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Radmacher - Where Now?

In advance of the much anticipated judgment of the Supreme Court in the Radmacher appeal, Ashley Murray examines the issues that will fall for consideration by the court and offers his view on the use of pre-nuptial agreements and the need for definitive guidance.







 



Ashley Murray, Barrister, Oriel Chambers, Liverpool

Introduction – Some Opening Thoughts:
There is a certain irony that the very case1 on pre-nuptial agreements, which reaches the Supreme Court in advance of the Law Commission's review2 and report on this subject, is an appeal by a man and not a woman, against a Court of Appeal decision to apply the terms of a pre-nuptial agreement to the detriment of his claims for ancillary relief.

If a man, familiar with commercial agreements such as the husband3 in Radmacher, can sign up to a completely one sided pre-nup, then what chance have less adept or worldly individuals of resisting the same temptation.

Clearly, the issue over the validity or effect of pre-nuptial agreements is not just a 'women's rights' issue, as some would observe, but more an issue for wider concern. Should agreements of such significance reached before the individuals concerned have entered a marital commitment and the awareness of the responsibilities that go with such a state, be fully bound several years later. The aspirations of men and women appear as different as Mars and Venus in many areas of life, not least in matrimony. To many women issues related to future divorce claims remain, at least, secondary to the preparations for the wedding itself and the prospect of married and family life thereafter. Is this really the environment for fairly negotiating pre-nuptial agreements that may be so decisive later on.

Baron J observed in NG v KR [2008] EWHC 1532 (Fam): (the first instance reference for Radmacher v Granatino):

'[29] It is understandable that English society in general (therefore the state) regards Court supervision as a necessary safeguard. To my mind, independent scrutiny of these agreements remains as necessary in modern times as it was in the last century because of the vulnerability of parties involved at times of high emotion where inequality of bargaining power may exist between them. Although civilization has made much progress over the centuries and the roles of men and women have altered so that, in some cultures, equality has been achieved that does not mean that fundamental human nature has changed. Whilst the Court must permit of current mores and will take full account of contemporary morality it should not be blind to human frailty and susceptibility when love and separation are involved. The need for careful safeguards to protect the weaker party and ensure fairness remains'. 4

Is the much lauded foreign experience of such agreements, which in many countries is much more part of the marriage legal process, an improvement or just an example of the drawbacks of a system which may be about to be forced through by the current judicial appeal system5, instead of awaiting the more reflective approach of the Law Commission?5.

Indeed, should our Supreme Court continue to be conservative in its approach in this area and be prepared only to determine the case before it on the basis of the usual cautious precedent based approach until the Law Commission has fully reported? Is the exceptional assembly of nine Law Lords (ten required for 'a leaping') simply a reflection of media and political pressure, which ought to have been resisted, albeit, some believe, encouraged by the Court of Appeal's decision in the same case6?

Should our law lamely follow society's attitudes or should there be, at least, an element of directive and even corrective purpose to the judicial pronouncements from our higher courts?

Has the average man and woman really been deprived in having had limited freedom of contract in this area to date or is there, actually, something about the married state which should not be regarded as reducible to a quasi-commercial agreement. Will their experiences of having to pay pre-marriage for a standard form pre-nup to be drawn up at a time when the couple may actually have modest finances and little prospect of the same, really improve their lot as a married couple or for that matter their future marital harmony?

If our Supreme Court encourages the pre-nuptial process, will not most of these agreements 'wither on the vine' as most spouses fail to review them at regular intervals. Does not the prospect of regular review and the repeated associated costs of such reviews constitute an unrealistic aspect of this type of agreement and one which should for most couples carry the money equivalent of a Government health warning! In reality, is the call for greater recognition of the pre-nup merely the tip of a more reactionary iceberg to equality of rights in divorce for women?7.

'33. It is said that calls for the legislative recognition of ante-nuptial agreements appear to have increased with the development of more egalitarian principles of financial and property adjustment on divorce, following the decisions of the House of Lords in White v White ...and Miller v Miller, McFarlane v McFarlane... If such calls are motivated by a perception that equality within marriage is wrong in principle, the more logical solution would be to examine the principles applicable to ascertaining the fair result of a claim for ancillary relief, rather than the pre-marital attempt to predict what the fair result will be long before the event. If such calls are motivated by a fear that people who feel threatened by what might happen in the event of divorce will not get married at all, there is a need for serious research and consideration of the extent of and reasons for the reduction in marriage rates over recent decades. It certainly cannot be demonstrated that the lack of enforceable ante-nuptial agreements in this country is depressing the marriage rate here as compared with other countries where such agreements can be made.'

