By Ellen Crofts, Trainee Solicitor
“Judges say they will ignore pre-nups unless couple are rich” is one of the recent headlines in response to the Family Justice Council’s publication of their new guide for litigants called “Sorting out Finances on Divorce”.
The guide claims that for parties in England and Wales, despite Prenuptial Agreements having become increasingly prominent, for most people they will not be relevant on divorce. This headline does not reflect the position in Scotland and greatly over simplifies the English position.
In Scotland, despite the enforceability of a Prenuptial Agreement never being tested in the Courts, they are universally regarded as legally binding on the parties. This is due to Scottish legislation specifically providing 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 that the Agreement was unfair and unreasonable at the time it was entered into. The main tests to determine whether an Agreement is “fair and reasonable” do not relate to the implications of the Prenuptial Agreement; rather the test focuses on the point at which the Agreement was entered into and whether the parties had ample time to consider and understand the terms of the Agreement and whether they received independent legal advice on the terms of the Agreement. Scots law has traditionally empowered parties of sound mind to freely enter into legally binding contracts.
In recent years in England Prenuptial Agreements have been given decisive and compelling weight, unless it can be shown in the circumstances it would not be fair to hold the parties to the Agreement. The fundamental difference between the jurisdictions is that, in England, the concept of ‘fairness’ can also apply to the end result even if a Prenuptial Agreement is upheld as being fair at the time it was entered into. The English Courts seem unlikely to uphold Agreements that would prejudice the reasonable requirements of any child of the family, or indeed unforeseen changes in the circumstances since the Prenuptial Agreement was signed. In a Report published by the English Law Commission in 2014, they recommended that for a Prenuptial Agreement to be held as legally binding and a "qualifying Nuptial Agreement" it must meet certain criteria, including meeting the needs of the financially weaker spouse. It is this point which the recent Family Justice Council’s publication seems to turn on its head. Instead of using the parties Prenuptial Agreement as the starting point for the division of assets, they state that it is only once the needs of the parties have been met, that the Prenuptial Agreement should be referred to in order to divide the surplus funds remaining. However, in recent case law in England, the Courts had begun to give more weight to Prenuptial Agreements, taking the approach of firstly looking at the Prenuptial Agreement and deciding whether it meets the needs of the parties and dividing the assets in accordance with it. If an Agreement fails to meet the party’s needs, only then should the judiciary step in and exercise its discretion in dividing the assets.
In Scotland, in testing whether a Prenuptial 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 Prenuptial 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.
For clients solely based in Scotland, the Family Justice Council position has no bearing on the legal position; nor does it give a full unbiased view of the English position, particularly following the case of Radmacher. The position in Scotland remains clear and is unchanged by this publication – we are confident that Prenuptial agreements are binding and will be upheld, save in the most extreme of circumstances. Prenuptial Agreements are factors which the court must, in either jurisdiction, at the very least consider when determining financial provision on divorce. Prenuptial Agreements empower couples with autonomy and can form an important part of an overall package of asset protection measures, whilst also making the financial outcome on separation much more predictable.
If you would like more information on prenuptial agreements or any other services we provide, please contact a member of the family law team on 0131 228 8111 or at FamilyLawTeam@turcanconnell.com.