Pre-Nuptial Agreements – The Cracks in Radmacher – Are the Courts nibbling away at Pre-Nuptials from both ends?

Divorce & Matrimonial Finance

23 May 2019

The very recent decision of Mostyn J in Ipekci v McConnell [2019] EWFC 19 illustrates the fragility of Pre-Nuptial Agreements (“PNAs” hereafter) from one end (vitiation) and the same case and other recent decisions do so from the other end (the extent to which they bind the court even if valid).

These two ends of the PNA equation are of course founded on the Radmacher [2010] 2 FLR 1900 principles, which effectively divide up into firstly, the circumstances into which the PNA was entered into and whether they vitiate the agreement from the start (procedural fairness) and secondly, whether, even if it is valid, the agreement is fair (substantive fairness).

Procedural Fairness

Radmacher itself emphasises that the parties must have entered into the PNA “of their own free will, without undue influence or pressure, and informed of its implications” [68] so that:

“The first question will be whether any of the standard vitiating factors, duress, fraud or misrepresentation, is present …….. those factors will negate any effect the agreement might otherwise have. But   unconscionable conduct such as undue pressure (falling short of duress) will also be likely to eliminate the weight to be attached to the agreement, and other unworthy conduct, such as exploitation of a dominant position to secure an unfair advantage, would reduce or eliminate it” [71].

Whilst one might have thought that “informed of its implications” meant with full and independent legal advice, the Supreme Court appeared to shy away from that somewhat in implying that something less amounting to a general being “aware of the implications” [69] was sufficient. However, in Kremen v Agrest [2012] EWHC 45 (fam) Mostyn J, having summarised Radmacher, went on to say:

 “It seems to me that it will only be in an unusual case where it can be said that, absent independent legal advice and full disclosure, a party can be taken to have freely entered into a marital agreement with a full appreciation of its implications. After all, almost every common law country that has legislated in this field has as a key pre-condition these requirements ….. It would surely have to be shown that the spouse, like Mr Granatino [the husband in Radmacher] had a high degree of financial and legal sophistication in order to have a full appreciation of what legal rights he or she is signing away.”

And, in Ipekci v McConnell (above) His Lordship rejected a PNA partly because, although the husband had had legal advice, the lawyer that he saw had previously acted for the wife and was not competent in the relevant area of law.

Substantive Fairness

Luckwell v Limata [2014] EWHC 502 (Fam), 2 FLR 168, is particularly interesting for its emphasis on sexual equality:

“The court must be scrupulous to avoid gender discrimination or gender bias ….. there must be no discrimination or bias based on gender alone, nor on any stereotypical view that a wife may be dependent upon her husband but not vice versa.” [132].

But, as per Jane Carter’s earlier article on this website, the Court of Appeal’s decision in Brack v Brack [2018] EWCA Civ 2862 is particularly significant. In fact this decision applies a fairly heavy break to the first instance decisions (including Luckwell above) that were seemingly speeding towards saying that a valid PNA can only be circumvented by a needs case. The Brack decision rejects that as the determinative principle and brings back in to the arena the principle of fairness in the round and all the S.25 factors and, thus leaves open arguments of compensation and fairness. What was also worrying about the earlier cases was that they came very close to not only embracing needs as the only argument left in respect of a valid PNA but also to confining it to what in Radmacher had been described as a “predicament of real need” as a further limiting factor. However in Ipekci v McConnell (above) Mostyn J also provides a rather pithy and irresistible analysis of that phrase:

“I do not take the language used by the Supreme Court, namely “predicament of real need” as signifying that needs when assessed in circumstances where there is a valid prenuptial agreement in play should be markedly less than needs assessed in ordinary circumstances. If you have reasonable needs which you cannot meet from your own resources, then you are in a predicament. Those needs are real needs.” [27 (iv)]

No one is suggesting that PNAs are in the descendent in judicial popularity overall but, there are cracks appearing that were not previously evident.

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