Most people living in the UK will know that the courts of England and Wales can make financial orders on divorce that can affect worldwide wealth (capital and income). Most will also know that such orders can have far reaching effect upon business and pension interests. What many expatriates living in the Gulf may not know, is that the divorce courts of England & Wales often retain jurisdiction over their divorce no matter how long they have lived in the Gulf. That does not mean to say the Gulf courts cannot also become involved, but that is another article in itself. In this article the writer considers what measures expatriates can take to protect their wealth from the divorce courts of England and Wales.
London has been called the divorce capital of the world. The divorce court has a wide discretion and in practice, that leads to uncertainty. So what can you do to try to protect yourself from a Judge making sweeping decisions about what should happen to your home, business and pension and introduce some certainty? The answer is ante-nuptial planning or, as it is more popularly known, a pre-nuptial agreement. The recent Supreme Court decision of Radmacher v Granatino (October 2010) has gone a long way to increase the effectiveness of these documents and the message is now simple. It is better to have one, than to not.
An ante-nuptial agreement sets out how a couple would wish to see their assets divided should they divorce. Unromantic? Possibly, but sensible. If you have an opportunity to try and have your say in how your hard earned wealth should be divided on divorce why not take it? An ante-nuptial agreement should be drafted by an experienced family lawyer. It should cover all points that would need to be resolved if a relationship breaks down including trying to protect inheritances from future claims (if relevant). It should enable the parties to review matters on significant life events such as the arrival of children, or one or the other party moving/giving up a job (particularly relevant to many expatriates). Too much 'crystal ball gazing' can render the document unenforceable, it is a question of getting the balance right at the drafting stage.
Contrary to the expectations of the popular press, it was never going to be possible for the court in the Radmacher case to rule that ante-nuptial agreements should, as a matter of law, always be binding. No contract can oust the courts jurisdiction to apply the factors in Section 25 of the Matrimonial Causes Act 1975 at the time of divorce but, the case did make clear that it is no longer contrary to public policy to allow couples to pre order their financial affairs in certain circumstances.
We now have an essential point of principle: "The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications, unless the circumstances prevailing it would not be fair to hold the parties to their agreement". Some have termed this "the effective 'unless' test".
Radmacher involved a wealthy German heiress and a French banker who lived most of their married life in England. The ante-nuptial agreement stated neither would make a financial claim against the other in the event of divorce. The husband did not take independent legal advice before signing the agreement and proper financial information was not exchanged. On subsequent divorce, the husband wanted to make a financial claim against the wife. At the first court hearing, the agreement was found to not be a valid contract. The husband was awarded substantial sums of capital (some to be used to produce his future income). The Court of Appeal thought the agreement should have been given 'decisive weight' so changed/reduced the award (which remained substantial in this particular case).
The Supreme Court agreed with the Court of Appeal. Several key points emerged which can now be used to determine the effectiveness of ante-nuptial agreements:
- Parties must enter into the agreement of their own free will without undue influence or pressure.
- They must be aware of its implications.
- There must not be any lack of financial information material to each parties own decision and;
- Each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.
Following Radmacher, a couple with an ante-nuptial agreement which does not fall foul of the above paints and to which English law applies after the date of the Judgment, can expect an inference that they intend to be bound by it. Add to this the sensible extra safeguards of obtaining independent legal advice and making full and frank financial disclosure in advance of signing and it seems a reasonable agreement will be on safe ground.
So significant is the Radmacher case, in January, the Law Commission of England and Wales published a consultation paper which considers the arguments for and against statutory reform of the law in this area. We must await the findings but, until then, it must be better to have an ante-nuptial agreement than to not. If you are considering marriage, you are better placed than ever before to try to protect your wealth from the divorce courts by having a well drafted ante-nuptial agreement. Understand the implications of what you are both signing (proper independent legal advice with help), make full and frank financial disclosure and sign as far in advance of the wedding as possible. This advice applies in equal measure to those of us who have left England and Wales for sunnier climes. In fact if there was a way of protecting the hard earned wealth you have travelled a long way from home to build up during many summers of 50 degree heat why would you not take it?
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
