Should a prenuptial agreement be available as an alternative to the judicial discretion? By Ellia Myrmidoni

Among foreign jurists, some allege that the English law in ancillary relief is defective as it is disqualified to the modern idea of marriage as a partnership.[1] In English law, ancillary relief procedure is governed mostly by Part II of the Matrimonial Causes Act 1973 (MCA 1973), in particular ss.23, 24 and 25, and Schedule 5 of the Civil Partnership Act 2004. In spite of the terms of the legislation, an important factor is the judicial discretion which prevails on the way the powers of financial orders should be exercised. Many couples nowadays, arrange their financial disputes from the divorce by consulting a lawyer, others without getting any legal advice and some others resort to the court. Nevertheless, there are few couples that make provision before marriage and both agree the form on how their assets should be divided in case of divorce or dissolution.[2] This formation of private arrangements is called prenuptial agreements (pre-nups). Historically, pre-nups make no difference in the discretionary style of English law on ancillary relief[3] as the case law was usually, but not always, negative towards them. The main objection to the implementation of the pre-nups is that they are thought to be contrary to public policy.[4] The decision of the Supreme Court in the case of Katrin Radmacher v Nicolas Granatino [5] was a progressive one in English law’s attitude to marriage agreements.[6] After Radmacher, things changed as it was the first time that the Supreme Court made a judgement on pre-nups and also gave effect to it. However, this decision has not brought a change to the current legislation; it was only a judicial decision.

The predominant s.25 of Matrimonial Causes Act defines that the court must have regard to all the circumstances of a case, including any relevant change of the circumstances and the first consideration of the court should be for the welfare of minor children of the family.[7] The court, using all the exercisable powers, is aimed to procreate a perfect result for the parties and their children. Three principles were derived from Miller v Miller; McFarlane v McFarlane[8], which the courts are using to support the ‘fair’ result: needs, compensation and equal sharing.

Beyond the statutory powers of the MCA, there is also the element of judicial discretion which is regarded as one of the strengths of English Family Law.[9] Lord Denning in Hanlon v Law Society[10] defined judicial discretion as like the court is taking the rights and obligations of the parties and puts them all together in a bag; then the court takes them out and splits the ‘pieces’ to the two parties.  Judges need to analyse each causes, look through their relationship and see whether they can assume it of ‘magnetic importance’.[11] Still, the discretion of the court and the provisions of the statute must be kept in mind.[12] In reality, it is simply impossible to eradicate the jurisdiction of the court.[13] Apparently, with judicial discretion, judges can widen their powers and not only stuck on the statutory powers, but on the other hand, with a wide ambit, judges might break away from the statute and legislate instead of interpret law.

Nowadays, there is an increasing interest in private arrangements; but in English law there is no sympathy towards private ordering and this can be attributed to the English legal approach to such contracts.[14] There are prejudices that pre-nups contradict with the traditional idea of couple as being a unity and therefore such contracts are thought to motivate divorce rather than marriage.

The considerable principle here is that of Hyman v Hyman[15]which defines that parties cannot oust the jurisdiction of the matrimonial courts by agreement; therefore the court can decide with its discretion what is the ‘fair’ outcome of a situation and the contract cannot deter the court from this discretion. The court and judges had this prejudice for the pre-nups because of the public policy motif. Wall J in N v N[16] noted that, as pre-nups are considered with what the parties will do in occasion of a divorce, there are contrary to public policy because they undermine the idea of life-long marriage. Subsequently, the court bears the agreement but s.25 more.

Although pre-nups were void in reality, lately they were not completely ignored. Despite of the progress on the issue of pre-nups, and that the judges seem to be more sympathise with them, the public policy objection was still there.

Radmacher is a recent case on pre-nups. Ms Radmacher and Mr Granatino signed a pre-nup in Germany which barred Mr Granatino from bringing any claim for financial provision on divorce and made no alternative provision for him.[17] Firstly, the High Court disregarded the agreement and awarded Granatino £5.5m. Afterwards, the Court of Appeal decided that it should be given decisive weight to agreements freely entered by the parties. The judges took the view that such a law is too old for nowadays and simply ignores the rights of marriageable adults.  Lastly, the Supreme Court ruled in favour of the pre-nup for the first time, meaning that Granatino should get only the supply for him as a father and not for his own needs.[18] The principle of the case, per Lord Philips, was: “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”.[19] It was noted that, there are no reasons anymore to render a pre-nup void in terms of conflict with public policy and that, the court has the power to decide what the effect of the agreement would be. The most important incentive that has led the court to decide in favour of the pre-nup was that of the autonomy; to reach a ‘fair’ outcome, there must be respect to the autonomy of the parties, to their choices as adults and to their wants in their marriage.[20]