Should not the same 'health' warning be given to High Street solicitors whose practices, would, undoubtedly, welcome the inevitable increase in business in these leaner times. Since many may find in  years to come, when some of these very clients are much wealthier and perhaps more litigious, that the pre-nup advice given was not quite as comprehensive as it should have been so that this new business may become decidedly toxic with damages claims far in excess of their lawyers' professional indemnity insurance cover!.

Issues in Need of Attention:
(a) Different Types of Agreement:

The clear message since the case of Hyman v Hyman [1929] AC 601  has been that any agreement, which purports to oust the jurisdiction of the court will be void on the grounds of public policy. Therefore, the new President of the Family Division as long ago as 1999 again re-stated the matrimonial court's position as being that pre-nuptial agreements remained unenforceable on the basis that they undermined 'the concept of marriage as a lifelong union' in purporting to oust the court's jurisdiction on an application for ancillary relief.8

This position has been the cause of a disparate development of 'marital agreements' generally in our family law, starting with the seminal case of Edgar v Edgar [1980] 2 FLR 19. in 1980 to the innovative development signalled by the Board's decision in the Privy Council's case of  Macleod v Macleod [2008] UKPC 64

The result has been that, until Macleod's case, we had distinctions between the court's approach to pre-nuptial agreements, post nuptial agreements, separation (Edgar type) agreements and agreements which effected a compromise of ancillary relief applications (see Xydhias v Xydhias [1999] 1 FLR 683 CA.

Now that the Macleod case has indicated, persuasively, that ss 34 and 35 of the Matrimonial Causes Act 1973 should be the starting point for any post-nuptial, separation or compromise agreement on the basis that all three forms of agreement fall within the statutory definition of a 'maintenance agreement', the position appeared to be relatively more straightforward. This was despite the fact that even the Court of Appeal in Edgar appeared to have missed the relevance of those sections to the issues which had arisen before them on the impact of a separation agreement within the section 25 exercise. 

Unfortunately, of course, the Court of Appeal in Radmacher, in what I respectfully submit, was a thinly veiled political attempt to push the issue of pre-nuptials, has inthe process, by some, relatively, loose attention to the issues before them, effectively, created , a double confusion post the Macleod  decision, first as to whether the Privy Council decision is to be seen as binding on the Court of Appeal (see para 124 below) and secondly (per Wilson LJ in Radmacher v Granatino at para 134 below) whether the 'maintenance agreement' route is the correct approach when dealing with marital agreements generally.

'[124] Insofar, however, as our views in this court about pre-nuptial contracts do not entirely coincide with those of the Board in MacLeod, I consider, as do my Lords, that it is open to us to express them; and that, in the light of the forthcoming project of enquiry on the part of the Law Commission into the optimum rules for recognition of all types of nuptial contract, it will be helpful for us to contribute to the generation of debate by so doing…'

…[[134] The suggested introduction into the consideration of post-nuptial contracts in proceedings for ancillary relief following divorce of an analogy with the power to alter a maintenance agreement under s 35 is, if I may speak for myself, entirely unexpected; and it will need careful, albeit genuinely respectful, scrutiny in the cases in which it arises. Sections 34 and 35 have been dead letters for more than thirty years. To the best of my recollection, neither at the bar nor on the bench have I been party to a case in which they have even fallen to be considered; but I hasten to add that I have discovered a brief, parenthetical reference to them, as being the foundation of a novel argument, in Morgan v Hill [2006] EWCA Civ 1602, [2006] 3 FCR 620, [2007] 1 FLR 1480 at 21. As the Board in MacLeod itself in effect pointed out, at 23, the progenitor of the sections was s 1 of the Maintenance Agreements Act 1957, enacted in an era when, if after separation one spouse wished to be divorced but the other spouse, innocent of a "matrimonial offence", declined to petition, the consequence was that they remained married indefinitely. In such circumstances it was important to create a facility, outside the context of divorce, for spouses to have access to a court, in particular to a Magistrates' Court, for a maintenance agreement between them to be altered and, subject thereto, for it to be binding and enforceable. Furthermore in 1957 the court had no jurisdiction, even in the context of divorce, to order capital provision to be made outright (ie by payment or transfer) by one spouse to the other. The word "maintenance" then in effect meant periodical payments, secured or unsecured: see, for example, s 16 Maintenance Orders Act 1950. Although in theory the parties could then agree that one should make a capital payment to the other, it is unrealistic to consider that the Act of 1957 was in any way devised in order to address the paradigm examples of the modern post-nuptial contract, namely agreements that, upon divorce, the financial claims of one spouse should either be nonexistent or be satisfied by provisions which almost always include, and usually comprise, a capital payment. To chart changes, foreseen or unforeseen, pursuant to s 35 of the Act of 1973 seems to me to be a very different exercise from that of weighing all the circumstances ab initio under s 25 of it; and, pending statutory reform or further interim guidance in a suitable case by the Supreme Court, it may be helpful for courts at any rate to remember that the weighing exercise under s 25 is mandatory.'9

