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The magnetic importance of a prenupin the paradigm case Crossley vCrossley [2008] 1 FCR 323Juliet Chapman aa 1 Hare CourtPublished online: 27 Nov 2008.

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CASES

Edited by Emma Hitchings

The magnetic importance of a prenup in the paradigm caseCrossley v Crossley [2008] 1 FCR 323

Juliet Chapman, 1 Hare Court

Keywords: ancillary relief; prenuptial agreements; Community of Property;Matrimonial Causes Act 1973, s. 25

Introduction

Prenuptial agreements (prenups) were once not worth the paper they were written

on. It was considered contrary to public policy that couples draw up an agreement

before their marriage contemplating its end. Furthermore, it was argued that theState should not be compelled to support ex-wives (typically) who have contracted

out of their ancillary relief claims against their ex-husbands. Nowadays, however,

although not legally binding in English law, prenuptial agreements are gradually

being granted greater recognition by the English courts. Crossley v Crossley is the

latest case which furthers this trend.

Two millionaires married in 2005 having signed a prenuptial agreement which

stated that in the event of a divorce, no ancillary relief claims would be brought byeither party. However, when their marriage broke down just over a year later, the

wife commenced a claim for financial provision against her husband. In the legal

proceedings that followed the prenuptial agreement was highly influential. In the

High Court the judge felt that the agreement enabled him to fast-track the usual

ancillary relief procedure, whilst in the Court of Appeal Lord Justice Thorpe,

upholding the lower court’s decision, confirmed the ‘magnetic importance’ of the

prenup in what he described as the ‘paradigm case’.

Here, we will explore the potential ramifications of the latest prenuptial

agreement case. Where does Crossley leave prenuptial agreements in English law and

who is this case likely to affect? In his judgment, Thorpe LJ likened the Crossley

prenup to a European-style marital property regime. He also noted that were we to

recognise prenuptial contracts, the divide between our system and the European civil

law system, namely a Community of Property regime, would narrow. In light of

these comments and the fact that the prenup in this case was given seminal

importance, what implications does this case have for English law?

The facts

Stuart and Susan Crossley became engaged just a few months after they met when he

was aged 60 and she 48. Mr Crossley, worth £45m, was a property developer who

*Email: Juliet.Chapman.1@city.ac.uk

Journal of Social Welfare & Family Law

Vol. 30, No. 3, September 2008, 233–241

ISSN 0964-9069 print/ISSN 1469-9621 online

# 2008 Taylor & Francis

DOI: 10.1080/09649060802550709

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had been married once before and had a long-term relationship by which he had four

children. Mrs Crossley, an ex-model, was worth approximately £18m. She had been

married three times previously and was the mother of three children. Following

negotiations and advice from experienced lawyers, the couple signed a prenuptial

agreement which determined that on divorce neither one of them would apply for

financial relief against the other; each would leave the marriage with only the goods

they had bought in and that any joint property would be equally divided.

Fourteen months after the marriage, the couple separated and, in August 2007,

Mrs Crossley petitioned for divorce. Then, in early September, she sought financial

relief from Mr Crossley by filing a form A which triggered the dates for the usual

ancillary relief procedure: in November, the exchange and filing of Forms E and the

filing of First Appointment documents and questionnaires; in December, a First

Appointment in the Principal Registry. In response to his wife’s financial relief claim,

which clearly disregarded the terms of the prenuptial agreement, on 20 September

Mr Crossley issued summons seeking an order that his wife should show cause why

her ancillary relief claims should not be dealt with in accordance with the prenuptial

agreement; he also sought directions to depart from the usual ancillary relief

procedure.

The legal proceedings

On 30 October Bennett J in the High Court heard a directions appointment on Mr

Crossley’s summons. Without hearing oral arguments and merely on the strength of

counsel’s written arguments, he decided that the parties should file Forms E without

the customary documents or questionnaires. Instead, in recognition of the

compelling nature of the prenup, he thought that the parties should explain in

their Forms E why the prenup should or should not be a ‘knock-out blow’. He

considered that the overriding objective contained in Family Proceedings Rules

1991, r.2.51D, that the court deal with cases justly, gave him scope to ignore r.261B

which governs procedure before the First Appointment. The judge accordingly

adjourned the December 2007 First Appointment to be held on the same date as the

husbands summons, in February 2008.

