Monday, February 24, 2014

SA v PA: Mostyn J considers pre-nups and compensation

Mr Justice Mostyn
In SA v PA (Pre-marital agreement: Compensation) [2014] EWHC 392 Mr Justice Mostyn considered, as the case name suggests, two issues: a pre-nuptial agreement (which had been signed by the parties in Amsterdam on the day before the wedding) and the wife's claim that her periodical payments award should be significantly enhanced by reference to the principle of compensation as explained by the House of Lords in McFarlane v McFarlane [2006] UKHL 24 [2006].

I do not propose here to go through the facts of the case, or even the details of Mr Justice Mostyn's decision. Instead, I thought it would be useful to briefly outline what he had to say regarding the legal principles on those two issues.

On the treatment of pre-nuptial agreements he of course referred to the test propounded by the Supreme Court in Radmacher v Granatino:
"The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
He then referred to his own previous attempts to summarise the principles, in Kremen v Agrest and B v S. These are set out in paragraphs 11 and 12 of this judgment.

In particular, he stated that there was no requirement to have received specific advice as to the operation of English law on the agreement in question, and that this proposition had been specifically approved by Moor J in AH v PH.

To those principles he added:
"Finally, it is clear that a marital agreement does not have to deal with all aspects of the parties' resources in order to be presumptively binding over the assets or resources which it addresses."
Moving on to the issue of compensation, he summarised the position neatly at paragraph 36:
"Obviously I am bound by the decision of the House of Lords. However, in the light of the later authorities, I think that the principles concerning a compensation claim can properly be expressed as follows:-
i) It will only be in a very rare and exceptional case where the principle will be capable of being successfully invoked.

ii) Such a case will be one where the court can say without any speculation, i.e. with almost near certainty, that the claimant gave up a very high earning career which had it not been foregone would have led to earnings at least equivalent to that presently enjoyed by the respondent.

iii) Such a high earning career will have been practised by the claimant over an appreciable period during the marriage. Proof of this track-record is key.

iv) Once these findings have been made compensation will be reflected by fixing the periodical payments award (or the multiplicand if this aspect is being capitalised by Duxbury) towards the top end of the discretionary bracket applicable for a needs assessment on the facts of the case. Compensation ought not be reflected by a premium or additional element on top of the needs based award."
He went on:
"Having regard to what I said in B v S at paras 73-79 it will be apparent that it is my firm belief that save in highly exceptional cases an award for periodical payments should be assessed by reference to the principle of need alone."
For the record, he found: (a) that, subject to "the critical question of maintenance", it would be fair to implement the capital division specified by the agreement and (no surprise here): (b) that this was not a compensation case.

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