Hence, these are now areas which require further and definitive guidance; particularly:-

(b) When will a Pre-nuptial Agreement Count?
This question was already being posed, at least, 12 years ago in the Government's consultation paper 'Supporting Families' (1998)10 when there was a list of some six safeguards which should they not exist then it was suggested that a pre-nuptial agreement should not be binding upon the parties who had signed it. This same list was, helpfully, used by Baron J in NG's case in determining what weight she should, in fairness, attribute to the pre-nuptial agreement signed by the husband. Again, in   K v K [2003] 1FLR 120; Roger Hayward-Smith QC sitting as a Deputy High Court judge had set out a list of similar questions to ask of any pre-nuptial arrangement when embarking upon the section 25 statutory exercise. These each involved the now familiar territory as to whether, prior to the agreement there had been:

The Court of Appeal in Radmacher's case has now, apparently, ventured an approach in which the Court must assess the impact of the failure to adhere to these familiar safeguards instead of regarding non-compliance with the same as an insuperable flaw to applying the pre-nuptial agreement to the statutory exercise. Of course, in this context, Baron J in NG's case had already adopted a similar, albeit less strident, approach in that, whilst being unwilling to apply the terms of  the pre-nuptial agreement strictly due to lack of separate legal advice and wealth disclosure and to some extent duress, she had under 'all the circumstances' of section 25 been prepared to factor in to some degree the approach that the nature of the agreement actually signed should impact upon the eventual outcome against the husband.

The Court of Appeal, however, used this methodology as an opening to a much wider arena of uniformity between the approach to such agreements in our jurisdiction and that of our EU counterparts (see Thorpe LJ). Such has been the approach of this highly respected judge for a number of years11, but, it is suggested, it is a hobby horse without much popular support. Indeed, his enthusiasm for the claimed better certainty of a system, which recognises the ability of adults to contract freely and where the pre-nup is regarded as being the route to less dispute and cost between divorcing parties fails, it is suggested, to give appropriate weight to the probable response to the impact that such judicial recognition would actually have, where the parties would litigate even more about both the application and relevance of such agreements than they do under the present regime.

Indeed, even in the 'brave new world' envisaged by the Court of Appeal, it is still accepted as essential that:-

i) there must be compliance with the general contractual and Edgar principles;
ii) ultimately, the court has a final sanction under the section 25 review of the pre-nup to rectify any 'manifestly unfair' provision. 
iii) attempts to oust the court's jurisdiction will continue to be void;

In consequence, it is suggested that the outcome would be a veritable seed bed of potential issues to any litigious party and not  the predicted landscape which avoids increased legal costs.

Accordingly, it is submitted, the following further issues need clarification:-

Some Final Thoughts
The decision of Baron J, at first instance, in Radmacher's case (i.e. NG v KR) was considered by many to be yet another fine example of the shrewdness and practical common sense of a much respected former specialist practitioner in this area of ancillary relief law. Accordingly, the criticism of the Court of Appeal judges of her judgment appeared to this same audience both strained and contrived to enable another, possibly more political, agenda to be addressed.

Wilson LJ in the Radmacher appeal, it may be thought by some, somewhat unconvincingly, stated:

'[135] Baron J has been a judge of the Division for six years. I have studied hundreds of her judgments, in particular in the field of substantial ancillary relief, and, with admiration, have agreed with all of them. Now for the first time, following protracted thought, I disagree with her, indeed to the necessary extent of considering her application of the existing law to the facts of the present case to be plainly wrong'.

Of course, if the position is ever reached where a judge is above criticism then even a review such as this may be a dangerous journey to embark upon and, plainly, we must all trust that our system remains free from political influence of such a kind. However, the cautionary words of Lord Hoffmann in Piglowska v Piglowski  [1999] AER 668, which bear repetition below, should, it is suggested, have been sufficient protection for Baron J's exercise of judicial discretion, especially in the area of the application of the terms of a pre-nuptial agreement under 'all the circumstances' of the section 25 exercise:-

'In G v G (Minors: Custody Appeal) [1985] 2 All ER 225, this House, … approved the following statement of principle by Asquith LJ in Bellenden (formerly Satterthwaite) v Satterthwaite [1948] 1 All ER 343, 345, which concerned an order for maintenance for a divorced wife:

"It is, of course, not enough for the wife to establish that this court might, or would, have made a different order. We are here concerned with a judicial discretion, and it is of the essence of such a discretion that on the same evidence two different minds might reach widely different decisions without either being appealable. It is only where the decision exceeds the generous ambit within which reasonable disagreement is possible, and is, in fact, plainly wrong, that an appellate body is entitled to interfere."

