IV. Nuptial agreements
As long as society continues to evolve, matrimonial law is ever changing. Agreements made between couples before or after marriage become more common. Premarital and post-marital agreements are known as nuptial agreements. Nuptial agreements are contracts, entered into by couples, which determine the rights and obligations of each of them in the event their marriage fails. Premarital agreements are drawn up and signed before marriage, while post-marital agreements are made during the marriage. Post-marital agreements can be made either while the couple is still together, or when they separate. Post-marital agreements entered into during separation are known as “separation agreements”.
The content of nuptial agreements normally include terms for:
- division of property
- maintenance for support of a spouse
- other financial arrangements such as trusts, company share transfers etc.
More complex agreements may arise where specific terms for a financial award result in the breakdown of the marriage.
A. Legal status of nuptial agreements
Separation agreements are agreements entered between couples once they have separated or on the occasion of their separation. These are common because they are valid contracts, according to section 14 of the Matrimonial Property and Proceedings Ordinance (“MPPO”), Cap. 192. Furthermore, as in the Hong Kong Court of appeal case of L v C, the courts have affirmed that such agreements should be upheld unless there is a compelling case of unforeseeable circumstances.
If an agreement is made during marriage but before separation, then this is known as pre-separation post marital agreement. This is not a separation agreement under section 14 of the MPPO. These agreements will be governed by similar considerations as pre-marital agreements in accordance with the Radmacher principles discussed below.
Nuptial agreements could be taken into account by the court when deciding the outcome in divorce proceedings involving ancillary relief and division of financial assets under section 7(1) of the MPPO as “circumstances of the case” or “conduct”, and may be upheld in part or in whole.
When the court needs to determine whether or not to make an order in accordance with a nuptial agreement, the question of fairness is the key issue. In the UK, it is likely that the court will follow the terms of the nuptial agreement and hold the parties to their agreement if the parties:
- are shown to have understood the terms of the agreement;
- had independent legal advice;
- gave full and frank disclosure of their financial positions;
- were not under pressure when signing the agreement;
- did not exploit a dominant position;
and if the agreement is not unjust.
This list is not exhaustive but provides a general basic guideline. A nuptial agreement should be given effect (that is, enforced) if it was “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.” (See: UK case Radmacher v Grantino)
In Hong Kong, the Court of Final Appeal in SPH v SA adopted Radmacher as good law.
B. Pre-marital agreements and public policy
Historically, pre-marital agreements were regarded as being contrary to public policy on the grounds that provision for a divorced wife and children of the family is a matter of public concern. In UK case Bennett v Bennett, the court said that “it is in the public interest that the wife and children of a divorced husband should not be left dependent on public assistance or on charity when he has the means to support them”.
For example, if a party had not given full and frank disclosure before the signing of the pre-marital agreement and the wife is left destitute under the agreement, the agreement may be contrary to public policy. Another example might be that since the marriage, the parties’ financial situations may have drastically changed (for the better or worse), thus what was initially agreed under the pre-marital agreement might not be “fair” or reflective of the parties’ living standard during the marriage.
Later, the UK court in the Radmachner case stated that pre-marital agreements are not contrary to public policy. However, this view is just of persuasive value in Hong Kong. Furthermore, pre-marital agreements cannot restrict parties from applying to the court for orders for financial arrangements. In Hong Kong, the Court of Final Appeal in SPH v SA endorsed the principle.