NUPTIAL AGREEMENTS Vicky de Sanna Avvocato e Solicitor

NUPTIAL AGREEMENTS Vicky de Sanna Avvocato e Solicitor

NUPTIAL AGREEMENTS Vicky de Sanna Avvocato e Solicitor of England & Wales 10 New Square, Lincolns Inn, London WC2A 3QG t: +44 (0)20 7465 4300 f: +44 (0)20 7465 4400 [email protected] Nuptial Agreements

Pre-Nuptial Post-Nuptial In the UK there is NO STATUTORY LAW IN RELATION TO NUPTIAL AGREEMENTS and there is NO CHOICE OF MATRIMONIAL REGIME WHEN PEOPLE MARRY. However, there is considerable case law Spouses to be can either decide to be left to the wide discretion of the court, with the inevitable result that both parties will share what has been accrued during the marriage, or, if they wish to limit the Courts discretion, they have no option but to consider a pre-nuptial agreement (PNA)

Capital only, being equivalent to the choice of a matrimonial regime Pre-Nuptial Agreements (PNA) or Capital and Income No agreement between the parties can override the legislation or oust the Judges discretion to decide on the

appropriate division of assets on a divorce. This means a PNA cannot stop a spouse applying to the Court for financial provision from the other spouse. Any waiver of the right to apply to Court for financial provision in an agreement will not be effective. The law relating to pre-nuptial agreements has developed following the Supreme Court decision in Radmacher v Granatino in October 2010. While PNAs are not currently legally binding, the significance of a PNA is as a relevant circumstance of the case to be weighed by the Judge. The Supreme Court in Radmacher said that the Court should give effect to a nuptial agreement that is fairly 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. This is what is referred to as the THREE STAGE TEST.

1. Agreement must be fairly entered into This means both parties must enter into the agreement of their own free will, without any pressure from each other or any third party. The agreement may not be upheld if the Court finds any evidence of mistake, duress, undue influence, misrepresentation or unconscionable conduct, such as the exploitation of a dominant position to secure an unfair advantage. Both parties should feel they are on equal footing and freely able to negotiate the terms of the PNA with one another. This is why they both engage separate solicitors. Both parties should negotiate the terms of the PNA as far in advance of the wedding date as possible to afford them sufficient time to consider the terms and receive legal advice as to the effect of those terms. This eliminates last minute pressure as the wedding day approaches. The Court will take into account individual circumstances such as a partys emotional state at the time of making the agreement and factors such as age and maturity and previous experience of long terms relationship. Such circumstances may inform what pressures a party felt under to sign the agreement. If a Court considers the parties entering into a PNA are mature, with a wealth of life experience

and knowledgeable in relation to financial matters, this will enhance the weight to be attributed to the agreement. So too may a partys nationality if that party originates from a country where there is a culture of entering into PNAs. The Court may also consider whether the marriage would have gone ahead in the absence of a PNA: if a party would have refused to proceed with the wedding, that will reinforce its weight. 2. Parties must have a full appreciation of the implications of the Agreement Both parties should be in possession of all the information material to their decision to sign the PNA before signing it, so that they fully understand the implications of the agreement. To assist the parties in fully understanding the implications of the PNA. The Court will consider whether both parties have received independent legal advice. Both parties will each provide financial disclosure to be included in the PNA, setting out their assets and income. So that the parties have a context in which to negotiate the terms of the PNA. Both parties should intend the PNA to determine the financial consequences of any future

breakdown of the marriage. 3. It must be fair to hold the parties to the agreement in the circumstances prevailing There is nothing inherently unfair about a PNA that seeks to ring fence non-matrimonial property. Which comprises of property owned by one party before the marriage, or assets a party receives from a third party during the marriage, through lifetime gift or inheritance. The Supreme Court Judgement sanctions the use of a PNA to shield family wealth and assets acquired before the marriage. The longer a marriage lasts following a PNA being signed, the greater the chance it may not be fair to hold the parties to its term because of unforeseen changes in circumstances. This is more relevant where significant assets have already been accrued before the marriage. However, significant changes in circumstances may occur shortly after signing the PNA (by way of example only, the birth of a child or bankruptcy). If the effect of the PNA would be leaving one party with less than his or her needs, while the other party is comfortably provided for, this is likely to be unfair. There is argument as what is meant by needs in this instance. Does the word needs mean being

able to maintain a standard of living not too dissimilar from that enjoyed during the marriage being left in a predicament of real need i.e. having to rely on state benefits which would be unfair? Not a unique view on this. If needs are adequately covered in the provision offered in the PNA, then further sharing of the assets may be prohibited. This limits a spouses ability to claim an interest in non-matrimonial property, such as inheritances, gifts and property owned by the other spouse before the marriage. The autonomy of adults should be respected: it is paternalistic and patronising to override the terms of an agreement simply on the basis that the Court knows best. However, a PNA cannot prejudice the reasonable requirements for children of the family THEN, IS IT BETTER TO BE MARRIED WITH LIMITED CLAIMS OR NOT MARRIED?? Effects of the Supreme Court Test

