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Nuptial Agreements: The Search for Intention

Ben Wooldridge, pupil at 1 Hare Court, reviews the court’s treatment of nuptial agreements since Radmacher v Granatino [2010] UKSC 42, highlighting emerging trends and the growing significance of the parties’ intentions in determining enforceability.

Ben Wooldridge. pupil at 1 Hare Court

Introduction
1. Over four years have passed since the Supreme Court delivered its judgment in Radmacher v Granatino [2010] UKSC 42.  In that time, the High Court has considered this leading authority on nuptial agreements on over a dozen occasions.

2. The first section of this article aims to identify and describe emerging trends in the application of the Radmacher decision. It does so in order to assist practitioners in drafting such agreements and advising on their enforceability.

3. The second section observes that the post-Radmacher jurisprudence is dominated by a desire to promote autonomy. To this end, the parties' intentions have assumed a new significance in the assessment of whether a nuptial agreement should be upheld.

A full appreciation of the implications: legal advice and disclosure
4. The overarching principle espoused by the Supreme Court in Radmacher was that:

'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 in the circumstances prevailing it would not be fair to hold the parties to their agreement (para 75).'

5. The Supreme Court explained that whether a party had entered into an agreement with a full appreciation of its implications depended in part upon whether there had been a 'material lack of disclosure, information or advice' 1.

6. Whether a lack of disclosure or advice is 'material' has been considered extensively in the post-Radmacher case law. The following guidance can be extracted:

a. Whilst there is 'no absolute black and white rule' 2 for full disclosure or independent legal advice, it will be an 'unusual case' 3 where absent the same a party will be considered to have had a full appreciation of the implications of the agreement;

b. Normally, a party will need to have received 'at least enough legal advice to appreciate what [they are] giving up 4';

c. However, the advice or disclosure required may be less onerous if it can be demonstrated that the party was financially and legally astute enough to appreciate what they were forgoing 5;

d. The level of advice necessary may also be lower where the language and purpose of the agreement is plainly intelligible 6 or where the agreement was concluded against the backdrop of a marital property regime which makes its purpose obvious 7;

e. A finding that a party was indifferent to the absence of advice or disclosure can prevent that deficiency being material 8;

f. So too can a finding that, even if the advice or disclosure had been provided, a party would not have acted any differently 9;

g. Where a case has a foreign dimension, a full appreciation of the implications does not require the parties to have 'received specific advice as to the operation of English law on the agreement in question 10';

h. However, it does require them to have had a general intention that the agreement be effective wherever they later decide to divorce; and

i. This intention must include an intention that the agreement be effective in a jurisdiction operating a system of equitable discretionary distribution 11.


Full appreciation of the implications: consensus ad idem
7. A full appreciation of the implications of an agreement also requires the parties to be ad idem as regards its consequences. In GS v L (Financial Remedies: Pre-Acquired Assets) [2011] EWHC 1759 (Fam);, the parties opted into a Spanish community of property regime during their marriage. It provided for all future assets to be owned jointly.

8. Mrs Justice Eleanor King (as she then was) found that:

'…there was no mutual understanding between the husband and wife in relation to the agreement: the husband believed it ring-fenced his pre-acquired asset; the wife did not (para 77).'

9. Accordingly, she held that this lack of common understanding prevented the parties from having a full appreciation of the implications of their agreement 12.

Full appreciation of the implications: the foreign element
10. In this context, the authorities also draw an important distinction between negotiated pre-nuptial agreements (which specifically contemplate divorce) and agreements made in civil jurisdictions to adopt a specific marital property regime 13.

11. In order to be credited with a full appreciation of its implications, parties to an agreement made in a civil jurisdiction must specifically demonstrate that they intended the agreement to be determinative of the distribution of their assets in the event of divorce 14

12. In Y v Y [2014] EWHC 2920 (Fam) (Unreported), the French husband and wife elected a regime of separation of assets. Allocating the agreement reduced weight, Mrs Justice Roberts observed that whilst the wife intended the settlement to govern the parties financial affairs during the existence of the marriage, she had:

'…no understanding and was unaware (and thus never intended) that its provisions should apply to a division of their marital estate in the event of either death or divorce 15.'