Mrs Crossley objected to this abbreviated procedure and in response sought to

argue that the issue could not be dealt with as a preliminary point and that her

husband had not made full disclosure about his assets in the drawing up of the

prenup. She wished to be allowed to file a questionnaire to further her case about

undisclosed assets that she alleged her husband had in Andorra and Monaco.

Accordingly, Bennett J heard the parties’ oral arguments, yet maintained his initial

direction that the First Appointment be adjourned to a hearing date in February

2008. He also maintained that Forms E should be filed and exchanged without the

supporting documents, but stated that the wifes legal team should write to the

husbands before the exchange of Forms E setting out her case on non-disclosure

which the husband should answer in his Form E. This unusual case management

would be faster, cheaper and recognised the prima facie compelling nature of the

prenuptial agreement in this case.

On 14 November, before the parties had filed the abbreviated Forms E, Mrs

Crossley appealed against the High Courts ruling. In terms of the case management

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employed, she argued that the judge was wrong to direct that Mr Crossley’s

summons be heard as a preliminary issue, as to do so would effectively oust the

jurisdiction of the court and its obligation to evaluate all of the criteria in section 25

of the Matrimonial Causes Act 1973. She also sought to persuade the court that the

judge was mistaken to give the overriding objective greater prominence than r.261B

which she argued was mandatory. She felt aggrieved at being precluded from filing aquestionnaire as she considered that this prevented her from challenging her

husband’s disclosure.

The Court of Appeal was unconvinced by Mrs Crossley’s arguments in light of

her husband’s case which was heavily supported by the persuasive prenup, and

upheld the lower court’s decision.

Regarding the procedural aspects of the case, which had been significantly

altered due to the weight accorded to the prenuptial agreement, Thorpe LJ praised

Bennett Js case management and the importance he had attached to the overriding

objective in r.2.51D, namely to deal with cases justly. He confirmed that in the

judge’s general duty of case management, he is required to identify the issues early on

and regulate the extent of disclosure of documents, etc. so that they areproportionate to the issues in question. Thus, given the compelling nature of the

agreement in question, the judge had not erred in fast-tracking or short-circuiting the

financial relief procedure. Further, he held that the wife was not precluded from

challenging the husbands disclosure as an alternative mechanism had been provided

to her by means of a letter to be answered in the husbands Form E.

Thorpe LJ found that the judge had not directed Mr Crossley’s summons to be

held as a preliminary issue. As counsel for Mr Crossley had argued, the prenuptial

agreement did not and could not oust the court’s jurisdiction, rather the court must

conduct the s. 25 exercise by reference to all the statutory criteria, of which the

prenuptial agreement was a very important aspect. Other factors which supported

Mr Crossley’s contention that the wife should not receive financial relief were the

short duration of the marriage, the fact that there were no children to the marriage,

and the fact that both parties had been married previously and had substantial,independent wealth. As such, according to Thorpe LJ, the facts of the case were

‘quite exceptional’, but ‘if ever there is to be a paradigm case in which the court will

look to the prenuptial agreement as not simply one of the peripheral factors in the

case but as a factor of magnetic importance, it seems to me that this is just the case’

[para. 15].

Discussion

Both the High Court and Court of Appeal’s decisions and management of the

Crossley case demonstrate that considerable weight can now be attached to

prenuptial agreements in English law; in that respect the law in this area has greatly

evolved.

The evolution of prenups in English law

Considered contrary to public policy and fearful about the financially stronger party

exerting pressure on their future spouse, the English courts have traditionally refused

to uphold prenuptial agreements. This approach could be seen as far back as the

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1920s, in the case of Hyman v Hyman [1929] AC 601 which, despite being concerned

with a deed of separation, has come to be influential in relation to prenups also. In

that case the deed of separation was held to be invalid both for its attempt to oust the

court’s jurisdiction in dissolving a marriage and because it was thought to be in the

wife’s and public’s interest that the wife should be prevented from frustrating her

claim for financial relief. Eight decades later the courts were still singing the same

tune about prenuptial agreements. In F v F (Ancillary Relief: Substantial Assets)

[1995] 2 FLR 45, Thorpe LJ clearly stated that ‘in this jurisdiction they must be of

very limited significance’ in a case in which the agreement would have had a

‘ridiculous result’.

