UK: Prenuptial Agreements – Placebo Or Panacea?

Last Updated: 24 April 2008
Article by Duncan Ranton

There appears to be a degree of general confusion as to the significance of prenuptial agreements when the court is asked to determine financial arrangements upon divorce. Stated simply, the position remains that, in contrast to the position in many other countries (for example, much of Continental Europe and many US States), prenuptial contracts are not strictly binding under English law and are seldom upheld by English Judges in their entirety. Instead, they are treated as one of the overall constellation of factors that ought to influence, as opposed to prescribe, the financial award when a marriage breaks down.

Whereas reference is made below to husbands and wives in the context of marriage, the principles relating to premarital contracts are equally applicable to registered partners under the Civil Partnership Act 2004.

The legislative framework

Dealing briefly with the black-letter law, a Judge charged with making appropriate financial provision upon divorce is obliged specifically to have regard to a checklist of considerations. Found in section 25 of the Matrimonial Causes Act 1973, this checklist is (unsurprisingly) routinely referred to as the "section 25 factors"; that shorthand will be adopted for the remainder of this article.

First and foremost in the section 25 factors is the welfare of any child of the family under the age of 18. Other considerations a Judge is obliged to weigh into the balance include the parties' incomes, earning capacities and property, their financial needs, the family's standard of living prior to the marriage breaking down or conduct which it would be unfair to disregard. What one does not find in the section 25 factors is a directive that Judges must have regard for any prenuptial agreement between spouses.

The cases

However the absence of a specific instruction to factor prenuptial agreements into the mix when settling financial arrangements does not mean that Judges simply ignore their existence. The prevailing wisdom is that any such agreement should be looked at by the court, which should decide in the particular circumstances of each case what weight should, using overall fairness as a barometer, be attached to it. Whereas prenuptial agreements can in no way bind a court's overarching discretion when determining a divorce settlement, nor is a blanket rejection of such agreements acceptable.

A whistle-stop tour through a handful of reported cases illustrates how prenuptial agreements have been taken into account in practice over the past decade. For example, in F –v– F, in 1995, Mr Justice Thorpe (now Lord Justice Thorpe) took the view that the parties' prenuptial agreement was of very limited significance in influencing the final award. Compare that with the view taken two years later, when Mr Justice Wilson (now Lord Justice Wilson) observed that, whilst not a section 25 factor, there might well come a case "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". Skipping ahead to 2001, Mr Justice Connell in M –v– M considered it would be unjust to the husband were he to ignore the existence of a prenuptial agreement and its terms, but equally unjust to hold the wife strictly to those terms. The Judge in that case walked www.kingsleynapley.co.uk the middle line: the agreement would be borne in mind as one of the more relevant circumstances of the case, albeit it did not displace the court's overriding duty to arrive at a solution which was fair in all the circumstances.

Considered one of the seminal cases, 2003 saw the decision in K –v– K. At the time the case came before the court, the husband was 39 and the wife 28. They married in March 2000 and the wife gave birth to their child some five months later. A little under a year after their child's birth, husband and wife separated. They had executed a prenuptial agreement literally days before their wedding, and it was accepted that the intention was to mollify the husband, who evidently was initially reluctant to marry. The terms of the agreement, which were limited to capital provision (as opposed to maintenance), entitled the wife to a fixed lump sum of £100,000 in the event of divorce within the first five years, in addition to which the husband would make reasonable financial provision for any children (including a house in trust). This was in the context of the wife's premarital assets of about £1 million (in trust), and the husband's comparable pre-existing financial resources of at least £25 million (he refused to disclose the full extent of his wealth).

The trial Judge upheld the terms of the prenuptial agreement as to the capital settlement, finding that the wife had understood the terms of it, had been properly advised as to those terms, and had signed it willingly and without pressure from the husband. Both husband and wife knew that the wife was expecting their baby at the time that the agreement was executed, so that could not be considered a "supervening event" (i.e. a later, usually unforeseen, event which undermines the basis of the original agreement). The husband had agreed to marry the wife on the understanding that her capital claims upon divorce would be governed by the prenuptial contract. In short, the court concluded that the meaning of the agreement was clear, and the interests of justice were not offended by the wife being held to its terms. The court then set out a checklist of factors (further details below) relevant to cases involving prenuptial agreements and these have since been treated by practitioners as guidelines when drafting premarital contracts.