This passage has been cited and approved many times but some of its implications need to be explained. First, the appellate court must bear in mind the advantage which the first instance judge had in seeing the parties and the other witnesses. This is well understood on questions of credibility and findings of primary fact. But it goes further than that. It applies also to the judge's evaluation of those facts. If I may quote what I said in Biogen Inc v Medeva Ltd (1996) 38 BMLR 149, [1997] RPC 1:

"The need for appellate caution in reversing the trial judge's evaluation of the facts is based upon much more solid grounds than professional courtesy. It is because specific findings of fact, even by the most meticulous judge, are inherently an incomplete statement of the impression which was made upon him by the primary evidence. His expressed findings are always surrounded by a penumbra of imprecision as to emphasis, relative weight, minor qualification and nuance . . . of which time and language do not permit exact expression, but which may play an important part in the judge's overall evaluation."

The second point follows from the first. The exigencies of daily court room life are such that reasons for judgment will always be capable of having been better expressed. This is particularly true of an unreserved judgment such as the judge gave in this case but also of a reserved judgment based upon notes, such as was given by the District Judge. These reasons should be read on the assumption that, unless he has demonstrated the contrary, the judge knew how he should perform his functions and which matters he should take into account. This is particularly true when the matters in question are so well known as those specified in s.25(2). An appellate court should resist the temptation to subvert the principle that they should not substitute their own discretion for that of the judge by a narrow textual analysis which enables them to claim that he misdirected himself. The reason why I have taken some time to deal with the Court of Appeal's assertion that the judge did not realise that she was entitled to exercise her own discretion is that I think it illustrates the dangers of this approach. The same is true of the claim that the District Judge "wholly failed" to carry out the statutory exercise of ascertaining the husband's needs.

Thirdly, the exercise of the discretion under s.24 in accordance with s.25 requires the court to weigh up a large number of different considerations. The Act does not, as I have said, lay down any hierarchy. It is one of the functions of the Court of Appeal, in appropriate cases, to lay down general guidelines on the relative weights to be given to various factors in different circumstances. M v B (Ancillary Proceedings: Lump Sum) [1998] 1 FLR 53, [1998] 1 FCR 213 emphasising the importance of providing the father of small children in the care of his divorced wife with accommodation in which he can receive them, is a good example of such a case. These guidelines, not expressly stated by Parliament, are derived by the courts from values about family life which it considers would be widely accepted in the community. But there are many cases which involve value judgments on which there are no such generally held views. The present case is a good example. Which should be given priority? The wife's desire to continue to live in the matrimonial home where she can conveniently carry on her business and accommodate her sons, or the husband's desire to return to England and establish himself here securely with his new family? In answering that question, what weight should be given to the history of the marriage and the respective contributions of the parties to the family assets? These are value judgments on which reasonable people may differ. Since judges are also people, this means that some degree of diversity in their application of values is inevitable and, within limits, an acceptable price to pay for the flexibility of the discretion conferred by the Act of 1973. The appellate court must be willing to permit a degree of pluralism in these matters…'.

Ultimately, the present problems posed by pre-nuptial agreements may be thought to affect quite a small minority of wealthy or potentially wealthy married couples. The width of the section 25 exercise ought, it is submitted, to be sufficient to cater for these matters without adopting some artificial route such as 'magnetic factors' or the 'presumptively dispositive', or a wholesale change of the law, any of which will result in a far wider application of the pre-nup to most marriages at an even greater cost to the hapless parties.

______________________________

1 Radmacher v Granatino [2009] EWCA Civ 649; sub nom NG v KR [2008] EWHC 1532 (Fam);
2 Consultation paper due to be published in mid 2010 examining status and enforceability of such agreements;
3 At the time of signing, an investment banker earning c £120k pa;
4 Thorpe LJ in Radmacher's case, see paras 2 to 11 of the judgment;
5 '35 In the Board's view the difficult issue of the validity and effect of ante-nuptial agreements is more appropriate to legislative rather than judicial development … (see Baroness Hale in Macleod v Macleod [2008] UKPC 64);
6 see e.g Wilson LJ in Radmacher's case;
7 see Baroness Hale in Macleod's case.
8 N v N (Jurisdiction: Pre-Nuptial Agreement) [1999] 2 FLR 745 at 752.
9 per Wilson LJ in Radmacher v Granatino
10 Supporting Families (Stationery Office, October 1998).
11 see Crossley v Crossley [2007] EWCA 1491