Thursday, December 18, 2008

MacLeod v MacLeod: Post-nups valid

The much-anticipated judgment in MacLeod v MacLeod [2008] UKPC 64 has now been delivered by the Privy Council, and the decision was not as all had expected. Some experts had predicted that the court would rule that pre-nuptial agreements should be enforceable if drawn up properly. The court (quite rightly, in my opinion) decided that such a matter was for Parliament to consider, but did find that a post-nuptial agreement was "valid and enforceable".

Briefly, the facts were that the parties, who were both American, were married in Florida in 1994. The husband was considerably more wealthy than the wife and they had entered into a pre-nuptial agreement on their wedding day. The agreement provided for each spouse to retain the separate property which they brought into the marriage and for the ownership of after-acquired property to depend upon legal title. In the event of divorce each party waived their right to claim any sort of maintenance. Properties owned jointly were to be divided equally between them. In addition the husband would pay the wife a lump sum calculated as $25,000 for each full year that the couple had been married. It was also agreed that, regardless of where the couple might later live, the agreement should be construed in accordance with the laws of the State of Florida. The family moved to the Isle of Man. The marriage subsequently broke down, and the husband issued divorce proceedings in 2003.

During the marriage, two further agreements had been reached, in 1997 and 2002, and the court was concerned with the latter, which confirmed the 1994 agreement but made substantial variations to it, including a provision that, in the event of divorce or the husband’s death, the wife should receive £1,000,000 sterling, adjusted for inflation since February 2002. In ancillary relief proceedings the wife claimed full financial provision, asserting that the agreements should be disregarded, as "unfair pressure" had been put on her. The husband claimed that the third agreement should be upheld, which would have meant giving the wife £1.89m. The court on the Isle of Man rejected the wife's claim but agreed she should be given an additional £1.25m for accommodation, and said it should be paid directly to her rather than held in trust. The husband eventually appealed to the Privy Council ("the Board"), on the issue of whether the housing needs of the wife and children should be catered for by the lump sum, as ordered by the judge, or by a trust fund, as proposed by him, and the argument turned on the validity and effect of the 2002 agreement.

In her judgment Baroness Hale reviewed the law on the validity and effect of separation and maintenance agreements and concluded that: "The Board takes the view that it is not open to them to reverse the long standing rule that ante-nuptial agreements are contrary to public policy and thus not valid or binding in the contractual sense." She went on: "In the Board’s view the difficult issue of the validity and effect of ante-nuptial agreements is more appropriate to legislative rather than judicial development." The post-nuptial agreement, however, was different:
"Post-nuptial agreements, however, are very different from pre-nuptial agreements. The couple are now married. They have undertaken towards one another the obligations and responsibilities of the married state. A pre-nuptial agreement is no longer the price which one party may extract for his or her willingness to marry. There is nothing to stop a couple entering into contractual financial arrangements governing their life together, as this couple did as part of their 2002 agreement."
Accordingly:
"In the Board’s view, therefore, the 2002 agreement was a valid and enforceable agreement, not only with respect to the arrangements made for the time when the parties were together, but also with respect to the arrangements made for them to live separately. However, the latter arrangements were subject to the court’s powers of variation and the provisions which purported to oust the jurisdiction of the court, whether on divorce or during the marriage, were void."
The husband's appeal was therefore allowed, and the matter was remitted to the High Court for an appropriate trust deed to be drafted if it could not be agreed.

1 comment:

  1. Told you so. I read this in the Telegraph. Anything other then what we have at the moment is a bonus.

    Still doesn't disband the CSA though. Without that gone men and women will live apart.

    Sad really. All governement intervention does is drive unhappinness and property prices.

    A step in the right direction this. Let people sort their own issues out. I that means their is a power imbalance in a relationship, so be it, better then the communism which currently exists.

    Sincerely, CC.

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