Postnuptial Agreements

It used to be contrary to public policy for a married couple who were living together, or a couple about to get married, to make an agreement that provided for the possibility that they might separate and how their financial assets should be distributed on separation. As a result, courts did not regard themselves as bound by prenuptial or postnuptial agreements. They were often not considered worth the paper they were written on.

The attitude of the English Courts towards pre and postnuptial agreements was in complete contrast to many other jurisdictions, including the United States and the European Community. A hint that things may soon change arose in the case of S v S (Matrimonial Proceedings: Appropriate Forum) [1997] when Mr Justice Wilson said, “Where the circumstances surrounding the prenuptial agreement and the provision therein contained might, when viewed in the context of the other circumstances of the case, prove influential or even crucial… we should be cautious about too categorically asserting the contrary”.

Over the course of the following years, prenuptial agreements were given more weight but postnuptial agreements (i.e. settlements entered into after marriage) remained rare.

In 2006, the husband in the case of NA v MA [2006] was unsuccessful in arguing that a postnuptial agreement, which had been entered into after he discovered his wife had committed adultery with one of his friends, should be upheld. He pressurised her into signing an agreement that provided that she would receive a specified lump sum and annual payments if their marriage subsequently ended in divorce. However, the judge found that the wife had been subject to undue influence (put under pressure to sign the document) because if she did not sign it, the husband would not agree to the marriage continuing. As a result the judge did not uphold the terms of the agreement.

The Privy Council in the case of MacLeod v MacLeod took the view that postnuptial agreements could be treated as binding contracts. The husband and wife had married in Florida in 1994, after signing a prenuptial agreement and six years and five children later when the marriage was in difficulty, they varied this agreement i.e. they executed a postnuptial agreement. When by August 2003, the marriage had totally broken down, the Privy Council held that the postnuptial agreement was valid and enforceable. They did however, add the proviso that the arrangements which took effect following their separation were subject to the court’s power of variation and provisions in the agreement which tried to prevent the court from exercising its jurisdiction were considered void.

In the hugely publicised 2010 case of Radmacher v Granatino, the Supreme Court decided that the old rule, that agreements providing for future separation were contrary to public policy, was obsolete and that the MacLeod decision was correct. However, the judges also held that this should apply not just to postnuptial agreements, but also to prenuptial agreements.

Many people are already aware of the possibility of having a prenuptial agreement. Fewer however, think about the possibility of having a postnuptial agreement. A postnuptial agreement can be used in the same way as a prenuptial agreement, save that it is entered into after the marriage and not beforehand. It records what a couple wish to happen in relation to financial matters in the event of the breakdown of their marriage. While some people take the view that this is as unromantic as entering into a prenuptial agreement, it can also be very practical, particularly if the couple have been through a difficult patch, to the extent sometimes of even having involved lawyers. As a result, they know how hard it is to predict what financial decision a judge will make if asked to determine a financial remedy application within divorce proceedings.

Spouses need to be willing to consider each other’s financial needs and to try to come up with a settlement that takes into account both of their financial priorities and which is fair to both of them. it is important to appreciate that the agreement may not necessarily be binding on a judge (in the same way as prenuptial agreements are not) but it may be taken into account and if, at the time of the divorce, the judge is of the view that those arrangements are fair, it is likely that the postnuptial agreement will be very persuasive, if not binding.

It is therefore important that if a couple are considering having a postnuptial agreement, they each have the benefit of independent legal advice, provide each other with full disclosure of their respective financial positions and feel under no pressure to sign it. If there are children or children are a possibility in the future, then it is essential that reasonable provision is made for them, including in relation to their housing as minors and maintenance, which may include spousal maintenance if one parent is intending to give up work.

The potential advantage of agreeing matters whilst together, is that a couple may be more able to appreciate each other’s particular needs and deal with things objectively without the emotion that can accompany financial settlement discussions following the breakdown of a marriage. Potentially, this could avoid tens of thousands of pounds being wasted on legal fees and many months of delay, in the unfortunate event that the marriage does subsequently break down.