13. Perhaps unsurprisingly, a finding that the primary intention of the parties when entering into the agreement was unrelated to the breakdown of the relationship is likely to prevent a finding that they entered into the agreement fully aware of its consequences.

14. In GS v L, Eleanor King J found that the principal intention of the parties when entering into the agreement was to provide the wife with financial security in the event of the husband's death.  Hence, she awarded the agreement reduced weight 16.

15. Two final factors can be discerned from the case law that impact on an assessment of whether the parties understood the implications of their agreement. These are:

a. whether the agreement would be upheld in the jurisdiction in which it was concluded 17 and;

b. whether there is evidence that entering such agreements is a common occurrence in the parties' country of origin 18.


A predicament of real need
19. In Radmacher, the Supreme Court held that the parties are unlikely to have intended that their agreement would result in one partner being left in a 'predicament of real need' whilst the other enjoyed a sufficiency or more.19

20. In a number of recent cases, guidance has been provided on the meaning of this phrase. Mr Justice Mostyn has indicated that he considers it to be synonymous with destitution 20.

21. A further illustration of what amounts to a 'predicament of real need' was provided by Luckwell v Limata [2014] EWHC 502 (Fam);. In this case, the parties signed a pre-nuptial agreement that provided that the husband would make no claim, either during or after marriage, on the wife's separate property or gifts made to her by her wealthy family. The husband later signed two further agreements specifically disclaiming any interest in two properties gifted to the wife by her parents.

22. Mr Justice Holman noted that a situation had developed in which the husband had: 

'…no home, no current income, no capital, considerable debts, and absolutely no further borrowing capacity (para 143).'

23. He considered that 'on any view' he was in 'predicament of real need'.21

Interim applications
24. The interaction between nuptial agreements and interim applications has also been considered in the post-Radmacher case law. In BN v MA [2013] EWHC 4250 (Fam) (Unreported) the parties signed a pre-nuptial agreement which confirmed their separate property interests and provided financial provision for the wife that depended on the length of the marriage.

25. On the breakdown of the relationship, the wife issued an application for the full range of financial remedies. In the interim, she sought maintenance pending suit pursuant to s 22 Matrimonial Causes Act 1973. Mostyn J held that:

'…when adjudicating a question of interim maintenance, where there has been a prenuptial agreement, the court should seek to apply the terms of the prenuptial agreement as closely and as practically as it can, unless the evidence of the wife in support of her application demonstrates, to a convincing standard, that she has a likely prospect of satisfying the court that this agreement should not be upheld (para 33).'

Weight
26. The post-Radmacher authorities reveal two competing schools of thought regarding the weight that should be allocated to an agreement that is deficient in some respect.

27. Kremen v Agrest [2012] EWHC 45 (Fam); concerned a post-nuptial agreement signed in Israel by Russian husband and wife. B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam);  involved the adoption by the parties of a regime of separate property upon marriage. In both cases, Mostyn J found that the parties had not entered into the agreement with a full appreciation of its implications. Consequently, he accorded the agreements no weight. 

28. A different approach can be seen in AH v PH [2013] EWHC 3873 (Fam); . The Scandinavian parties entered into a pre-nuptial agreement adopting a regime of partial separation of property. Whilst Mr Justice Moor considered it was unfair to hold the parties rigidly to their agreement, he was of the view that existence of the marriage settlement remained one of the circumstances of the case.

29. The settlement, which he found had been intended by the parties to protect the husband's inherited wealth, provided a reason to 'invade [his] inherited capital only insofar as it [was] appropriate to deal fairly' with the wife's housing needs 22.

30. Moor J's approach was endorsed by Roberts J in Y v Y.  Her Ladyship also considered that the signed agreement amounted to a relevant consideration 23. To reflect the parties' intentions, she excluded their non-marital property from the pool of assets subject to the sharing principle 24.

Other trends
31. The recent authorities also reveal a number of other developments that, whilst isolated, may be of interest to practitioners:

a. The fact that an agreement was signed within days of the marriage itself will not necessarily prevent it being upheld. The court will look to the substance of the matter. If the terms of the agreement have been subject to some prior negotiation 25 or adequate legal advice has been received, then the issue of timing may be rendered immaterial 26;

b. If an agreement is affected by vitiating factors and not upheld, the terms favourable to the successful party should not be 'cherry picked' and enforced as part of the s 25 exercise 27;

c. A nuptial agreement 'does not have to deal with all aspects of the parties' resources in order to be presumptively binding over the assets or resources which it addresses' 28; and

d. An agreement is likely to be considered unfair where it provides nothing for one party regardless of the duration of the marriage or a party's future needs.