But just two years later in S v S (Divorce: Staying Proceedings) [1997] 2 FLR

100, a perceptible change of tact could be noticed when Mr Justice Wilson criticised

the law’s approach as being contrary to personal autonomy and warned against

Thorpe LJ’s words in F v F being taken out of context. He went on to predict that

‘there will come a case … where the circumstances surrounding the prenuptial

agreement and the provision therein contained might … prove influential or even

crucial’ (p. 104). Thereafter, more and more weight was attached to prenuptial

agreements in various cases. For example, in M v M [2002] 1 FLR 654 a Canadian

couple signed a prenuptial agreement whilst the wife was pregnant. The agreement

stipulated that upon divorce she should receive a lump sum of £275,000. After five

years of marriage which had produced one child, the parties divorced and the wife

attempted to argue that she should not be bound by the agreement as she had been

pressurised into it. The presence of children in a marriage is often considered a prime

reason not to recognise the prenup as under section 25(1) MCA children are the

court’s first consideration in deciding how to exercise its powers relating to financial

provision; their well-being therefore takes priority over all other factors. In this case,

however, the agreement proved to be influential, in part because the children were

specifically contemplated by the terms of the agreement. The husband, worth £7.5m,

was ordered to pay only £875,000 to the wife, with the court acknowledging that the

prenup had worked ‘to guide the court to a more modest award that might have been

made without it’. The decision was perhaps all the more surprising as the Court

acknowledged that the agreement would not have been upheld in Canada, where it

was originally signed.

The most decisive pro-prenuptial agreement case however, prior to Crossley, was

K v K [2003] 1 FLR 120, in which the High Court judge not only substantially upheld

the terms of couples’ prenuptial agreement, but interestingly went as far as to set out

a check-list to determine the influence of a prenup. The check-list extensively covers

any forms of pressure placed on the parties and also includes: the parties’

understanding of the agreement, its content, whether there had been full disclosure,

whether the prenup was entered into in the knowledge that there would be a child

and, more generally, whether there are any grounds for concluding that injustice

would be done if the parties were held to the terms of the agreement.

The parties in K v K had signed a prenup which provided that upon dissolution

within five years of the marriage the wife should receive a lump sum of £100,000. The

agreement was signed the day before the wedding, which was itself arranged whilst

the wife was pregnant. Whilst both these factors have traditionally been compelling

reasons for the court to shy away from prenups because they have the potential to

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indicate that the agreement was not freely entered into, in this case the court stuck

substantially to the terms of the agreement. Having satisfied itself that the parties

had had independent legal advice, the husband, worth approximately £25m, was

ordered to pay the wife a lump sum of £120,000, in addition to periodical payments

for the wife and maintenance for the child (neither of which were covered in the

prenup). K v K clearly highlights a modern and much altered attitude as to the place

of prenuptial agreement in English law, both in terms of the facts of this case, and

the progressive move by the High Court judge in setting out a test to determine

whether a prenup will be binding.

Crossley and prenups in English law

The result of Crossley, attributable to the importance assigned to the prenup,

appears perhaps less novel when one considers that over the last 10 years such

agreements have played an increasingly significant role in various cases. However,

even after 10 years of gradual evolution, and after the bold decision of K v K, they

still fall short of being legally binding. Rather, they will be taken into account by a

court exercising its discretion under section 25 of the Matrimonial Causes Act 1973,

either as part of ‘all the circumstances of the case’ (s. 25(1)) or as ‘conduct it would

be inequitable to disregard’ (s.25(2) (g)).

To some extent it is hard to predict the exact effect that Crossley will have in

English law as the Court of Appeal in the case was not actually applying section 25

criteria, but rather approving a lower court case management decision. However,

one potential interpretation is that, in certain cases, prenups will assume greater

procedural importance than other s. 25 factors. In other words, a hierarchy in the s.