Baroness Hale had a dissenting opinion; she insisted on the position that pre-nups are contrary to public policy and re-emphasised the distinction between post-nuptials and pre-nups. Furthermore, she added that there is public interest in the idea of marriage and to the need to make couples have in mind the welfare of their families. In addition, Baroness Hale noted that it is difficult for someone to foresee what the future of a couple would be, and even more difficult to foresee what the fair outcome for the financial provisions of a couple should be.[21] She was concerned also for the too much autonomy that was given to the parties as this would undermine the traditional idea of marriage.[22]

Why was Radmacher important? Hannah Reid said: “Because people will have the ability to protect their assets, we might even see an increase in marriage”.[23] We can argue that Radmacher was important since it made a clear departure from previous case law, it gave a clear sign for respect of autonomy and also it had international dimension. The Court of Appeal held that, in fact, independent legal advice and full disclosure are not necessary for giving effect to an agreement.[24] Another change was that the public policy against pre-nups should not exist because of its obsolete nature, and pre-nups and post-nuptials must be decided on the same way. At last, after Radmacher we can observe that the provisions’ basis is more likely to be based on compensation and/or needs rather than on equal sharing.

There are many agreements for and against pre-nups. On the one hand, such an agreement was seen objectionable to the fundamental notion of marriage, and to the need of couples to stay together, because it encourages couples to not get marry and not live together. Indeed, pre-nups are not romantic, they are a form of contract that the couples must go through it before the marriage and that makes them become concern about it, as with these negotiations they will face the ‘bad face’ of marriage before even happens. In addition, all these settlements and modern contracts prior something will make us loose the moral value of promise.[25]

On the other hand, pre-nups are in favour of the parties’ autonomy because they let parties to decide how their marriage would be and make their own conditions in respect of their financial assets. Additionally, pre-nups transmit that court should be the last resort in terms of a divorce or separation; parties should unbind their matters on their own and therefore avoid the expensive and slow proceedings of a court. Margaret Hatwood in the case of Madonna’s divorce said: “They have undoubtedly saved much money in legal costs and have not had to suffer the sort of public scrutiny that the McCartneys went through”.[26] Pre-nups help the parties protect themselves and their property, reduce future disputes between them and save them money in case of divorce and moreover, not only support the communication of the couple for their matters, but also they can improve their relationship status in general.

Assessing all the above, Radmacher cannot be seen as a fundamental departure from the previous development, that decisive weight must be given to pre-nups in accordance with the s.25 discretion. The fundamental departure must be done by the Parliament, as judges can only follow what the legislation predicts. Parkman in 1998-1999 stated that: “The most important change from current statutes should be a more systematic recognition of the effect of marriage on the parties’ income-earning capacities”. However, any statutory development needs to implement the right safeguards to protect the spouses. Lastly, many countries have endorsed pre-nups in their law, therefore it is time for English law to enforce prenuptial agreements and not been ‘isolated’ on issues like that.

BY:Ellia Myrmidoni – Trainee Lawyer, Limassol, Cyprus, March 2015

Bibliography

Primary Sources:

Table of Cases

• Hanlon v Law Society [1981] AC 124, 146 (CA)
• Hyman v Hyman [1929] AC 601
• Katrin Radmacher v Nicolas Granatino [2010] UKSC 42
• McCartney v Mills McCartney [2008] EWHC 401, [301]
• Miller v Miller; McFarlane v McFarlane [2006] UKHL 24
• N v N [1999] 2 FCR 583

Table of Statutes

• Matrimonial Causes Act 1973 k
• Civil Partnership Act 2004

Secondary Sources:

Books

• Sonia Harris-Short and Joanna Miles, Family Law Text, Cases and Materials (Oxford, United States 2011)
• Frances Burton, Family Law (Gavendish Publishing Limited, Great Britain 2003)
• Antony W.Dnes & Robert Rowthorn, The Law and Economics of Marriage & Divorce (Cambridge, United Kingdom 2002)
• Rebecca Probert, Cretney and Probert’s Family Law (Sweet & Maxwell, London 2009)

Journals/Articles

• Joanna Miles, ‘Marriage and Divorce in the Supreme Court and the Law Commission: for Love or Money?’ (2011), Modern Law Review 74(3): 430-455
• Andrew Meehan, ‘Radmacher in the Supreme Court: What Does It Mean?’ (2010), Family Law Journal
• Sally Hamilton, ‘Prenup Business on Brink of a Boom’ (Wednesday 20 October 2010), on Guardian
• Jens M. Scherpe, ‘Pre-nups, private autonomy and paternalism’ (2010), Cambridge Law Journal
• Frances Gibb, ‘…while Richie is happy to pass up Madonna’s millions’, (Friday November 21 2008), The Times

Other Sources:

• Consultation Paper, Marital Property Agreements (2011)
• Resolution: A more Certain Future – Recognition for Pre Marital Agreements in England and in Wales (2004)