Bookended by certainty: Further guidance from the High Court on prenups and postnups

Financial proceedings on divorce can be long, complex and messy. They are often intrusive and judges possess a wide range of discretionary powers that make it difficult to predict what the final outcome will be. In that context, it is understandable that prenuptial and postnuptial agreements (‘prenups’ and ‘postnups’) continue to grow in popularity.

Increasingly, wealthy individuals seeking to protect their assets in the event of marriage breakdown are entering into prenups and postnups. Prenups used to carry negative connotations but those days are over. We find clients now look at prenups and postnups as a logical step that protects against future risk. They provide simplicity and certainty at a difficult time.

Currently, there is no act of Parliament making nuptial agreements binding. However, the family courts are filling the current legislative vacuum and the trend is toward prenups and postnups being treated like other forms of contract. Those who enter into a prenup or postnup should now expect to be held to the terms of their agreement by a court unless doing so would be unfair.

The landmark case of Radmacher v Granatino [2010] UKSC 42 stated that agreements that have been freely entered into are likely to be enforced if the parties have given financial disclosure to each other, taken independent legal advice and entered into the agreement in full appreciation of its implications in good time before the wedding. Crucially, the agreement must not leave either party in “a predicament of real need” financially.

The recent High Court case of Cummins v Fawn [2023] EWHC 830 (Fam) clarifies the law on “predicament of real need” and is an example of the courts seeking to increase certainty for those entering into prenups and postnups.

Before Cummins, the law said that if an agreement left a party in a “predicament of real need” they could not meet their reasonable financial needs (as assessed by the court) from their own resources. Cummins says that an agreement needs to leave the party within the range of acceptable outcomes to be upheld as fair but it does not have to go as far as meeting their reasonable needs.

The analogy used in the judgment is of a bookshelf with bookends at either side. The space between the bookends is the range of fair outcomes and:

“the right bookend represents a comfortable, perhaps even luxurious lifestyle. The left bookend represents a spartan lifestyle catering for not much more than essentials”.

If, adopting a broad approach, the court finds that an agreement leaves one party in a position of living beyond the left bookend the agreement would be unfair. However, if it leaves that party with a standard of living between the bookends – even if it is only just between the bookends – that party would not be in a “predicament of real need”. Such an agreement would be capable of being considered fair by the court and therefore it would be upheld.

The judgment also clarifies that, if an agreement is found to be unfair, the court should improve its provision by no more than is necessary to bring the party’s lifestyle just within the range of fair outcomes.

What does this decision mean in practice?

The judgment in Cummins may make it harder for a party to successfully challenge an agreement on divorce on the basis that it leaves them in a “predicament of real need”. If an agreement is challenged and Cummins is followed, the court should adopt a broad approach rather than a forensic analysis in assessing whether an agreement is fair, meaning a less intrusive process if court proceedings are required.

Importantly, if the court finds that an agreement has to be augmented because it is unfair, then that agreement should only be adjusted by the amount needed to bring it within the ‘bookends’. The courts should keep any adjustments to the minimum required meaning the final outcome should remain as close to the provision in the prenup or postnup as possible.

Cummins will be viewed positively by those who seek the certainty and reassurance that an agreement in writing should provide. The decision is good news for those hoping to reduce the scope of potential conflict and preserve their wealth on divorce.

Written by Sean O’Beirne from Kingsley Napley.