25 factors has been created – in that occasionally such an agreement can fast-track

the case in a way that other s. 25 factors usually cannot. In that sense, although not

binding, today a prenup in the correct circumstances has the potential to be

substantially determinative of the outcome of the ancillary relief proceedings.

In certain respects, however, Crossley is inherently limited. Although in the case

‘magnetic importance’ was attached to the prenup, this was because it was a

‘paradigm case’ which was, as admitted by Thorpe LJ, ‘quite exceptional on its facts’

[para. 15]: the very brief duration of the marriage (barely over a year); the fact that

no significant wealth had been accrued during the marriage; the fact that both

parties had previously been married; the great independent wealth of the parties and

the fact that the marriage was childless. Arguably if the above factors are not

present, a prenuptial agreement may be just another factor for the court to consider.

How will this affect other cases? It could be suggested that only in a small

minority of cases will prenuptial agreements be considered of magnetic importance.

This is due to three main considerations which will be addressed in turn.

First, it is likely that only the well-off will be able to afford the gamble of

entering into an expensive persuasive prenup given the unsettled nature of the law

relating to these agreements. Those most likely to be interested in signing prenups to

protect their assets are also, probably, the better off.

Second, the weight attached to the prenup in Crossley will only be replicated in

cases involving very short marriages, as was also the case in K v K. In White v White

[2001] 1 AC 596 the House of Lords determined that the court had an overriding

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objective in ancillary relief claims to produce a fair outcome which could be achieved

by checking the provisional award, deduced by consideration of all the section 25

factors, against a yardstick of equality. In McFarlane v McFarlane; Miller v Miller

[2006] 2 AC 618, the Law Lords identified three requirements of fairness: sharing,

needs and compensation. Although there are often compelling reasons to depart

from the attractive fairness of an equal division of assets, in longer marriages it

would be highly unusual that the parties’ wealth would not be substantially shared.

It would also usually be contrary to the concept of justice that if the assets permitted,

a spouse to a long marriage would not have his/her needs catered for. Furthermore,

the longer the marriage the greater the probability that, in addition to sharing and

needs, one spouse will be entitled to an element of compensation for relationship

generated disadvantage.

Last, as soon as children enter the equation the importance of a prenup will

reduce significantly, unless, as was the case in both K v K and M v M, children are

specifically contemplated in the terms of the agreement. This is due to the fact that

children are the court’s first consideration (s. 25(1)) when deciding ancillary relief

provision and take priority over all other s. 25(2) factors, which, of course, includes

prenuptial agreements.

In summary then, the Crossley case will probably have most influence for very

wealthy individuals, who were married for a very short period and who have no

children together; in other words, the Crossleys and very few others.

Party autonomy

A close reading of the prenup case law reveals that the element of contractual

autonomy has been a powerful influence in the evolution of this area. This was

explicitly recognised in Crossley by Lord Justice Thorpe when he stated that ‘the role

of contractual dealing, the opportunity for the autonomy of the parties, is becoming

increasingly important’ [para. 17]. This attitude echoes previous cases in which

prenups have been determinative of the financial proceedings outcome. In S v S, for

example, Wilson J stated that he could ‘find nothing in s. 25 to compel a conclusion so

much at odds with personal freedoms to make arrangement for ourselves’ (p. 104) so

as to not recognise those agreements. Contractual autonomy is highly regarded in

other areas of law; in the commercial world, for example the courts will not intervene

to protect us from our own foolishness. Even in family law, an area which is

complicated by emotions and complex relationships, personal autonomy to contract is

generally well respected; postnuptial settlements, separation agreements, cohabitation

contracts, deeds of gift and declarations of trust are all enforceable in law.

So why should prenuptial contracts be treated differently and, despite their

evolution, still remain legally unenforceable? In 1929 when Hyman was decided the

public policy argument trumped. At that time, however, women were generally

financially weaker and more vulnerable; certainly marriage was not the partnership

of equals that it is considered to be today. Furthermore, on divorce, itself a much

rarer occurrence, it was not necessary to protect assets as the law did not provide for

capital transfer.

