When is an agreement binding? This is a crucial question in financial disputes on divorce, particularly as the parties are (or should be) encouraged by all concerned, particularly the courts, to resolve those disputes by agreement.
Edgar v Edgar, decided by the Court of Appeal in 1980, dealt with just that question. It is another of those rare cases whose name has been written into the fabric of family law, with the term ‘Edgar agreement’ still being used to this day.
Edgar concerned a wife’s application to the court for a financial settlement on divorce. The husband was an extremely rich multi-millionaire who was “in a position to make a very large payment”. However, he argued that the wife should be bound by a separation deed that they had entered into, which set out agreed terms of settlement and included an undertaking by the wife not to apply, after divorce, for additional capital provision, beyond that provided by the deed.
To understand Edgar we need to look at the facts in a little more detail.
The parties were married in 1967 and there were four children. The marriage broke down and by October 1975 the wife had decided to leave the husband, taking the children with her, as soon as arrangements could be made for her to do so. For this she required the husband, having no mean of providing herself and the children with an alternative home.
Accordingly, the wife proposed that the husband purchase a suitable property for her and the children. The total amount of capital provision that she proposed amounted to about £100,000, despite the fact that her lawyers had advised her that she was entitled to considerably more.
The husband agreed to the wife’s proposals and a separation deed was entered into on the 1st of April 1976, setting out the full terms of settlement and including an acknowledgement by the wife that she did not intend to seek any further capital provision from the husband. The wife moved into her new home the following November.
In November 1978 the wife petitioned for divorce and in March 1979 she applied for a financial settlement, claiming a ‘substantial capital sum’. The judge at first instance decided that he could ignore the wife’s undertaking and made an order for the husband to pay a lump sum of £670,000, to include the capitalisation of the wife’s maintenance and also, strangely, the children’s maintenance. The husband appealed against that order.
Whilst accepting that it did not prevent the court from entertaining the wife’s application for a financial settlement, the Court of Appeal had to consider the effect of the wife’s undertaking. Lord Justice Ormrod said:
“To decide what weight should be given in order to reach a just result, to a prior agreement not to claim a lump sum, regard must be had to the conduct of both parties, leading up to the prior agreement, and to their subsequent conduct, in consequence of it … Important too is the general proposition that, formal agreements, properly and fairly arrived at with competent legal advice, should not be displaced unless there are good and substantial grounds for concluding that an injustice will be done by holding the parties to the terms of their agreement.”
Lord Justice Ormrod accepted that the wife was eager to get out of the matrimonial home with the children and that there was clearly a disparity of bargaining power between the husband and the wife. However, there was no evidence that the husband had used that to induce the wife to act to her disadvantage. Accordingly, the wife had failed to show why the court should go behind the agreement set out in the separation deed. The husband’s appeal was therefore allowed and the wife’s claims were dismissed.
Giving a concurring judgment Lord Justice Oliver made a statement that has often been quoted since:
“Men and women of full age education and understanding, acting with competent advice available to them, must be assumed to know and appreciate what they are doing and their actual respective bargaining strengths will in fact depend in every case upon a subjective evaluation of their motives for doing it. One may, of course, find that some unfair advantage has been taken of a judgment impaired by emotion, or that one party is motivated by fear induced by some conduct of the other or by some misapprehension of a factual or legal position, but in the absence of some such consideration as that – and these are examples only -the mere strength of one party’s desire for a particular result or the mere fact that one party has greater wealth than the other cannot, I think, affect the weight to be attributed to a freely negotiated bargain.”
Since 1980 agreements between parties about the division of assets upon divorce have been referred to, as I mentioned above, as ‘Edgar agreements’, and the court’s approach to upholding or departing from the terms of such agreements remains largely the same.
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