On 27th February 2014, the Law Commission in England and Wales published a Report which considered, amongst other things, whether nuptial agreements should be legally binding in England and Wales. The Report recommends that provided a Nuptial Agreement meets certain conditions, it should be legally binding. The present position in England and Wales is that, as a result of developing case law, Pre Nuptial Agreements are much more likely to be taken into account, provided that it would not be unfair to do so. However, there is no certainty or guidance – the question of to what extent spouses should be held to an Agreement they entered into is looked at on a case by case basis and is wholly within the discretion of Court. We will have to wait and see whether the Law Commission recommendations for"Qualifying Nuptial Agreements" to be binding are incorporated into legislation in England and Wales in due course. This does, however, raise the question of where we stand in Scotland.
In Scotland, Pre Nuptial Agreements have never been fully tested under our current legislation. However, it is widely accepted that the reason these Agreements have not been fully tested by a Scottish Court is because it is more or less universally accepted that a properly prepared and executed Pre Nuptial Agreement will be legally binding in Scotland.
The reason for such certainty is that our legislation specifically provides that any Agreement entered into between two parties to a marriage in respect of financial provision of divorce will be legally binding unless it can be established, in the context of a divorce action, that the Agreement was unfair and unreasonable at the time it was entered into. Whilst the questions of fairness and reasonableness have largely been explored in case law relating to Separation Agreements, the same principles apply to Nuptial Agreements.
Under the Law Commission proposals, a"qualifying Nuptial Agreement" must meet certain criteria, including meeting the needs of the financially weaker spouse. In Scotland, in testing whether a Pre Nuptial Agreement should or should not be upheld the Court would inevitably require to consider what the financial outcome for the parties might have been were the Pre Nuptial Agreement not in place. However, it has been established in case law that the fact that an Agreement produces an unfair result will not, of itself, make an Agreement unfair or unreasonable.
The most important consideration for a Court in Scotland would be the circumstances surrounding the Nuptial Agreement being entered into. The Law Commission proposals look to attach certain conditions to Pre Nuptial Agreements being legally binding in England and Wales. This would include that they were entered into at least 28 days before a marriage, that there was full disclosure and that each party was independently advised. In Scotland, there are no hard and fast rules.
Provided therefore that the parties to any Pre Nuptial Agreement have been given ample opportunity to consider the implications of signing the Agreement (an Agreement presented to the bride on the night before her wedding would be unlikely to be enforceable!), and provided that each party understood what they were doing in signing an Agreement, then an Agreement will in all likelihood be legally binding irrespective of its effect. If both parties have had the opportunity to take independent legal advice and no important information has been withheld, it would be difficult, if not impossible, to set aside a Pre Nuptial Agreement.
For clients solely based in Scotland, the Law Commission proposals will not impact now, or in due course, on the enforceability of Pre Nuptial Agreements in Scotland. However, for those clients who divide their time both north and south of the border, the Law Commission's proposals, if effected, will provide much greater certainty on the circumstances in which a Pre Nuptial Agreement will be legally binding in England and Wales, and will provide at least an increased degree of consistency between the two jurisdictions.
If you would like any information regarding the preparation of a Pre Nuptial or Post Nuptial Agreement please contact any member of the Family Law Team who would be happy to assist.