Given the high number of marriages that end in divorce nowadays, it is certainly

understandable that adults, particularly those with substantial assets, might wish to

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determine before marriage how their wealth should be divided in the unfortunate,

but statistically common event of a divorce. This is particularly the case under the

current legal framework which is characterised by great judicial discretion and which

can allow assets to be divided up equally in order to achieve fairness. Indeed, given

the court’s extensive discretion, not to allow parties to contract out of the

unattractive possibility of losing up to half their assets could conceivably discourage

couples from marrying in the first place, a concern that was voiced in the 1998

government Green Paper ‘Supporting families’.

In addition to this legal framework, the current legal climate, especially in

relation to cases where assets exceed needs, provides another incentive to make

prenups legally binding. The law relating to ancillary relief is highly unpredictable;

indeed some have likened it to entering a casino, or playing an extremely unfair

board game during which the rules keep changing (Greensmith 2007). This is

particularly so for the very well off, where the elements of compensation and sharing

produce rife grounds for contention. Recent studies have confirmed that the furore

and complications surrounding big money cases has had very little practical effect on

the everyday small money case (Hitchings 2008). For the latter, a less controversial

needs-based approach prevails, which is very much concerned with practicalities and

stretching modest resources to meet the parties’ needs.

The concept of ‘fairness’ which has governed this area of law since the seminal case

of White is laudable; however, as has been expressed by the highest members of the

judiciary it is inherently uncertain and subjective. In White Lord Nicholls himself

admitted that ‘fairness, like beauty, lies in the eye of the beholder (p. 600); in Miller;

McFarlane he conceded that ‘fairness is an elusive concept’ (para. 4). The nature of the

relationship between the strands of fairness as indentified in Miller; McFarlane (needs,

compensation and sharing) remains unclear, as do various critical issues, such as which

assets are pre-marital and if and how they should be divided, which are beyond the

scope of this article. However, as mentioned previously, these more complicated areas

by their very nature tend to cause problems in big money cases only; indeed Hitchings’

recent findings (above) suggest that in many small money cases, practicalities, rather

than legal doctrine, can be determinative of the outcome of the case.

Prenuptial agreements can supply the certainty and predictability that our current

ancillary relief provisions desperately lack in big money cases. In short, parties should

have the contractual freedom to determine for themselves what they consider to be a

fair result. In doing so they would be able to assume responsibility over their finances

and ensure that they are not exposing themselves to the future costs of uncertain and

lengthy ancillary relief litigation. An effective, comprehensive and coherent law on

prenuptial agreements would also allay the fears that couples would, rather than

disputing s. 25 factors, instead argue over questions such as the validity of the prenup

and its content. The autonomy that legally enforceable prenups would provide might

feasibly strengthen the institution of marriage and encourage those worried about

modern divorce rates and ancillary relief outcomes to get married.

Yet another step towards a system of Community of Property in English law?

The prenuptial agreement in Crossley was classified by Thorpe LJ as akin to a

marital property regime. Many civil law European countries boast a system whereby

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a Community of Property is created and marital assets are shared equally either on

marriage or divorce. Whilst these systems vary from country to country, in most, in

addition to the default position, couples usually have a number of options which

they can contract into before marriage. Alternatively, in some jurisdictions a

prenuptial agreement can be signed to contract out of the default position. The effect

of an express agreement (whether it is the default position or another) made before

marriage is that on divorce, property is shared in accordance with the couples’

agreement, rather than being split to give effect to an individual judge’s concept of

fairness.

Whilst a system of Community of Property is only concerned with the division of

marital assets, and leaves maintenance to be calculated separately by the courts, the

advantage of such a system is clarity, predictability and the autonomy granted to the

parties to arrange their property affairs as they consider just. In France, for example,

(Bradley and Drouet-Bassou 2003) there are four regimes into which marrying

parties can enter. The majority of French couples are governed by the default

Community of Property regime which provides that all assets and income acquired

during the marriage are the spouses’ common property, irrespective of who bought

what. On divorce all this property, except assets obtained by inheritance or gift, is

split equally. If this position is not attractive to the couple they have three further

options. They can enter a Universal Community of Property, which is very similar to

Community of Property, except that inheritance and gifts, etc. are also shared on

divorce. Alternatively, they can enter a system of Sharing of Acquired Assets, which

involves the parties’ assets being separated during the marriage, but on divorce the

division is assessed bearing in mind each spouse’s financial contributions. Last there

is the Separation of Assets to which Thorpe LJ specifically likened the Crossley

arrangement. Under this system the spouses chose not to share any property or

assets and each remains free to use and dispose of their own assets. Issues regarding

matrimonial assets aside, the French court is left solely to decide whether to grant

compensatory maintenance, which is concerned with compensating one spouse for

the disparity of standard of living created by the dissolution of the marriage. This,

however, is not habitual; according to Ministry of Justice statistics gathered in 1996,

it is only ordered in approximately 15% of divorces (Bradley and Drouet-Bassou

2003).

