Tuesday, January 13, 2015
French Marriage Contract Unenforceable in England
Jeremy D. Morley
A newly-reported ruling of the English High Court on prenuptial agreements demonstrates (a) the sharp division between the law in France concerning marriage contracts and the law in England; (b) the need to appropriately forum shop when strategizing a potential divorce; and (c) the continuing strong paternalism of the English judiciary in family law cases. Y v Y (Financial Remedy - Marriage Contract)  EWHC 2920 (Fam).
The parties were French nationals who lived together in France at the time of their marriage. They entered into a French marriage contract pursuant to which they selected the standard-form regime of separation de biens, whereby each spouse keeps his or her own assets, whether in existence at the time or subsequently acquired, separate and free from any claim by the other unless jointly acquired and specifically held in joint (or common) ownership.
The marriage contract itself did not contain any specific reference to the dissolution of the marriage (other than by death), but under French law its terms would certainly govern a divorce.
The parties met with a notaire in Paris shortly before they signed the contract but, as is usual in France, they did not have separate counsel. However, it is the duty of a notaire in such circumstances to act for both parties equally, to read the marriage contract and to explain its effect to both parties.
Shortly after the marriage the parties relocated to England, where they lived and had a family throughout a long marriage, but they retained strong connections to France and remained domiciled there. The husband worked as a banker while the worked in business.
The parties and the Court agreed that if the case had been heard in France the marriage contract would be absolutely binding and would govern the divorce.
However, in England the governing law is that which was set forth by the U.K. Supreme Court in the seminal case of Radmacher v. Granatino, 2010] UKSC 42. There, the majority stated that, “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.” (emphasis added). In considering whether each party had a “full appreciation” of the implications of such an agreement, the majority stated that, “'What is important is that each party should have all the information that is material to his or her decision, and that each party should intend that the agreement should govern the financial consequences of the marriage coming to an end.”
In Y v. Y, Mrs. Justice Roberts applying the Radmacher test and determined that, although the wife conceded that she understood from the outset that the marriage contract provided that she and her husband would have separate ownership of their assets during the marriage, she did not understand that this would apply if they were to divorce and she did not have all of the information which was likely to have been material to her decision. Consequently, all of the assets that each of the parties had accumulated during the marriage, mostly by the husband, comprising many millions of pounds, should be divided equally.
The judge’s decision on the facts concerning the inferred intentions of the wife, and the extent of her understanding at the time the contract was signed, were made despite the existence of substantial evidence to the contrary, including expert evidence from French counsel that, when a French notaire conducts the meeting that must be held before any such agreement is signed, the notaire explains and reads out the draft marriage contract, answers questions the parties may have, and normally explains how the provisions of the marriage contract will apply, notably in the event of dissolution of the marriage (in the event of death or divorce). In addition, this was not a case in which the wife was unsophisticated; indeed, she had worked throughout most of the marriage “at a senior management level” and had earned a substantial income.
The U.K. Law Commission has proposed that prenuptial agreements should be enforceable in England and Wales, but subject to an exception if an agreement does not satisfy the “financial needs” of the parties. I have previously opined that the exception is far too broad and indefinite, especially given the insistence of the English judiciary to oversee such agreements and to ignore them when a judge deems it appropriate to do so. The decision in Y v. Y. demonstrates exactly the kind of judicial intervention that the Law Commission should anticipate if it recommends a broad “needs” or “fairness” exception to any legislation that purports to authorize prenuptial agreements. The French parties living in France chose to enter into a French agreement that would be fully enforceable in France, but the English court undermined that certainty and party autonomy and substituted its own determination of what was fair in the circumstances.