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The Times reports on the Law Commissions pre-nuptial consultation

13th January 2011

Prenuptial contracts: the Law Commission wants your views

Frances Gibb Legal Editor

www.thetimes.co.uk/tto/news/

January 13 2011 12:01AM

Should couples be able to make a binding agreement before they marry or enter a civil partnership about what will happen to their property should they split?

The law was given a push in this direction by the recent Supreme Court ruling in the case involving Katrin Radmacher, a German heiress, and her estranged husband, Nicolas Granatino.

In October the justices ruled that Radmacher could keep her £100 million fortune on divorce, saying that “decisive weight” should be given to the agreement signed before the couple married that Granatino would make no claims on his wife’s fortune.

The courts, they said, should give effect to prenuptial contracts freely entered into. It would be unfair to do otherwise.

Lawyers were split over whether the justices had changed the law. But most agreed that they had affirmed a presumption in favour of prenuptial contracts, while retaining the courts’ discretion not to follow them.

But debate still rages about whether courts should have any such discretion at all. As Professor Elizabeth Cooke, a law commissioner, said this week: “Some felt that where couples have reached agreement, the courts should not be involved; yet the courts’ approach is primarily protective and some feel that they should not be wholly excluded.”

This week the Law Commission, the law reform body for England and Wales, launched a consultation on whether the law on prenups, postnups and separation agreements needs to be changed.

Every year more than 100,000 marriages end in divorce and a growing number of civil partnerships are dissolved. The issue of marriage contracts is not only for the very wealthy, despite the headline cases that make the media. Cooke said: “Cases that have been publicised certainly are [those that involve the wealthy]. But it is certainly worth giving some thought to people of ordinary means who might have been married before, say a widow who has got a house and who are contemplating getting married again.”

Others may be put off marriage or be thinking “long and hard” before marrying because they wish to protect “something of value to them, even if quite ordinary”, with an agreement. Yet such people are likely, the commission says, to be for those of “more than average means”.

Graham Coy, family law partner at the Surrey firm Mundays, agrees. “Pre-nups are not just something for the very rich; they are just as relevant and useful to anyone getting married. The real problem at present is knowing when people will be held to what they have agreed to.”

So what do people think of the options on the table? Marian Lynch, family partner with Pitmans, said reform was overdue, particularly for those embarking on second marriages who, being at a later stage in life, were “often less able to withstand losing a significant proportion of their wealth through divorce”.

Michael Rowlands, family law partner at Kingsley Napley, agrees reform is needed. However, the arguments for and against are complex. “Balancing the wishes of some individuals for autonomy with the risks to the weaker party of such an agreement might be impossible to achieve.”

Inevitably, he predicts, the divorce courts will still have a role and be left enough discretion to allow for “sufficient wriggle room”.

Geraldine Morris, solicitor and family law expert at LexisNexis Butterworths, argues that any reform should be in wider context of the law on dividing assets on divorce, which marital agreements are just one aspect.

The primary legislation on splitting assets, namely the Matrimonial Causes Act 1973, was drafted when society and family structures were very different from now, the lack of legal provision for cohabitees was also “long overdue for reform”.

The consultation period ends in April, just before the Royal marriage. Caitlin Jenkins, family law partner with Mills & Reeve, notes that although the law will not be changed by then, under the commission’s proposals Prince William would have been required to provide Kate Middleton with a full and frank disclosure of all his finances, were they to have signed a prenup.

Some also argue that prenups undermine the institution of marriage altogether. But the Law Commission seems to disagree: the law has moved on, it says, from the 19th century when such agreements were regarded as void and contrary to public policy.

It is more concerned about ensuring that people reach agreements freely and that no one, whether vulnerable spouses or children, are left unprotected. Pressure can be overt, or very subtle, it says.

Reform could have also a positive impact on relationship breakdown by minimising litigation. But could also have a “very negative impact upon individuals” if they are deprived of financial provision to which they are entitled.

And although agreements cannot oust the jurisdiction of the courts, the law could be changed so courts will follow agreements, where they are freely entered into — and where to do otherwise would be unfair. In other words, the Radmacher position.

What will happen? Most likely is a halfway house. Cooke indicated that the commission might be more in favour of binding agreements that relate only to inherited goods or property or owned before the marriage.

Meanwhile, as Richard Hogwood, family law partner with Speechly Bircham, puts it, the commission has put forward more questions than answers. But reform, he adds, is long overdue, irrespective of its ultimate scale. It may be tricky but as Baroness Hale of Richmond said in Radmacher, it is “just the sort of task for which the Law Commission was established”.

 

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