Cretney (2003) considers that the House of Lords case of White and the Court of

Appeal case of Lambert v Lambert [2002] EWCA Civ 1685, had the effect of

introducing into English law a regime of deferred Community of Property, limited to

acquisitions, for big money cases. Prior to White, the wife’s claim was limited by her

‘reasonable requirements’, but following those decisions the spouse was entitled on

divorce to a prima facie equal share in the assets. According to Barlow (2007) Miller;

McFarlane worked to bring us even closer to a Community of Property approach in

cases where assets exceed needs. That decision confirmed that Lord Nicholls’

yardstick of equality could equally be used as a starting point as a check against the

provisional award (thereby creating a stronger presumption of equal sharing), and

the House drew a distinction between matrimonial and non-matrimonial property, a

distinction which resonates with the Community of Property approach.

Crossley is the latest case that brings big money cases further in line with the civil

jurisdictions. As they would have been entitled to do in a civil law style system of

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Community of Property, Mr and Mrs Crossley were allowed to arrange their

financial affairs prior to their marriage in the way they saw fit. This agreement was

as good as upheld for the couple, which resulted in them contracting out of thedefault position, which itself is becoming ever closer to the Community of Property

approach. This was explicitly recognised by Thorpe LJ in Crossley when he said

‘Undoubtedly there would be some narrowing between this European divide if

greater opportunity were given within our justice system for parties to contract in

advance of marriage, to make provision for the possibility of dissolution’ [para. 17].

Furthermore, by creating a hierarchy in the s. 25 factors, the case has limited judicial

discretion, albeit in very exceptional circumstances, but in circumstances which are

likely to affect the affluent. A restriction of judicial discretion also chimes withEuropean systems.

Such a result is hardly surprising when one considers the English system. Whilst

for the average case the system which, by means of judicial discretion, seeks to

produce a fair result by satisfying the parties’ needs probably still functions

adequately, it is clear that for the exceptional, big money cases the situation has

changed. For the wealthy, as our system has moved closer to a Community of

Property (characterised by equal division of assets and the exclusion of pre-marital

assets) the need for prenups, another crucial element in the functioning of the civiljurisdiction system, has also become glaringly apparent. This has been recently

recognised by the Law Commission which is due in 2009 to start a project to examine

‘marital property agreements’ (Law Commission 2008). The Law Commission

expects to draft a report and produce a Bill on these agreements, which they consider

to be of ‘great social importance’, by late 2012. This need has also been recognised by

the evolution of prenup cases and most recently Crossley v Crossley. Now the

fabulously rich who enter into very short marriages have the option to contract out

of the default position and specify how they wish their assets to be divided (or not asthe case may be) in the event of their divorce. Whilst our common law discretionary

and unpredictable system will remain for the average case, Crossley v Crossley

suggests that the wealthy can expect to be governed by a system of Community of

Property in all but name.

References

Barlow, A. 2007. Community of Property – the logical response to Miller and McFarlane?

Bracton law journal, 39, 19–34.

Bradley, C. and Drouet-Bassou, K. 2003. A world apart S.J., 147(31), 917–919.

Law Commission 2008. http://www.lawcom.gov.uk/marital_property.htm, 29.09.08.

Cretney, S. 2003. Community of property imposed by judicial decision. L.Q.R., 119(Jul),

349–352.

Greensmith, A. 2007. Let’s play Ancillary Relief Family law, 37(203).

Hitchings, E. 2008. ‘Everyday cases in the post-White era’ Family Law, 38(Sep), 873–879.

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at 1

0:03

11

Oct

ober

201

4