Friday, 20 June 2014

The Pre-nup Paradox: Twenty-eight days later.

In February 2014 the Law Commission released its report on Matrimonial Property, Needs and Agreements. The report looked into several questions which have been the subject of debate and discussion in family law both in and out of court for many years, questions such as:
  • Should pre-nups be binding? - The answer was ‘yes’ in certain circumstances (see below); and
  • What do needs actually mean in the context of a divorce?  - The answer 'was…we’re not sure, we need more guidance'.
It should be noted that, at the moment, these recommendations remain just that and it is unlikely that any of the proposed changes will become law for at least another year, but they are not to be dismissed lightly, particularly after such a long and extensive consultation, and they will arguably influence both judicial thinking and the mentality of the profession.

Of particular interest was the recommendation that we should introduce Qualifying Nuptial Agreements (QNAs) which would be binding, and safe from judicial interference, if certain criteria were met. These criteria are:

  1. That the QNA must have contractual validity i.e. there can be no undue influence/misrepresentation etc.;
  2. It must be executed as a deed;
  3. If the QNA is entered into before the marriage (a pre-nup as opposed to a post-nup) then it must be entered into at least 28 days prior to the date of the wedding;
  4. There must be material disclosure of both parties' financial positions;
  5. Both parties must have taken independent legal advice; and finally
  6. The QNA must be fair i.e. it cannot be used to contract out of making provision for financial needs (obviously, once we have a better idea about what “needs” are, this will become clearer).
It is the requirement for the QNA to be signed at least a clear 28 days before the marriage (point 3 above) that I want to have a closer look at because it seems to create something of a paradox.

The Law Commission have made this recommendation to help ensure that QNAs “will be consensual and will not be the product of negotiations conducted under pressure which clouds the parties’ judgment” (para 6.65 of the Report). The thinking being that the closer you are to the big day, the greater the pressure to sign otherwise you risk having to tell the families and guests, the caterers, the church, the venue, the florist, the musicians/dj/band  that the big day will have to be postponed (goodbye deposits!) And  what to do about Cousin Morris who has already booked her flight from California! Then there is the added pressure of having to go through the entire process again re book the venue, re-send the invitations etc. It is therefore understandable that, faced with such pressure, signing on the dotted line would seem to be the easier option even if you are not entirely happy with the terms of the agreement.

But will the 28 day requirement solve this problem?

If the parties want to have a pre-nup then it is likely that they will want it to be a QNA, in all its binding glory. If that is the case then surely all you are doing is shifting that pressure forwards by 28 days.  Imagine a bride- or groom-to-be on day 28 who is faced with 24 hours to either:

  • Sign;
  • Carry on negotiating but accepting that you won’t have a QNA unless you wait until after the wedding (a QNA post-nup) in which case there is always a risk that one party won’t want to sign and by that time you are married!; or
  • Postpone the wedding.

It could be enough to make anyone go apocalyptic and one could even argue that, having been under such pressure, they should not be held to that agreement at a later date? That said, if QNAs become law, then would it not be difficult, if not impossible, to challenge an agreement that was signed on the 28th day before the wedding (unless you could rely on failure to comply with another criteria)?

Whilst the best thing may be to start thinking about a pre-nup before looking at venues or dresses, that won’t always be the case. After all, a marriage is not just a financial and legal relationship, it is an emotional and cultural one as well and those latter factors tend to have more sway over decision making in the early stages of an engagement. In addition, there are often other family members and/or trusts or family offices getting involved at various stages and financial disclosure and negotiations can take time. It is therefore safe to say that the issue of timing and nuptial agreements is not one that is going to go away and it would be interesting to see how the recommendations affect legal practice and how they stand up to judicial challenges particularly when held against a traditional nuptial agreement negotiated and signed under the guidance given in Radmacher v Granatino in 2010.

So, if you want a QNA but are not ready to put pen to paper on day 28 then be prepared to make some pretty difficult phone calls.

“Er…Cousin Morris, you’ve got travel insurance right?”