The Times article - Feb 14, 2008

Should you bother with a prenup?


They may not seem terribly romantic but the agreements help to avoid "considerable stress and heartache should a marriage break down"

 

It may not seem the most romantic gift for Valentine's Day. But prenups look set to become the must-have fashion accessory of lovers looking to wed.

The decision this week of Susan Crossley to drop her claim for a slice of her fourth husband's £45 million fortune is a boost to the status of prenuptial agreements in English law — confirming that they are highly influential in any decision on assets, if not strictly binding.

Mrs Crossley had signed one saying that neither she nor her husband Stuart would claim a penny of the other's wealth if the marriage broke up. But the woman described by her husband as a "career divorcee" (she had netted £18 million from her previous three marriages) changed her mind when the marriage of 18 months fell apart.

She claimed that the prenup was invalid — arguing that her property tycoon husband had failed to disclose millions he held in offshore accounts. In a landmark ruling last December Lord Justice Thorpe, deputy head of family justice, sitting with two other appeal judges, said: "If ever there is to be a paradigm case in which the court will look to the prenuptial agreement as not simply one of the peripheral factors of the case but as a factor of magnetic importance . . . this is just such a case."

undefinedThe judges ruled that Mr Justice Bennett — this week hearing the McCartneys' battle — was right in saying that the prenuptial agreement should be evaluated before any claim made by Mrs Crossley for a share of her husband's fortune. Mr Justice Bennett's ruling would mean a novel one-day streamlined hearing, rather than weeks of costly argument over the couple's assets.

But this week that one-day hearing did not go ahead. Mrs Crossley clearly accepted — in the words of one lawyer — that she had no chance of success and withdrew her claim. Lawyers are disappointed that the prenup will not be put to the test. But her withdrawal is in itself an acceptance, in terms, of the prenup's validity.

Mark Harper, Mr Crossley's solicitor at Withers, the London law firm, says that the Court of Appeal ruling was a "significant step forward" for prenuptial agreements. "The Court of Appeal has shown that when a prenuptial agreement exists, the English courts can take a pragmatic approach and short-circuit normal court procedures, saving time, money and emotional distress for all involved."

Other lawyers agree. Richard Hogwood, of Speechly Bircham LLP, says that prenups seemed to have "finally come of age". It is disappointing that the case would not be tested at trial, he adds, so as to confirm the prenup as a "valuable weapon in the armoury of the wealthy". But judges are increasingly minded to take account of properly drawn up prenuptial agreements and a trickle of demand had become "if not a torrent, a significant and steady flow".

Likewise, Rachel Spencer Robb, of the Leeds firm Clarion Solicitors, hails the Crossley decision as "good news for the future of prenuptial contracts. Many factors will still take precedent over a prenuptial agreement such as children and the length of the marriage, but as divorce rates rise and marriages get shorter, such agreements will be a significant factor that courts can't dismiss."

So prenups are the future for many couples — because, as Sandra Davis, head of family law at Mishcon de Reya, puts it, they can avoid "considerable stress and heartache should the marriage break down", and provide "some insurance against costly litigation".

But their rise in popularity is not just on pragmatic grounds. Some say it also signals a change in attitude from the courts. Joanna Goodall, a barrister employed at the law firm Mills & Reeve, argues that the Crossley case has "shifted" the onus away from a person to show why he or she should rely on a prenup to the person "who wants to renege on it to show why it should not be regarded".

She adds: "The case highlights the fact that premarital agreements are being recognised in the English courts and, if properly constituted, are difficult to wriggle out of." In the past, she says, prenups were perhaps entered into in the hope, rather than belief, that they would be binding. "Now they offer real protection."

Christine Pews, who heads the family law team at Blake Lapthorn Tarlo Lyons, agrees that there has been a "sea change". Courts "are looking closely at prenuptial agreements and want good reasons — such as children or significant changes in a person's circumstances — to depart from them". "Are the courts," she asks, "moving away from paternalistic approach to family law?"

So who should go for a prenup? Goodall says that they are suitable for a wide range of people, including those marrying for the second time, professionals and those not necessarily "mega-wealthy".

Hazel Wright, a partner with Cumberland Ellis, pinpoints six categories of client who would benefit. They are: international clients used to prenups in their home jurisdiction; young City entrepreneurs in their twenties making money through work, skill and some luck; second-time rounders, in their forties and fifties, who want to provide fully for children of the first marriage and protect their own assets (sometimes against gold-digging former husbands when they meet someone wealthy); business men and women used to binding agreements in their working lives; gay and lesbian clients who may have cohabited for years and now enter civil partnerships; and anyone who favours "self-determination" and taking control of how financial issues might be resolved on divorce.

Prenups can also serve as a pointer to unmarried couples or others who jointly own property, she says, in drawing their attention to the benefits of pre-planning if things go wrong. She dismisses the idea that such agreements are unromantic. "Marriage and civil partnership are a huge commitment, and people find that using sensitive lawyers, often with a mediation or collaborative background, the whole process can be part of marriage preparation in thinking about and deciding together — rather than having unintended legal solutions imposed on them."

So if prenups are such a good insurance policy, why not make them legally binding? Lord Justice Thorpe, giving judgment in the Crossley case, suggested that it was time to look at legislation to make them enforeceable in law, given the lack of a marital property regime in England as found on the Continent. And Alex Carruthers, at niche divorce firm Hughes Fowler Carruthers, argues that the only way forward to clarify the system is for Parliament to legislate.

Yet many lawyers disagree. Marilyn Stowe, the leading family lawyer of the Harrogate law firm Stowe Family Law LLP, says that would be a "disaster". She says: "There's a safeguard implicit in current law that allows a court to uphold a prenuptial agreement if it is deemed fair to do so. I've come across many prenups, made in other countries, and their terms are usually grossly unfair to the poorer spouse."

Kathryn Peat, leading family lawyer at Gordon Dadds, makes the same point. "I'd not favour making them legally binding. Courts need to be able to exercise their discretion. Such agreements may be made under duress, or without proper legal advice or proper disclosure of assets."

Yet, she says, they are now the thing to do. Clients are advised to have them and more and more are following that advice. Not only that — if they don't manage the prenup before the marriage, there is now the postnup, she says, often at the instigation of parents wanting to protect their grandchildren's inheritance.

"These are becoming more popular. People wake up and realise that if they don't do something, the downside of a marriage break up could be huge."

She adds: "It must be in the first flush of the marriage — as in, darling, didn't we have a lovely honeymoon? Now what about a postnup? Otherwise it becomes more difficult and people tend to think it won't be needed."

The more certain people are that pre or postnups will be accepted by the courts, the more people will enter into them, says James Stewart, of Manches. "They may seem unromantic but it's simply part of good planning, akin to making a will regardless of the gloominess of contemplating death while looking ahead to a bright future."

How ironic, then, that this same week another keenly watched marital dispute is in the courts which is a classic case for a prenup if ever there was one. If Sir Paul McCartney and Heather Mills had gone for a prenup they could have saved the costs and anguish of their battle at the Royal Courts of Justice. "We don't think," Goodall said, " Sir Paul would be embarking on a five-day visit to the High Court had he taken the time to enter one."

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