Analysis and comment
32. As predicted, the Supreme Court's decision in Radmacher has necessitated a significant change in the approach to be adopted to nuptial agreements 29. It is abundantly clear that such agreements can and have altered the assessment of what amounts to a fair award.30

33. The justification for this sea-change is an increased respect for personal autonomy 31. Indeed, there is some authority for the proposition that respect for autonomy now constitutes a fourth guiding principle in the elusive search for fairness.32

34. As can be seen above, the post-Radmacher authorities are laden with the language of intention. This article argues that this focus on intention is the way in which autonomy is promoted in practice. As a consequence, the intentions of the parties have taken centre stage in an assessment of whether a nuptial agreement should be enforced.

35. The extent that this development is welcomed will depend upon an assessment of whether the Court is right to make the promotion of autonomy its primary aim. Leaving this argument of principle to one side, the remainder of this article considers the practical implications of the intention based approach to the question of autonomy.

36. As outlined above, the authorities require the parties to demonstrate a commonality of intention regarding the purpose of their agreement. It is questionable whether the Supreme Court ever intended the enforceability of nuptial agreements to depend on the existence of a consensus ad idem between the parties.

37. This requirement appears to conflate and confuse the two separate issues of whether the parties intended the agreement to be binding in principle and whether they were in agreement about the meaning of each of its terms. It would appear this judicial gloss offers almost limitless potential for parties to seek to resile from an agreement on the basis that the exact meaning of a particular term was not agreed.

38. In the case of agreements to adopt a specific marital property regime, it was explained above that the parties must also demonstrate an intention that the agreement be binding and determinative upon divorce.

39. This additional requirement is entirely logical. Unlike a common law pre-nuptial agreement, a marital property regime may be adopted for a number of reasons unrelated to a future divorce. For example, spouses may contract out of a default regime of immediate community of property in order to prevent joint liability for debts arising during the relationship.

40. The promotion of autonomy therefore rightly requires an examination of whether both parties to the agreement intended it to be operative in the event of a divorce. Autonomy would not be furthered by, for example, holding a spouse to such an agreement where he or she simply intended to protect his or her assets from the other spouse's creditors during the existence of the relationship.

41. Similarly, the requirement that the parties to such an agreement intend it to be effective wherever they may later divorce is justified. Based on the multiple marital property regimes in operation across Europe, to hold otherwise would not reflect intention in any informed, meaningful sense.

42. This requirement raises a more general issue of how the required intention is to be evidenced. It also raises the possibility that the court will become embroiled in the lengthy and unedifying process of trying to ascertain the parties' intentions from a consideration of the surrounding circumstances. The question of whether intention in these circumstances is to be looked at objectively or subjectively also remains unanswered.

43. Evidence of intention is also central to the question of whether enforcing an agreement is fair in all the circumstances. If it can be shown that the agreement would be enforceable in the parties' country of origin, or that such agreements are commonplace in their home country, then it appears that an inference can be drawn that they intended the agreement to be binding.

44. Whilst looking at an agreement in context seems inherently sensible, there is a concern that this will encourage the expensive use of expert testimony regarding whether an agreement would be upheld in the relevant foreign jurisdiction.

45. It is also notable that all but one of the cases considered above concerned agreements entered into prior to the decision in Radmacher.  Accordingly, the legal advice (if any) received by the parties in those cases was likely to have been that such agreements would not be binding in English law.

46. If intention is the vehicle through which autonomy is to be promoted, it is surely much more realistic to find or infer that the parties intended to be bound by their agreement after the change in the law which recognised this possibility explicitly. It is to be hoped that the parties will have received specific legal advice warning them of the binding nature of such agreements and may even have a general awareness of the decision from the media. They can therefore be ascribed an informed intention which sits comfortably with the promotion of autonomy.

