Yesterday there was much talk of the Law Commission recommending that pre-nuptial agreements be made enforceable. However, there was no confirmation of this from the Commission, which is simply saying that its report upon the matter will be published on the 27th of February.
Meanwhile, I thought it might be useful to remind ourselves in advance just what the report will be covering, particularly as pre-nuptial agreements are just one of the topics being considered.
The Law Commission project began way back in October 2009, with the original remit of examining the status and enforceability of ‘marital property agreements’. The term ‘marital property agreements’ covers not just pre-nuptial agreements, but also ‘post-nuptial agreements’ (i.e. property agreements between spouses after they have married) and ‘separation agreements’, which set out settlements agreed between spouses after they have separated.
In February 2012 the remit of the project was extended to cover two other issues relating to finances on divorce: the financial needs of the parties and ‘non-matrimonial property’.
I will now look at the three issues in turn.
Marital property agreements have been a contentious issue in family law in this country for as long as I can remember. Whilst other countries have happily adopted them (at least pre-nuptial agreements), we have debated about them, seemingly endlessly.
The argument boils down to who should have the last say: the people involved or the courts? That argument has gradually been swinging in favour of the people, with various cases moving the law in that direction. Now, provided that that the parties enter into them freely with a full appreciation of their implications, the courts will normally give effect to pre- or post-nuptial agreements, unless it would be unfair to do so.
Personally, I’m not sure that making pre- and post-nuptial agreements enforceable (if that is what is going to happen) is likely to have the seismic effect upon family law that some would have you believe. The number of such agreements that are entered into is very small. Okay, that number may increase if the law is changed, but they are still likely to be limited to those couples where one or both of the parties have substantial means. After all, what is the point of a prenup if you have no assets to protect?
Separation agreements, on the other hand, are much more common, although I’m not sure of the need for much change in the law relating to them. As it is, they are usually upheld by the courts provided, once again, that the parties understand them (something which usually requires taking legal advice), and provided also that each party has made full disclosure of their means and that the agreements are broadly fair.
Moving on to the issue of needs, this is actually one of the factors that the court should take into account when considering a financial settlement on divorce, according to section 25(2)(b) of the Matrimonial Causes Act 1973: “the financial needs, obligations and responsibilities which each of the parties to the marriage has or is likely to have in the foreseeable future.”
The issue with needs is how they should be defined. For example, should the needs of someone used to a high standard of living be greater than those of someone used to a lower standard of living? If a ‘need’ is a requirement for something that is essential, then what is essential? One person’s idea is likely to differ from another’s.
Clearly, a definition of what ‘needs’ are would be helpful (although in low-money cases ‘needs’ are usually fairly obvious). The problem, as always, is that defining something too tightly will take away the discretion of the court, which could lead to unfairness, as a strict definition cannot cover all situations.
The last issue being being looked at by the Law Commission is ‘non-matrimonial property’. This is actually an invention of the courts rather than parliament, and refers to property that ‘belongs’ to one party, for example property that that party brought into the relationship, property that they acquired by gift; or property that they inherited during the relationship. The question is: how should that property be treated? Should it go into the ‘pot’ for division between the parties, or should it be ‘ring-fenced’ for the party who originally owned/acquired it?
Again, this is an area where we differ from some other countries such as France, where they have a ‘community property’ regime. Basically, under such a regime everything acquired during the marriage is ‘community property’ and is divided equally. What we call ‘non-matrimonial property’ is not included as community property.
Under our present law, however, the courts can use ‘non-matrimonial property’ to meet the needs of the parties. Only once needs have been met might the courts say that such property should remain in the hands of the party who contributed it.
The questions that the Law Commission have been considering in relation to non-matrimonial property include what property is ‘non-matrimonial’, whether it should be shared, and if not whether it should be used to meet needs.
Again, a clarification in the law here would be welcome, but would it be fair to deny one party their needs in order to ensure that the other party keeps their property? As with marital property agreements and needs, it is a difficult issue, and we will just have to wait until the 27th for the answer.
John Bolch is a family law blogger