K –v– K remained the last word on the relevance of prenuptial agreements in financial proceedings until very recently when, in January of this year, the Court of Appeal considered the case of Ella –v– Ella.

The issue in Ella was whether divorce proceedngs ought to be brought in England or in Israel. Whilst the husband and wife lived in London, they had executed a prenuptial agreement that sought to give the Rabbinical court in Israel exclusive jurisdiction to adjudicate on divorce issues, in the event of their marriage breaking down. Whilst not immediately affiliated with financial issues, the significance of this determination was that it was acknowledged that the wife's financial award would likely be more generous if decided by an English court, rather than an Israeli one.

The Court of Appeal unanimously concluded that the trial Judge had been right to decide that the divorce proceedings should take place in Israel, regarding as a major factor the terms of the pre-nuptial agreement. This was notwithstanding that the wife had not been independently advised about the terms of that agreement, which had been drawn up by a notary who had acted for the husband for some time.

Drafting considerations

Because the circumstances of each family are unique, any premarital agreement must be tailored to the individual circumstances of those who stand to be affected. One simply cannot seek to apply an "off-the-peg" prenuptial contract to each prospective bride and groom – to do so would be a recipe for disaster for at least one of the couple concerned. Careful planning and equally careful drafting are essential. It is not uncommon to seek input and guidance from foreign experts, particularly where the parties hail from different countries or have assets abroad. As a result, it will sometimes be necessary to have mirror agreements in different jurisdictions.

The K-v-K checklist

Any self-respecting prenuptial agreement should to look to include a number of practical and procedural safeguards, with particular reference to the K –v– K checklist. These ought to be considered fundamental, as failure to observe them might well form a basis for a court deciding not to hold a spouse to the terms of his or her agreement.

These include that:

  • in advance of the agreement being executed, each spouse had provided full and frank disclosure of their financial resources
  • there was equality of bargaining power; there was provision for independent legal advice to be provided to each party; there was financial provision made for future children (or alternatively the agreement was stated to end on the birth of any children)
  • the agreement was signed at least 21 days before the wedding; the parties were not under undue pressure from the other or from other sources
  • the terms were inherently fair when negotiated

In terms of the timeframe, commonsense suggests that an agreement executed hours before the wedding is likely to be treated with more scepticism than, say, one concluded a month or more beforehand, about which the participants had had ample time to reflect and reconsider. However it is our experience that parties frequently underestimate the time it will inevitably take to negotiate and conclude a prenuptial agreement (particularly one with international considerations) and only approach their solicitors relatively shortly before the wedding, with the result that there is often significant pressure on all parties to finalise the agreement before the 21 day deadline suggested by K –v– K. As pressure is in itself a factor that may undermine the agreement, parties considering a prenuptial agreement should approach their respective solicitors as long before the wedding as possible.

The future

As long ago now as November 2004, Resolution (formerly The Solicitors' Family Law Association) recommended that prenuptial arrangements be added to the section 25 factors as a relevant consideration in their own right; a recommendation which has not however been taken up. Nevertheless, practitioners generally agree that the incidence of clients asking for a prenuptial contract to be drafted, or to be advised about the terms of such a document, is on the increase. Such agreements are also no longer the province of the super wealthy but are sought by many couples, including those with a disparity in their financial positions, those marrying for the second time and wishing to protect assets for their first family or have foreign connections. This increase is perhaps fuelled in part by a subtle but palpable judicial softening over the past decade regarding how determinative a factor the existence of a prenuptial agreement might be in the overall circumstances of each case.

As England gains a reputation as the forum of choice for divorcing wives seeking to achieve the most generous divorce settlements – see the cases of Parlour, Miller, McFarlane and Charman, amongst others, and the media frenzy that each of those decisions generated – it is anticipated that this too might fuel the demand for prenuptial agreements. It is in cases like these, where the available financial resources exceed the parties' needs (and those of any children of the family), that one might expect the terms of a prenuptial agreement will more readily be upheld. A more robust approach to premarital contracts in such cases may well be the corollary to the perceived generosity of courts to wives in cases where no such agreement exists to regulate financial provision.

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.

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