Prenups and postnups in a credit crunch - Renewing Those Intentions After The Vows

by Arlene Milne

There is a difference in the status of pre and post nuptial agreements, and for the record, a PRENUP settlement (or ante nuptial agreement) is an agreement made prior to a marriage (or civil partnership) which purports to govern the rights of the parties in the event of a parting of the ways thereafter. A POSTNUP is a contractual agreement made once the relationship has been cemented, which unlike a PRENUP is binding on the parties, and enforceable. It may also be varied under s35 MCA 1973 by the courts in the event of ancillary relief becoming necessary.

In a credit crunch both partners/spouses are likely to be worried about the effect of a downturn on their assets and disposable income. Clients worried about a fall in the prioce of their stocks and shares, and a housing market resulting in valuations of the FMH hurtling downwards some 10% or more, are keen to revisit their original intentions, and those promises made when love was still on the horizon.

Incorporating a PRENUP into a POSTNUP is a good idea in that it makes it enforceable in law, unlike a PRENUP, which remains at the discretion for the Judge to consider it as part of the s25 MCA 1973 criteria, under the umbrella of "other circumstances", when dividing up assets under the ancillary relief umbrella..

The leading authority on POSTNUPS is still the case of EDGAR V EDGAR (1980) All ER 887, which gives us the general principle that the courts will uphold agreements freely entered into by parties, who are deemed to have taken legal advice before entering into such agreement. There is a proviso, however, which is that in "unusual circumstances" the courts have the discretion to refuse to enforce these agreements. Such "unusual circumstances" might include one party failing to understand the agreement, or inadequate legal advice.

The case of MCLEOD V MCLEOD [2008] UKPC64 is a recent case which illustrates the enforceability of such a POSTNUP, upon which the Husband wanted to rely. He won on appeal and the agreement was upheld as binding on the parties and enforceable, but the Privy council pointed out that had the agreement merely have been made as a PRENUP and not confirmed during the marriage it would have been "contrary to public policy" and not enforceable in the courts of England and Wales.

It seems then, like good advice to get clients to confirm their PRENUP ideas into a POSTNUP document once the knot is tied. There is, however, a word of warning. Remember to advise clients that POSTNUPs are subject to being varied during any subsequent ancillary relief proceedings under s35MCA 1973 where there is a "material change in circumstances" , or where the court considers that the provision made for children of the parties is inadequate. Properly worded, however, a POSTNUP can save legal costs, and hours of frustration negotiating points which have been agreed as fundamental between the parties long ago.


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