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Durham E-Theses Durham E-Theses Regulating Prenuptial Agreements: Balancing Autonomy and Protection DALLING, SAMUEL,JED How to cite: DALLING, SAMUEL,JED (2013) Regulating Prenuptial Agreements: Balancing Autonomy and Protection , Durham theses, Durham University. Available at Durham E-Theses Online: http://etheses.dur.ac.uk/7768/ Use policy The full-text may be used and/or reproduced, and given to third parties in any format or medium, without prior permission or charge, for personal research or study, educational, or not-for-prot purposes provided that: • a full bibliographic reference is made to the original source • a link is made to the metadata record in Durham E-Theses • the full-text is not changed in any way The full-text must not be sold in any format or medium without the formal permission of the copyright holders. Please consult the full Durham E-Theses policy for further details. Academic Support Oce, Durham University, University Oce, Old Elvet, Durham DH1 3HP e-mail: [email protected] Tel: +44 0191 334 6107 http://etheses.dur.ac.uk Regulating Prenuptial Agreements? Balancing Autonomy and Protection TABLE OF CONTENTS TERMINOLOGY ........................................................................................................................ 2 INTRODUCTION ........................................................................................................................ 4 Looking Towards the Future .............................................................................................. 7 CHAPTER 1: THE TENSION BETWEEN AUTONOMY AND PROTECTION .................................... 13 Public Policy Objections to Marital Property Agreements .............................................. 15 Contractual Autonomy v State Protection ........................................................................ 19 Using Relational Contract Theory to Bridge the Gap? .................................................... 31 Conclusion ........................................................................................................................ 39 CHAPTER 2: THE KEY ISSUES IN ENGLAND AND WALES ....................................................... 41 Dividing ‘Matrimonial Property’ ..................................................................................... 41 The Uncertainty Surrounding Ancillary Relief ................................................................. 44 Focus on Prenuptial Agreements as a Vehicle for Reform .............................................. 50 Supporting Families and the Six Safeguards .................................................................... 51 Historical Attitudes to Contracts Seeking to Oust the Court’s Discretion ....................... 53 Prenuptial Agreements – the Early Years ........................................................................ 55 The Current Position of the Law ...................................................................................... 57 Future Regulation of Prenuptial Agreements ................................................................... 69 CHAPTER 3: THE KEY ISSUES IN AUSTRALIA ........................................................................ 72 Family Law in Australia ................................................................................................... 72 The Financial Regulation of Divorce ............................................................................... 73 The Introduction of Statutory Prenuptial Agreements ..................................................... 76 Section 90B, 90C and 90D FLA 1975 - Forming a Financial Agreement ....................... 77 Section 90G - When a Prenuptial Agreement Will Bind the Courts ................................. 82 The Strict Interpretation of Section 90G FLA 1975 ......................................................... 83 Section 90K - Setting aside a Prenuptial Agreement ....................................................... 90 Conclusion ........................................................................................................................ 96 CHAPTER 4: DRAWING COMPARISONS BETWEEN THE JURISDICTIONS ................................... 98 i) The Signing of the Agreement ....................................................................................... 99 ii) Independent Legal Advice ......................................................................................... 102 iii) Full and Frank Disclosure ....................................................................................... 113 iv) Fairness ................................................................................................................... 125 Conclusion ...................................................................................................................... 135 CONCLUSION ....................................................................................................................... 136 1 Regulating Prenuptial Agreements? Balancing Autonomy and Protection Terminology This thesis is concerned with the regulation of prenuptial agreements. Couples use these in an attempt to avoid the default laws of financial orders. Previously, the making of such orders was referred to as ancillary relief, however, Rule 2.3 of the Family Procedure Rules 2010 served to update the terminology. Much of the academic commentary and judicial decision is couched in the old terminology, and so the terms ancillary relief and financial order will be used interchangeably throughout this thesis. There is no statutory definition of a prenuptial agreement in England and Wales. Therefore, for the purpose of this thesis, a prenuptial agreement shall be defined as a contract that is entered into by a couple intending to marry, prior to the date of their marriage, which purports to regulate the financial aspect of any future reallocation of assets upon divorce. It is prudent at this stage to highlight that there are two alternative forms of financial agreement affecting ‘matrimonial property’. The postnuptial agreement has the same characteristics as a prenuptial agreement, save for the fact that it is signed at some point following the marriage ceremony, while the separation agreement, which again regulates the financial aspect of divorce, is not entered into until after the couple’s relationship has irretrievably broken down. In that respect, a separation agreement is somewhat distinguishable from a prenuptial and a postnuptial agreement. At the time of entering into the separation agreement, the parties have greater awareness of all the circumstances and arguably the extent of the assets to be divided. Prior to the Supreme Court decision in Radmacher v Granatino,1 separation agreements were deemed enforceable by the Court of Appeal in Edgar v Edgar,2 while Baroness Hale, sitting in the Privy Council, upheld a postnuptial agreement in Macleod v Macleod,3contending that prenuptial agreements and postnuptial agreements were ‘very different’.4 1 [2010] UKSC 42. 2 [1980] EWCA Civ 2. 3 [2008] UKPC 64, 4 ibid [36]. 2 Regulating Prenuptial Agreements? Balancing Autonomy and Protection The majority of the Supreme Court in Radmacher emphatically overturned this approach. The court expressed a preference for the umbrella term ‘nuptial agreements’,5 encapsulating financial agreements made both prior to and after the date of the marriage. The effect of this decision is that English courts will no longer look to draw a distinction between prenuptial and postnuptial agreements. However, for the sake of clarity it will sometimes be necessary to maintain the division within this thesis. Therefore, as far as it is possible to do so, I will endeavour to distinguish financial agreements as follows: i) ‘Prenuptial agreement’ will be used when referring specifically to a prenuptial agreement. ii) ‘Postnuptial agreement’ and ‘separation agreement’ will only be used any time that reference is made specifically to one of these types of agreement. iii) ‘Marital property agreements’, ‘nuptial agreements’ and ‘financial agreements’ will be used interchangeably as umbrella terms, incorporating all three types of agreement. It should also be noted that the cases discussed within this thesis deal with the breakdown of a marriage between a man and a woman, however, all of the ideas promulgated apply equally to civil partners. 5 Radmacher (n1) [1]. 3 Regulating Prenuptial Agreements? Balancing Autonomy and Protection Introduction Prenuptial agreements are family law’s ‘hot topic’.1 Some married couples utilise prenuptial agreements in an attempt to establish contract-like terms that will serve to dictate the distribution of their assets in the event of divorce. Legal practitioners have described prenuptial agreements as unromantic, expensive2 and even ‘cold blooded’.3 In England and Wales, the courts have traditionally been highly suspicious4 of prenuptial agreements and what they represent. Public perception on the other hand is more complex and there is no single, unanimous view that can be gleaned. Michael Winner, who in 2011 finally decided to marry his partner of over 50 years, ‘absolutely declined’5 to sign a prenuptial agreement, although he acknowledged that there were several members of the legal profession willing to charge him extortionate amounts to aid him in drawing one up.6 Winner is known for his abrupt manner, but is his view reflective of the stereotypical British approach towards prenuptial agreements? It has been suggested that prenuptial agreements may
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