As English law currently stands, it might be said that PNAs are almost as good as binding, provided they are fundamentally fair. However, as emphasised above, even if a PNA is given decisive weight, the Court still has the power to make financial awards on divorce and a PNA will be only one of the factors considered when the Court is exercising its discretion to deal with parties finances. The Courts duty to go through the s.25 factors discussed above includes the duty to consider if a significant change in circumstances has also invalidated the agreement, such as a if party develops a significant or life-changing illness which requires extensive financial support. The parties should, however, expect to be held to its terms and assume the PNA will pass the three stage test. POST-NUPTIAL AGREEMENTS A post-nuptial agreement is a legal agreement made between individuals who are already married. It usually sets out how the couple wish their assets to be divided between them if they later separate

or divorce. Some post-nuptial agreements also detail how the couple currently arrange their finances and how this will continue or change during the marriage. Before 2010 (Radmacher v Granatino), it was thought that post-nuptial agreements were more likely to be upheld by the court. In some cases post-nuptial agreements were made to reconfirm terms of the pre-nuptial agreement during the marriage. However, the Supreme Court has now clarified that there is no difference in the legal status of prenuptial agreements and post-nuptial agreements. Duress and Undue influence IF YOU DONT SIGN THIS, I WILL NOT MARRY YOU! DURESS What does this mean?

In Hopkins v Hopkins [2015] EWHC 812 (Fam), the wife challenged the post-nuptial agreement, alleging it had been vitiated due to duress, undue pressure, or exploitation of a dominant position to secure an unfair advantage. The husband acknowledged in two letters that he had been "bullying" towards her. However, when read in the context of other letters he had written around the same time, it was evident that he was not always in control of the relationship. The wife alleged one incident of physically threatening behaviour, which the husband denied. The evidence was inconclusive, but it was clear that whatever had happened, it had not affected the wife's ability to think independently. The High Court found that the wife was not operating under any duress or improper pressure when she entered the post-nuptial agreement. Significant emphasis was placed on the fact that she had received a substantial amount of matrimonial advice over a significant time period before signing the agreement and the evidence pointed to her understanding the implications of the advice. While that case involved a post-nuptial agreement, similar considerations apply to parties entering into a pre-nuptial agreement.

UNDUE INFLUENCE what does this mean? In NA v MA [2006] EWHC 2900 (Fam), a post-nuptial agreement failed because the husband gave the wife an ultimatum: sign the agreement or end the marriage. This, combined with his bullying behaviour towards her over a number of months, resulted in the agreement being completely disregarded. Can a pre-nuptial agreement could potentially fail if a similar ultimatum is given: sign the pre-nuptial agreement in these terms or cancel the wedding. Much will depend on the circumstances of the case: in KA v MA [2018] EWHC 499 (Fam), the Judge emphasised that such an ultimatum will not necessarily amount to improper pressure. The circumstances surrounding the signing of the nuptial agreement and the nature of the couple's personal relationship are key. In KA v MA, the parties were mature and had both been married previously. The wife had an established career when she met the husband and was financially independent and by the time of their engagement, they had been cohabiting for four years and had a child together. The wife understood throughout their relationship that the husband did not wish to marry and when, following the birth of their child, the wife grew

more insistent in her desire to marry, the husband made it clear he would not do so without a pre-nuptial agreement. THE IMPORTANT THING IS TO HANDLE IT IN THE BEST WAY International consideration International issues often arise in cases involving nuptial agreements. In Radmacher, the Supreme Court explained that the English court will apply English law when exercising its jurisdiction to make an order for financial remedy irrespective of the domicile of the parties or any foreign connection. The fact that the parties were nationals of France and Germany, executed a German prenuptial agreement and included a clause in the agreement stating that German law should govern their matrimonial property in the future, did not prevent the

