Lawyers call for clarity on pre-nups as Law Commission launches review

Leading UK family lawyers have called for greater clarity as the Law Commission carries out a review likely to usher in legally binding pre-nuptial agreements.

Partners are broadly in favour of the review, which could lead to the introduction of legally binding pre-nuptial agreements that would be enforceable in English courts.

However, many want to ensure safeguards exist to protect vulnerable spouses and children, with some arguing the courts should be given the final say.

The Commission launched its consultation this week (11 January) looking at pre-nuptial, post-nuptial and separation agreements.

In addition to looking at whether couples should be able to enter into binding agreements not to seek ancilliary relief in the event of divorce and what such agreements should encompass, the consultation also looks at the formalities needed for an agreement to qualify – such as the need for full financial disclosure between the couple and signed documentation based on legal advice.

Withers head of family law Julian Lipson said: “We are behind the times in this country to pretend that marriages do not break down as often as they do or that a pre-nup would of itself undermine the institution of marriage. They may be considered unromantic, but pre-nups can be put together fairly and are symptomatic of modern society, where divorce is, sadly, a common phenomenon. Such agreements should be available to be relied upon, if they are done properly.”

He continued: “There needs to be a line beyond which it is possible to say that if a pre-nup makes significantly unfair provision or is not done properly, it can be departed from.”

Richard Hogwood, family partner at Speechly Bircham, commented: “Reforms in this area are long overdue, and regardless of the ultimate scale of reforms, the results of the consultation will have far-reaching implications for family law across the UK.”

“If pre-nups are here to stay it will be better to have something in statute rather than case law. Better to have it in chapter and verse.”

The consultation comes after the Radmacher case which last October saw the Supreme Court for the first time back the enforceability of prenuptial agreements in what was regarded as a landmark ruling for family law.

The court backed German heiress Katrin Radmacher (pictured) – who had an estimated fortune of more than £100m – in her dispute with ex-husband Nicolas Granatino.

Despite the High Court refusing to fully enforce the prenuptial contract, Radmacher successfully appealed to the Court of Appeal and Supreme Court which concluded that the prenuptial agreement should be given “decisive weight”.

The Law Commission’s consultation is being led by commissioner Elizabeth Cooke. It closes on 11 April 2011.

Click here to to view the Law Commission consultation paper

Expert reaction to the consultation

“Pre-nups are a topical issue. Under the current law the starting point for the resolution of financial division on divorce is the discretion of the court. Some feel 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.

“Our consultation paper considers the arguments for and against reform and examines how a new approach might balance the desire of some couples to plot their own future with more certainty against the need for safeguards against exploitation and the creation of hardship. This is an issue that needs to be handled with care.”
Elizabeth Cooke, law commissioner, Law Commission

“At this stage the consultation paper puts forward more questions than answers. The Law Commission has clearly picked up on a groundswell of support for pre-nups and post-nups.”

“The Commission may have opened a Pandora’s box by raising the idea of reviewing the entire legal basis for financial awards on divorce. If the size of this initial paper is anything to go by, one can only imagine how substantial and complex a review of financial awards would be.”

“Pre-nups and post-nups are clearly here to stay and, after Radmacher, are only likely to become more popular. The big question raised and considered by the Law Commission, though, is whether they should remain a creature of case law or instead be given a firm statutory footing. If the latter, the thorny next question is how?”
Richard Hogwood, family partner, Speechly Bircham

“Whilst there has been a considerable increase in the number of people entering into pre-marital agreements over the last five years, the Law Commission appears to doubt that such agreements would become the norm even if they were to be made binding. In most divorce cases the difficulties in dealing with the finances arise not from legal uncertainty, but from attempting to stretch limited financial resources to fund two households. Pre-nups may well therefore remain the preserve of the wealthy and those with assets acquired by gift or inheritance which they want to protect.”
Caitlin Jenkins, family partner, Mills & Reeve

“The fundamental difficulty, which I think is lost on many who don’t have direct experience of negotiating pre-nups, is the extent to which the negotiations can be fundamentally flawed. The reality is that the financially weaker party frequently finds himself (or more often herself) with no choice: sign up, or appear to be a gold-digger. There is often limited opportunity to have a meaningful analysis of what the situation might be at the time of separation, because the parties are in no mood to have an argument in advance about something that they naturally hope and expect will not apply to them.”

“Any new law would have to include caveats, some sort of ‘get out’ clause – and that is what people will be fighting over.”
Tom Amlot, family head, Harbottle & Lewis

“There is still a perception that these are for an elite Hollywood-type couple and it makes sense where there is a lot of family wealth. Most family practitioners won’t have couples clamouring for advice about pre-nups or spending a couple of thousand pounds on them as part of the wedding planning process. They are as popular as wills for young people.”

“All the interest peaked in 2010 with Radmacher. The Supreme Court has taken this as far as it needs to go and made a clear statement that they are decisive contracts unless unfair. If the Law Commission wants to take it to the next stage with legislation then it will remove court discretion – a fundamental change to family justice. There is not a crying social need for this and it is not lawyer or even client-led.”
Alison Hawes, family partner, Irwin Mitchell

“The Law Commission’s consultation paper suggests that it will only recommend that marital agreements will be binding subject to the Court’s ultimate approval. The minority of couples who are wealthy enough for a marital agreement to make a difference are unlikely to be satisfied by this. Time and effort will be spent negotiating agreements to ring-fence inherited, pre-acquired or gifted assets or to limit the receiving spouse’s claim either to a share of assets accumulated during the marriage or to his or her reasonable needs. The value of any such agreement will therefore be entirely dependent upon the couples’ financial and other circumstances at the time of any divorce. Reform of this nature is no reform at all; rather it pretty much reflects the current position in English law.”
Sandra Davis, head of family law, Mishcon de Reya