Are we ready for prenups to become the law?
10 March 2008
Having generated an estimated £18m from three earlier divorces, Susan Crossley was roundly criticised in the media for having the temerity to pursue her fourth husband for a share of his fortune. Worse still, she was trying to wriggle out of an agreement reached prior to her marriage to Stuart Crossley that neither of them would bring a claim for financial relief if they divorced.
Predictably, the popular press applauded Mrs Crossley's decision to abandon her action, which was generally reported as evidence of a progressive judicial approach towards the recognition and enforcement of prenuptial agreements. In the clamour to hail the victory for private rights over public intervention, the fundamental issue - whether this development is desirable or effective - was overlooked.
English law historically does not recognise prenuptial agreements, because such agreements were considered objectionable in that they undermine the institution of marriage.
Marriage rates are at their lowest recorded level and courts are swamped with divorcees litigating over finances. It is likely that cohabitants will soon be afforded statutory rights, as the Law Commission recommended last year. What could more undermine the institution of marriage?A more relevant objection to prenuptial agreements is that they are contrary to the public interest of ensuring that former spouses receive appropriate financial provision. But, increasingly, their terms are being taken into account by judges who are increasingly disillusioned by the Government's failure to review our divorce laws.
The single purpose of a prenuptial agreement is to provide certainty and to avoid the financial and emotional costs of litigation. However, because the judiciary remains bound by the public interest requirement, the status to be afforded to any agreement has to be decided on a case-by-case basis. Indeed, it was only after the Court of Appeal said that her prenuptial agreement was not just a circumstance of the case but "a factor of magnetic importance", that Mrs Crossley's argument that she should not be held to its terms was holed beneath the waterline.
Mr and Mrs Crossley are independently wealthy. Theirs was a short, childless marriage and they had enlisted experienced matrimonial lawyers to negotiate the terms of their prenuptial agreement. The Court of Appeal said theirs was the paradigm case, and yet the status of their agreement was still the subject of litigation. And this will remain the risk in all cases for as long as the court retains an ultimate discretion to determine the appropriate provision for spouses on divorce.
Legislation will be needed before prenuptial agreements can truly be said to be binding and enforceable. This will require debate to determine whether there should remain any restraint on the freedom of individuals to contractually regulate the financial consequences of divorce. A set of rules will need to be formulated, providing the criteria to be met before a couple can contract out of their statutory rights.
The provision of separate independent legal advice and full and frank disclosure are obvious, but beyond this Parliament will have to decide whether the courts should retain any residual powers to unpick agreements that although properly negotiated, fail to adequately provide for one or other of the parties.
The terms of a prenuptial agreement may be entirely fair and reasonable at the point of execution, but what of the effects of the passage of time? Extraordinary, unforeseen wealth may be created or economic disadvantage may result from the obligations of childcare.
Before rushing headlong down this path, we need to look to jurisdictions that do recognise prenuptial agreements. In the US, for example, a cottage industry has grown up whereby parties, not unlike Susan Crossley, seek to extricate themselves from unfavourable terms entered into years before. And is this so wrong? Presumably if the terms of the agreement remained fair(ish), couples would be far less inclined to litigate. But empirical evidence confirms what we all know; the future is uncertain and prenuptial contracts cannot remedy this. Is society ready for them to become the alternative to the fair administration and application of justice?