Separation anxiety

Thursday, 01 May 2014
The Law Commission’s report on ‘Matrimonial Property, Needs and Agreements’ makes welcome recommendations for reform, but many questions remain unanswered, writes Tracey Dargan.

The Law Commission for England and Wales published its report on ‘Matrimonial Property, Needs and Agreements’ on 27 February 2014. The report presents advice on three specific areas of matrimonial law: marital property agreements (i.e. prenuptial agreements, postnuptial agreements and separation agreements); non-matrimonial property; and financial needs on divorce and dissolution.

Qualifying nuptial agreements

The Law Commission has recommended a change in the law to make marital property agreements enforceable as contracts under English and Welsh law. To qualify, it advises such agreements must satisfy six criteria:

  • The agreement must be contractually valid (and able to withstand challenge on the basis of undue influence or misrepresentation, for example).
  • The agreement must be in the form of a deed and must contain a statement signed by both parties that they understand that the agreement is a ‘qualifying nuptial agreement’ that will partially remove the court’s discretion to make financial orders.
  • The agreement must be executed at least 28 days before the wedding.
  • There should be disclosure of material information from both parties at the time of making the agreement.
  • Both parties should receive separate and independent legal advice at the time the agreement is formed.
  • It should not be possible for either party to waive their rights to disclosure and legal advice.

The Law Commission further proposes that, if a party is able to satisfy the above criteria, then the agreement would be upheld by the court, provided it meets the needs of the parties and the children. 

What are ‘needs’?

What amounts to a party’s needs is a concept that family lawyers have grappled with since the introduction of the relevant legislation in the 1970s. Needs are currently assessed in light of all the circumstances of the case; the judge has a very wide discretion to interpret a party’s needs and, more importantly, how such needs should be met.

The Law Commission does not advocate legislative reform and states that the courts’ approach is correct. However, it recommends that the Family Justice Council drafts guidelines to provide for a more consistent interpretation of need. The Law Commission has also proposed that further research is undertaken into the feasibility of developing a formula or formulae that may assist with determining this issue. It is hard to imagine how any formula would be able to adequately deal with the individual circumstances of a particular case. Indeed, the report itself acknowledges that the use of such a formula is likely to be restricted to providing a range of values within which parties may be able to negotiate.

Non-matrimonial property

The report also considers the courts’ treatment of non-matrimonial property, i.e. property acquired by inheritance, gift and/or prior to the marriage. As a general rule, the courts’ approach is that such property should not be shared, although this is very much at the discretion of the individual judge. The report does not recommend any deviation from current practice, but does suggest that some further statutory guidance may be welcome.

A damp squib?

Regular STEP Journal readers may well recall an article on the treatment of prenuptial and postnuptial agreements following Radmacher v Granatino [2010] UKSC 42.1 You may well feel that the proposal advocated by the Law Commission in relation to marital property agreements is strikingly similar to the approach that has been adopted in response to the Supreme Court’s decision in this case. However, the key difference is that the Law Commission is recommending a change in the law so that such agreements are enforceable as a contract and will not therefore be subject to the scrutiny of the court, unless the parties and children’s needs have not been met.

In the author’s opinion, the recommendations are a step in the right direction, providing a level of certainty for couples who wish to regularise their finances in the event of a divorce or separation. However, guidance is required on both the assessment of ‘financial needs’ and the treatment of ‘matrimonial property’ so that we can assess how effective they will be in practice. The report also prompts numerous questions, including: how will the courts treat prenuptial or postnuptial agreements that have been entered into before a change in the law? How will the courts treat foreign nuptial agreements and will such agreements be subject to the same or a separate test? Clearly, there is more work to be done.  

  • 1Tracey Dargan, ‘Love in the time of Radmacher’, STEP Journal, October 2012, page 58
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Tracey Dargan

Tracey Dargan is an Associate Solicitor at Irwin Mitchell LLP.

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