English court from dealing with the parties' finances on the breakdown of their marriage. These facts were, however, relevant in demonstrating that the couple intended the agreement should, if possible, be binding on them. Jurisdiction clauses A jurisdiction clause should be included in a nuptial agreement if the parties want any disputes arising under the nuptial agreement to be determined by the courts of a particular country. However, their effect is unclear. On one view, they have no binding effect, particularly if there is a competing jurisdiction within the EU under Regulation (EC) No 2201/2003 Jurisdiction clauses remain popular because parties who want the English court to have jurisdiction in any future proceedings are not disadvantaged by including a jurisdiction clause in favour of England and Wales. Equally, parties may wish to have a jurisdiction clause in favour of a jurisdiction in which the nuptial agreement is likely to be

binding for reasons of certainty. Whether such a clause will lead to the nuptial agreement being enforced in that other jurisdiction may depend on whether the divorce actually takes place in that jurisdiction and whether there is a choice of court clause that complies with article 4 of the EU Maintenance Regulation. Brussels II Jurisdiction Jurisdiction clauses clauses Maintenance Regulation In Jefferson v O'Connor [2014] EWCA Civ 38, the Court of Appeal held that Article 19 of Brussels II Revised (lis pendens)

cannot be overridden by parties to divorce proceedings selecting a jurisdiction in an agreement. The parties had signed an agreement providing that the wife would abandon her English divorce proceedings and submit the divorce to the Spanish jurisdiction. The Court of Appeal held that the agreement did not estop her from arguing that the English proceedings remained extant as the English court was first seized under Brussels II Revised. If there is a competing jurisdiction that is not an EU member state, a jurisdiction clause may carry more weight, as a party could apply to stay the proceedings on the basis of forum conveniens. In this case, the English court is likely to have regard to the jurisdiction clause, although what weight it will carry will depend on all the circumstances of the case (including the connection the parties have with the relevant jurisdictions and the location of the assets). In Mantegazza v Mantegazza [2017] EWHC 3811 (Fam), the judge listed 11 factors that convinced him that Switzerland was the more appropriate jurisdiction to hear the divorce and ancillary financial proceedings: the existence of the pre-nuptial agreement executed in Switzerland; its jurisdiction clause and its choice of law clause in favour of Switzerland

were listed as the first three factors. Jurisdiction clauses and maintenance It is not clear what effect a general jurisdiction clause has in relation to "maintenance", in the light of art 4 of Regulation (EC) No 4/2009. In DB v PB [2016] EWHC 3431 (Fam), the parties, both Swedish nationals, signed pre-nuptial agreements containing a choice of court clause complying with article 4, conferring exclusive jurisdiction on the City Court of Stockholm. Following the breakdown of the marriage, the wife issued proceedings first in time in England, before the husband issued proceedings in Sweden. The Court found that the agreements were valid, with no vitiating factors, but the terms were unfair given the length of the marriage and the existence of two children of the family. The choice of court clauses complying with article 4 excluded the English court's jurisdiction to make maintenance orders. The court's jurisdiction was confined to dealing with "rights in property arising out of a matrimonial relationship". The wife's maintenance claims were stayed to be

determined in Sweden. This meant her needs could not be assessed and the Court considered that the terms of the agreements precluded a sharing order from being made. DB v PB illustrates that where divorce and ancillary financial proceedings are started in a different jurisdiction to that selected in the choice of court clause, the elements of the financial claim involving "maintenance" (within the meaning of the EU Maintenance Regulation) are likely to be stayed, perhaps years later, when their circumstances may have changed significantly, even if another jurisdiction with which they are both more closely connected is dealing with the divorce and other financial claims. Will a choice of law clause be binding? However a choice of law clause will not necessarily be effective especially if not a choice of law under article 4 of Maintenance Regulation. In Radmacher v Granatino [2010] UKSC 42, The Supreme Court said that the choice of law clause did not bind the English court and despite the international nature of the couple

and the agreement, which was binding under German law, the issues in the case were governed exclusively by English law. Will the court treat foreign nuptial agreements differently from English nuptial agreements? The legal status of a nuptial agreement in England and Wales is the same whether the agreement is made in England or in a foreign jurisdiction, as the English court will apply English law, irrespective of any foreign connection. What is less certain is whether the English court will give different weight to an agreement made in a jurisdiction other than England. If an English agreement was made after Radmacher, there should be no difference in the weight accorded to it and a foreign nuptial agreement. The relevance of the agreement being made in a jurisdiction where nuptial agreements are binding

is as an indicator that the parties intended it to be binding in any future divorce or financial proceedings. The post 2010 case law was for a while that for a foreign nuptial agreement to carry weight, the parties must intend it to apply wherever they might be divorced, including a jurisdiction operating a system of discretionary equitable distribution and will "usually" need to have received legal advice to that effect. In Versteegh v Versteegh [2018] EWCA Civ 1050, the Court of Appeal (B v S) reversed the position and emphasised that where there is a simply drafted nuptial agreement signed in a country where nuptial agreements are commonplace, generally signed without legal advice (or disclosure), the court should not infer that a spouse will not understand the agreement's implications without legal advice explaining that during their marriage, they may live somewhere that operates a discretionary system. A nuptial agreement is part of their marriage, metaphorically taken with them wherever they go, reflecting their autonomous decision to govern their affairs in a certain way.

