NEWSLETTER
MARCH 2009
MacLeod – the vaLidity and effect of post-nuptiaL agreeMents
After a brief respite the case of MacLeod v MacLeod [2008] UKPC 64 has placed pre and post nuptial agreements firmly back under the spotlight and led to renewed calls for legislation on the validity and effect of these agreements. Despite comment in the press to the contrary MacLeod did not review the position in respect of pre-nuptial agreements, which, as a matter of public policy, are still technically not “valid and enforceable”. They will, however, be taken into account by the Court and their persuasiveness will depend upon all the circumstances of the case at the time of the divorce but they are becoming increasingly influential. MacLeod instead concentrated on the validity and effect of post nuptial agreements, i.e. agreements signed after the marriage while the couple are still living together and dealing with their financial arrangements while together and often also in the event of a divorce.
T h e Fa c T s
The facts of the case (briefly) were that the husband and wife married in Florida on 14 February 1994 with a prenuptial agreement (which are enforceable in the State of Florida). By the time of the proceedings in 2005 they had five children and were living in the Isle of Man. They entered three agreements during the marriage, including the prenuptial agreement. The final one (and the subject of these proceedings) was signed in July 2002, shortly after which the marriage broke down. This agreement was signed following a lengthy period of negotiations (14 months) during which both parties had independent legal advice. The main area of disagreement between the parties was in respect of the issue of housing and whether the wife’s housing should be held in Trust and revert to the husband at a fixed point in time or whether it should be given outright to the wife.
T h e L aw
Whereas a pre-nuptial agreement is technically invalid for reasons of public policy, a post nuptial agreement comes within the definition of a “maintenance agreement” – a written agreement containing financial arrangements made during or after the dissolution/annulment of the marriage. These agreements are binding unless there is a reason for them to be void or unenforceable (e.g. purporting to restrict a right to apply to Court or to oust the Courts jurisdiction, misrepresentation, undue influence etc). This would therefore seem to suggest that all post nuptial agreements will be binding on the parties (subject to voidable/unenforceable provisions) and can provide certainty without the need for litigation in financial proceedings on divorce, something of a holy grail in the family law world!
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NEWSLETTER
MARCH 2009
As ever, however, with family law the Courts retain discretion and the final say because “maintenance agreements” are always subject to the Courts powers of variation. These can be used if there has been a change in circumstances (even if foreseen) or the agreement does not contain proper arrangements for the children of the family. This will determine the validity of the agreement in any financial application, as will any circumstances in which the agreement was made which might be relevant! The best example of such a circumstance is the exploitation of an unequal bargaining power. Although seemingly wide and uncertain it is not all doom and gloom.
concLusion
The upshot is that although post nuptial agreements are not binding as a matter of course the law has moved forward to the extent that there will need to be a good reason for such an agreement not to be upheld either in its entirety or excluding any void/unenforceable provisions or taking into account variations by the Court. As a result post nuptial agreements now provide more certainty than pre nuptial agreements although the extent of that certainty will still remain at the discretion of the Courts and just like pre-nuptial agreements, influenced by further passage of time pre divorce and significant changes in circumstances. It does, however, give those who wish to regulate their finances (as is increasingly the case in modern times) a better chance of doing so for better or for worse!
Per Baroness Hale at paragraph 42: “We must assume that each party to a properly negotiated agreement is a grown up and able to look after him or herself. At the same time we must be alive to the risk of unfair exploitation of superior strength. But the mere fact that the agreement is not what a Court would have done cannot be enough to have it set aside.”
In Macleod at the time of the 2002 post nuptial agreement the wife was fully aware of the husband's financial position and had had independent legal advice. In addition following the agreement the marriage broke down very quickly and therefore the position had not changed significantly from when the agreement was signed. The Court therefore felt (as in Crossley) that there was no good reason not to hold her to the agreement save in respect of provision for the children (which was not considered to be proper) and so they varied it to that extent.
This article offers general guidance only. It reflects the law as at March 2009. The circumstances of each case vary and this article should not be relied upon in place of specific legal advice.
For further information, please contact: Ann Northover on 020 7863 8533 or aenorthover@forsters.co.uk
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