Law Commission Recommendations on Enforceability of Pre-Nuptial Agreements – are we any clearer?

Coodes Family Lawyer Ian Taylor reviews the Law Commissions long awaited report on the enforceability of pre-nuptial agreements.

The Law Commissions initial task was to look at the enforceability of ‘nuptial’ agreements however with the financial needs of the parties and any dependent children becoming the deciding factor in most cases, its consultation was extended to include consideration of the broader concepts of ‘Matrimonial Property, Needs and Agreements’.

Nationally, Courts have undertaken the assessment of financial ‘needs’ in very different ways, leading to a divergence in outcome and uncertainty for separating partners and lawyers alike.

The recommendations include a number of suggestions for statutory reforms and judicial guidelines as to how the Courts should approach the division of matrimonial and non-matrimonial property.

There is no recommendation to change much of the current law, including the criteria for considering needs set out in the Matrimonial Causes Act 1973 at Section 25(2). The wide discretion of the Court would also remain except in those cases where there is a ‘Qualifying Nuptial Agreement’.

A key recommendation is that guidelines be formulated by the Family Justice Council to provide direction to judges to assist in the assessment of need. These guidelines would, if universally adopted, provide a set of criteria to enable a consistent approach across all Courts and in particular to assist with determining

• what are the needs?
• at what level should they be met?
• what is the appropriate duration for any provision

The Commission also proposes further analysis be undertaken to look at a formula for maintenance payments. This could however take up to five years to complete.

The Effect of Nuptial Agreements

It is proposed that where a ‘Qualifying Nuptial Agreement’ is made either before or after marriage or Civil Partnership, this will prohibit the court from exercising its discretionary powers to make a financial order unless it is necessary to meet the needs of a party or a dependent child.

A ‘Qualifying Nuptial Agreement’ will only be binding if it meets certain formalities. It must :

a. be a valid contract;

b. be made by deed;

c. be made more than 28 days before the marriage or civil partnership;

d. include a statement by each party indicating their understanding that the agreement removes the court’s discretion;

e. be accompanied with disclosure of ‘material’ information about each party’s financial position ;

f. be accompanied by independent legal advice at the time the agreement is formed dealing with the exclusion of the court’s discretion and the effect of the agreement on the rights of the party being advised;

g. include a statement that legal advice has been given.

There are no recommendations to amend the law regarding how ‘non-matrimonial property’, for example obtained by inheritance or gift or prior to the marriage, is to be treated. The Commission appears to endorse the Court of Appeal’s approach in Jones v Jones which was to determine the matrimonial and non-matrimonial property, disregard the non-matrimonial property unless it is required to meet parties or childrens’ needs, and share the remaining property equally.

The benefit of such an approach is that it would provide greater clarity and therefore encourage early settlement between parties who now spend much time (and legal fees) trying to guess what proportions a judge would apply to the property established as non-matrimonial in nature.

Overall the report is cautious and maintains the idea of wide judicial discretion to deal with the vast range of situations that separating couples find themselves in. There are some proposals however which, if adopted, might make it easier to predict the outcome of a financial application and may provide some certainty for those couples who want to avoid expensive legal argument after the event, provided they follow the rules when entering into an agreement.