It would be unrealistic to expect a couple to take legal advice "just in case" they move to England or Wales, or to have to "refresh" their nuptial agreement by receiving legal advice before relocating. Just before Versteegh v Versteegh, in XW v XH [2017] EWFC 76, the Court expressed its agreement with the case of B v S: A full appreciation of the implications of a nuptial agreement will, in almost every case, involve both parties understanding the nature and effect of its terms and how its implementation in another jurisdiction may affect the scope of any legal award or remedy which otherwise would be available to a party on divorce. While there may be a difference in judicial opinion about what the extent of a spouse's understanding about the legal implications of a foreign nuptial agreement should be before that agreement is given decisive weight, clearly the circumstances in which the agreement is made are highly relevant. In XW v XH, the wife spoke little Italian, the wedding ceremony was conducted in Italian and she signed her agreement

to the Italian separazione dei beni, during the wedding ceremony, without legal advice, based on the husband's translation. The three Italian law experts had differing opinions as to whether the election of the Italian separazione dei beni contained an express or implied term that property relations between the parties would be governed by Italian law. By contrast, in Versteegh, both parties were Swedish and there was evidence that the wife had understood the implications of the Swedish pre-nuptial agreement when she signed it and had acted to ameliorate its effect during the marriage. CONTEXT IS KEY EVOLVING LAW The Law Commission began a project in October 2009 to examine the status and enforceability of pre-nuptial and post-nuptial agreements.

In January 2011, the Law Commission published a consultation paper discussing whether these agreements should be legally binding subject to certain safeguards and formation. In February 2012, the Commission extended its project to consider reform of the law relating to needs and the legal status of non-matrimonial property. In September 2012, a supplementary consultation paper was published. The Commission published the final report in its Matrimonial Property, Needs and Agreements project on 27 February 2014, together with a draft nuptial agreements bill (Nuptial Agreements Bill). The report recommends the introduction of qualifying nuptial agreements that will limit the court's powers to make financial orders on divorce or dissolution. In its final report, the Law Commission proposes that in the future, a nuptial agreement should be legally binding if it meets both parties' financial needs and those of any child of the family and complies with the following criteria: Is contractually valid Is validly executed as a deed and contains a "relevant statement" .

Was not made within the 28 days immediately before the wedding or civil partnership ceremony. That both parties receive material financial disclosure from the other party before entering the agreement. That both parties receive independent legal advice at the time they entered the agreement. Agreements that are not qualifying nuptial agreements will continue to be treated as a "relevant factor" The extent to which the Law Commission proposals may become the law is currently unclear. The government's final response to the Law Commission's proposals will now await the next Parliament. BREXIT? While the consequences of Brexit are currently unknown, there may be future changes to the law that could affect a nuptial agreement purporting compliance with article 4 of the EU Maintenance

Regulation. The government's current stated intention is to convert all directly applicable EU law into UK law. It may be, then, that a choice of court clause within a nuptial agreement complying with article 4 would be upheld by an English court following Brexit, but it is far from clear how an EU member state would deal with a jurisdiction that is no longer an EU member state staying its proceedings and remitting the case there for determination on aspects relating to maintenance in purported compliance with article 4. DISCLAIMER Payne Hicks Beach is a partnership authorised and regulated by the Solicitors' Regulation Authority (number 59098). Its main office is at 10 New Square, Lincoln's Inn, London WC2A 3QG and a list of the partners may be inspected there. The contents of this document (and any related slides and presentations) are the copyright of

Payne Hicks Beach. All the rights are reserved. The purpose of this document is to set out general advice and comments, and therefore specific legal advice must be taken before reliance is placed upon it in any particular circumstances. Where hyperlinks are provided to third party websites, Payne Hicks Beach is not responsible for the content of such sites. To the extent information and opinions contained in this presentation have been obtained from public sources, these are believed to be reliable, but no representation, warranty or undertaking, expressed or implied, is made or given whether such information is accurate, reasonable, authentic, valid or complete and it should not be relied upon as such. Payne Hicks Beach accepts no liability or responsibility for any direct or consequential loss arising from any use of the material contained in this presentation. It may not be passed on to any third party and no representation on behalf of Payne Hicks Beach may be made in relation to such onward transmission. Nothing in this documentation may be contained in any presentation or other documentation produced by any other party without the prior written consent of Payne Hicks


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