributed to a pre-nuptial agreement but whether or not they are enforced on divorce or dissolution depends upon the individual facts of each case. In 2012, there were 118,000 divorces and about 33% of marriages end in divorce.  

The debate

  • Proposer: Geoffrey Kingscote, 1 Hare Court, London, a barrister who successfully represented Ms Radmacher in the Radmacher v Granatino case. The motion was seconded by Julia Belyavin, a barrister of St John's Chambers in Bristol.
  • Opposer: Charles Hyde QC, Albion Chambers, Bristol, a barrister who specialises in matrimonial law, particularly complex financial cases.  In 2011 he was appointed a Deputy High Court Judge in the Family Division and is a fellow of the International Academy of Matrimonial Lawyers. He was supported in opposing the motion by Nick Sproull, a barrister also from Albion Chambers.

In addition, the following panel of experts offered commentary on the issues in debate:

  • Professor Elizabeth Cooke –Law Commissioner for England and Wales and author of the Law Commission's Report on Matrimonial Property Needs and Arrangements 
  • Jonathan Riley – Head of the Michelmores Private Wealth Team
  • Zoe Porter – Partner in the Michelmores Family Team
  • Sue Probyn – chartered accountant and Partner at Francis Clark.

Upholding the motion Geoffrey Kingscote submitted:

  • Pre-nuptial agreements take away the uncertainty, expense and delays associated with court litigation.
  • Pre-nuptial agreements are not a bullies' charter in that:
    • Procedural safeguards ensure that both parties must obtain separate independent legal advice and sign the prenuptial agreement at least 28 days before the wedding. Both parties must also make full disclosure of their financial position.
    • A party cannot opt out of making provision for the other's 'needs'. A pre-nuptial agreement is likely to be enforced if the parties' joint income and assets well exceed their respective financial needs. However, this situation only arises in approximately 2-5% of all divorces.
  • In other parts of the world a prenuptial agreement is an accepted part of the culture and the 'done thing', and there was speculation that perhaps 'we Brits' are too romantic.

Opposing the motion, Charles Hyde QC submitted:

  • It is manifestly necessary for the English Court to retain discretion following a breakdown in a marriage or civil partnership and a resulting divorce/dissolution.
  • The only certainty from a pre-nuptial agreement is uncertainty
  • The circumstances of the parties will often have changed beyond recognition by the time of the breakdown of the relationship.
  • It does not make sense to allow opting out of some aspects of the law of marriage but not others. 
  • The principle of sharing the matrimonial assets upon divorce is currently enshrined within our law and with good reason and cannot run parallel to a system that enforces all pre-nuptial agreements.
  • Many clients requesting a pre-nuptial agreement are affluent men and women under a certain amount of pressure from their parents, who may not understand the complexity of their own financial position. (The Law Commission report found that a common reason for entering into a pre-nuptial agreement is pressure from one or other set of parents.) 

The following points were also made in the lively question and answer session which followed the debate:

  • The best advice is to draft the terms of a pre-nuptial agreement so that they are fair and reasonable and on the spectrum of possible solutions likely to be imposed by the court. 
  • The process of drafting the pre-nuptial agreement before the marriage/civil partnership takes place is far preferable to litigation on divorce/dissolution.
  • The assets likely to be protected by a pre-nuptial agreement are non-matrimonial property such as inherited wealth, assets acquired prior to the marriage and gifts.
  • Pre-nuptial agreements are often seen by extended family members as a sound method of preserving assets and safeguarding wealth that is passed down through the generations. 

In conclusion it was felt that for our wealthy clients, where income and assets exceed needs – and by this we mean that they could very comfortably afford to set up two homes following a relationship breakdown - a pre-nuptial agreement is indeed sound financial planning.  Professor Cooke also emphasised that it was crucial that each party must obtain separate independent legal advice. 

Delegates at the Michelmores Debate voted overwhelmingly in favour of the motion, though there were some dissenting voices. 

Thank you to all who supported and attended this informative, fun and highly topical debate. 

For more information on the Law Commission's Report on Pre-nuptial Agreements click on: http://lawcommission.justice.gov.uk/areas/marital-property-agreements.htm 

Simon Thomas, Head of the Michelmores Family Team and Jonathan Riley, Head of the Private Wealth Team, are able to offer tailored advice on pre-nuptial agreements and on the preservation of family wealth.