47. However, the only case in which such reasoning can be seen is AC v DC (No.2) [2012] EWHC 2420 (Fam); in which Sir Hugh Bennett held that there would be 'intrinsic unfairness' in holding a wife to an agreement 'entered into so long before the celebrated case of Granatino v Radmacher (para 26).' This is a matter of some concern because uninformed intention does not sit so easily alongside the promotion of autonomy.

48. The promotion of autonomy also necessarily lends support to the more nuanced approach of Moor J and Roberts J to the weight that should be ascribed to an agreement affected by a vitiating factor.

49. If the evidence demonstrates that the parties clearly intended the agreement to achieve a particular outcome, but there has been a failure of procedure or form, then autonomy dictates that such intentions are reflected to the greatest extent possible. To disregard the agreement in its entirety would be to throw the baby out with the bath water.

50. Findings of fact as to the parties' intentions can have a pronounced impact on assessment of what constitutes a fair award. In Luckwell v Limata, Holman J's judgment was underpinned by his absolute conviction that the husband had intended to be bound by the agreements in question 33.

51. After having acknowledged that his award was 'based entirely on the needs of (the husband), considered in conjunction with his role as a father', he commented that:

'But for the agreements, I would have awarded a larger housing fund and the whole of it outright. As it is, all of it is provided only for a term, and much of it only during the dependency of the children. He only ever gets the use of it in the form of housing. He can never touch the capital (para 166)'.

52. Prima facie, it appears that the existence of the pre-nuptial agreement affected Holman J's assessment of the quantum and structure of the exclusively needs based award. But for the agreement, the husband would have received a larger capital fund for housing that would have been awarded outright.

53. If this analysis is correct, it marks a significant departure from the current understanding that nuptial agreements usually restrict only the scope of the sharing principle 34. It seems axiomatic that such a development will in some cases lead to unfairness. If Holman J's approach gains traction and is followed, parties really will have to be careful what they wish for.


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1 Radmacher v Granatino [2010] UKSC 42; [2011] 1 AC 534, [69]

2 Kremen v Agrest [2012] EWHC 45 (Fam); [2012] 2 FLR 414, [72]

3 Ibid, [73]

4 BN v MA [2013] EWHC 4250 (Fam) (Unreported) [30]; Kremen v Agrest, [30] 

5 V v V (Ancillary Relief: Pre-Nuptial Agreement) [2011] EWHC 3230 (Fam); [2012] 1 FLR 1315, [48], Kremem v Agrest, [73]; BN v MA, [30]; AH v PH [2013] EWHC 3873 (Fam); [2014] 2 FLR 251, [58]

6 V v V, [50]

7 Ibid [67] – [68]

8 Ibid [49], [52]

9 Ibid 

10 B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam); [2012] 2 FLR 502, [20]

11 Ibid, [20], [34]; SA v PA (Premarital Agreement: Compensation) [2014] EWHC 392 (Fam); [2014] 2 FLR 1028, [55]. Mostyn J's view was endorsed by Moor J in AH v PH, [63] and Roberts J in Y v Y [2014] EWHC 2920 (Fam) (Unreported), [110]

12 See also Y v Y, [88]

13 Kremen v Agrest, [5]

14 GS v L (Financial Remedies: Pre-Acquired Assets) [2011] EWHC 1759 (Fam); [2013] 1 FLR 300, [77]; V v V, [67] – 68; Kremen v Agrest, [74(ii)]; Luckwell v Limata [2014] EWHC 502; [2014] 2 FLR 168, [17]; Y v Y, [67]

15 [67], [73], [109]

16 [77]

17 GS v L, [77]; Z v Z (Financial Remedies: Marriage Contract), [40]; AH v PH, [65]

18 Z v Z, [42],[45]; AH v PH, [10]; SA v PA, [51]

19 Radmacher v Granatino, [81]

20 Kremen v Agrest, [72]; BN v MA, [29]

21 Luckwell v Limata, [143]

22 AH v PH, [67] – [69]

23 Y v Y, [69]

24 AH v PH, [111]

25 Ibid, [12]

26 SA v PA, [63]

27 AH v PH, [68]

28 SA v PA, [14]

29 AH v PH, [43]

30 Z v Z, [64]

31 V v V, [79]

32 Ibid, [39]

33 Luckwell v Limata, [12], [17], [133]

34 Radmacher v Granatino, [82]