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There are many potential benefits to pre-marital and post-marital agreements which are often referred to as pre-nups and post-nups. They can reduce uncertainty, promote autonomy and they can often successfully address the division of property and sometimes spousal maintenance in the event of marital break down. The question is, do these benefits sometimes come at the expense of justice?

The just, or potentially unjust, nature of a martial agreement depends to some extent on the laws in a given country as to what types of assets can be divided on divorce. In many countries pre-marital assets, inheritance, post-separation assets, pensions or even assets held in other countries are not divided upon divorce. However, in England for example, all these categories of assets can sometimes be divided upon divorce (although please take great care with regards to pensions, particularly where the matter involves an international couple).

The outcomes of these agreements can be arguably unjust in the absence of safeguards when entering into and enforcing agreements. This is particularly so if the less financially wealthy spouse does not enter into an agreement freely; if the agreement was entered into without independent legal advice (as is the case in some countries where agreements are legally binding despite this); or without disclosure of all relevant facts, particularly around each party’s financial circumstances.

The country in which a couple enter into an agreement may not be the country which might one day review the agreement.  This is particularly pertinent where the couple are international (by birth, citizenship or residence).  If the agreement is drafted in one country, but the couple divorce in another country (for which they had valid divorce jurisdiction) the agreement is likely to be reviewed in that different country where approaches to pre-nuptial agreements might be substantively different. Even within the UK, the laws upon separation/divorce vary considerably between England, Scotland and Ireland.

The disparity in different countries' laws upon divorce and their approaches to the safeguards (or sometimes lack thereof) for marital agreements is an aspect of growing concern when addressing the fairness of marital agreements for international families. Some of the main points about safeguards apply equally to national families.

Here we consider and compare several of the most recent legal challenges to marital agreements in the courts of:

  • Australia - where marital agreements are binding if legislative requirements are met and where stringent safeguards are encouraged; and
  • England - where marital agreements are not legally binding but hold significant evidential weight if entered freely, with independent legal advice and sufficient disclosure of all relevant factors.

In Australia, the safeguards are mostly found in legislation (Family Law Act 1975 (Cth)). In England, they are found in case law and the guidance provided by the Law Commission.

The decisions below remind us of the importance of both parties entering into the agreement freely with full independent legal advice on the terms, advantages and disadvantages of the marital agreement. This is regardless of the country in which the agreement was entered into or whether they are a national or international couple. The English case described below also illustrates the impact of how, sometimes other countries' laws (here it happens to be England's) provide for the ability and hence willingness to interfere with the terms agreed when the Court deems it fair or just to do so.

RECENT AUSTRALIAN CASES

There have been a couple of significant recent cases in the Australian Courts challenging national marital agreements involving international couples.

In Australia, for a martial agreement (known simply as a financial agreement) to be binding and enforceable or to be recognised and upheld by a Court in England, there are several requirements which should be met.

As referenced above, one of those is that each party to the agreement has received suitable independent legal advice (or in England, at least offered the option to take independent legal advice) prior to entering into the agreement, addressing the legal rights a person is potentially curtailing or foregoing by entering the agreement and the effect of the agreement.  

In the recent Australian decision of Purdey and Millington [2018] FCCA 213, the Court found the agreement was not binding as:

  • the wife was not provided with 'independent' legal advice; and
  • it would be unjust or inequitable for her to be bound by its terms.

Although the wife had met with a solicitor before she signed the agreement, the Court found that the legal advice was not independent, nor sufficient for various reasons including:

  • the husband had arranged the appointment with the wife's solicitor and attended the meeting;
  • the wife's lawyer was provided the draft agreement only shortly before the meeting;
  • the meeting between the wife and her lawyer lasted just 20 minutes and the wife could not have been given the required legal advice in those circumstances; and
  • the wife also had difficulties reading and speaking English.

In another recent Australian case, Thorne and Kennedy [2017] HCA 49 (determined in November 2017) by Australia’s highest court, it was found that two identical martial agreements were voidable owing to undue influence and unconscionable conduct by the husband on the wife. Simply put, it was found that the wife did not freely enter the financial agreements. In this case:

  • the parties met over the internet in 2006.
  • the 36 year old Eastern European wife moved to Australia seven months after meeting the husband to live with him with the intention of marrying. He was a 67 year old wealthy property developer.
  • the wife had given up her life and belongings prior to moving to Australia where she was entirely dependent upon the husband.
  • the wife was unaware of the contents of the agreement until 19 September 2007 and saw the agreement for the first time on 20 September 2007, just 10 days before the wedding.
  • the agreement was signed on 26 September 2007.
  • the parties married on 30 September 2007.
  • a further agreement (in identical terms) was signed after the marriage on 5 November 2007.
  • the financial provision for the wife under the agreement was significantly less than she would have received otherwise.
  • the wife's family had arrived for the wedding at the time of negotiating the agreement and the husband had told her the wedding would not go ahead if she did not sign the agreement.

A RECENT ENGLISH CASE

The decision of KA v MA [2018] EWHC 499 provides an example of another safeguard which exists in England, but not necessarily in many other countries – where an English court will intervene, despite a freely entered prenuptial agreement, to ensure that the reasonable financial needs of the weaker financial spouse are met following the breakdown of a marriage.

In this case:

  • there was a 13 year old child of the relationship and adult children from the husband's first marriage.
  • the parties had been living together and the child had been born, prior to the agreement.
  • although the wife was unhappy with the contents of the agreement and reported heated conversations with the husband about the contents of the agreement prior to signing it, it was found that the wife:
    • knew that the husband would not marry without an agreement;
    • understood that the agreement would be binding; and
    • understood the husband’s intention was always to protect assets he had acquired prior to the relationship.
  • The agreement was signed by the wife some 21 days prior to the marriage and the husband, 18 days beforehand.

Regardless of these findings the court in England ordered provision of a lump sum payment of £2.7 million along with a periodic payment of £30,000 to the wife for the child’s benefit, which reduced during the child’s education. Leaving to one side the periodical payments, the lump sum payment awarded by the Court was £1.1million higher than the amount to be provided to the wife under the terms of the agreement.

DOES GENDER PLAY A ROLE?

Many believe gender inequality still provides a sometimes subtle cultural or systemic influence which can cause injustice in or unfair negotiation of marital agreements.

Great strides within many societies around the world have been made to redress gender inequality, and from personal experience, amongst the marital agreements upon which I advise in England there is a decreasing differential between which spouse is the financially stronger party (from their own endeavours or those of their families).

However, gender inequality still arises in the dynamics of some negotiations about financial agreements worldwide. It is also perhaps more apparent in current case law, owing to the fact many of the agreements in dispute arose at a less 'enlightened' time when household roles and decision-making responsibilities were more defined between the sexes.

Each of the cases above noticeably involve the wife or homemaker being in a position of disadvantage.

IN SUMMARY

Although you can never guarantee with absolute certainty that a martial agreement will be binding and enforceable on the breakdown of a marriage, we are reminded that it is essential for both parties to obtain proper independent legal advice from specialist family lawyers and to obtain sufficient disclosure for the agreement to be binding.  

In an international context, where the couple are likely to live in or have strong ties with multiple jurisdictions, it is important to obtain advice from family law specialists in each relevant jurisdiction to ascertain whether the agreement is binding or enforceable in all the relevant countries.

iFLG regularly work with international family law firms around the world to facilitate this process quickly and effectively. The disparity between countries laws can be significant and highly unpredictable.

It is certainly true that the risks for any misuse by the stronger party (financially or otherwise) are reduced where courts can intervene and find that certain marital agreements are not binding and should be set-aside or adapted.

With safeguards (and so long as those safeguards are not so zealously enforced as to undermine the balance for genuine autonomy) marital agreements can greatly assist parties in minimising, and in some situations removing, the animosity around financial arrangements following the breakdown of a marriage.  

This approach to my mind provides a suitable balance between the preference for autonomy versus fairness.

Marital agreements can also serve as effective tools to protect gifted, generational wealth or pre/post marriage assets, particularly in countries like England, where such assets can be vulnerable to division upon divorce and where the couple has a sufficient connection to that country. Such possibilities can cause significant concerns for the parents of those marrying as well as the couple themselves.

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This article represents insight into just some of the issues which Lucy Greenwood, Partner at iFLG will be discussing and presenting alongside William J. Howe III of Counsel, Oregon at the AFCC conference in Washington DC on 8 June 2018. The title of their 90-minute presentation is "Prenups and Postnups: Private Autonomy or Gender Discriminatory Injustice".

Lucy Greenwood would like to thank Sarah Basso, a qualified Australian lawyer and senior paralegal at iFLG for her input in preparing this article.

If you or anyone you know needs advice about marital agreements where the couple have a connection to England, please contact Lucy Greenwood at

Lucy.Greenwood@iflg.uk.com.

Lucy Greenwood is a Partner at iFLG. Lucy has a very broad depth of experience and knowledge in resolving family issues having specialised exclusively in the field of family law for over 20 years. Lucy has a particular specialism in the drafting of pre-nuptial and post–nuptial agreements having done a large number of such agreements involving many parts of the world.

Sarah Basso is a Senior Paralegal at iFLG. Sarah graduated from a Bachelor of Laws with first class honours in Brisbane and is an fully qualified Australian solicitor (QLD). Through her practice in Australia as part of top tier family law team, Sarah has experience assisting in a wide range of family law matters from complex financial disputes for high net wealth individuals with a cross-jurisdictional element to international relocation. Sarah also has experience in matters involving spousal maintenance and child support.

 

Lucy Greenwood & Sarah Basso

The International Family Law Group LLP

www.iflg.uk.com

© 4 June 2018