Ancillary Relief – MacLeod v MacLeod [2008] UKPC 64

[2009] Fam Law 178

March 2009

Family Law > 2009 > March > Case Reports

Family Law

(Privy Council; Lord Scott of Foscote, Lord Walker of Gestingthorpe, Baroness Hale of Richmond, Sir Henry
Brooke, Sir Jonathan Parker; 17 December 2008) [2009] 1 FLR 641

The husband and wife were both born and brought up in the USA and married in Florida. The wife was 22 years
younger than the husband and there was a considerable wealth difference between them, the husband having
amassed some £7m from business and property development. On the day of the marriage they entered into a pre-
nuptial agreement; each was separately advised and made disclosure. The agreement provided that each spouse
should retain what they brought into the marriage and for ownership of after-acquired property to depend on legal
title. In the event of divorce each party waived the right to maintenance. Properties owned jointly were to be divided
equally. The husband was to pay the wife a fixed lump sum for each year of marriage. The agreement was
governed by Florida law. A year after the marriage the couple moved to the Isle of Man where they made their
home in a substantial property bought in the name of a company owned by the husband. They went on to have 5
children. After 8 years of marriage they entered into a post-nuptial agreement; they were separately represented
and negotiations were protracted. At that time the husband's assets were worth nearly £14m and the wife's
£184,000 (this sum being her half-interest in a jointly owned property). This agreement was an affirmation of the
pre-nuptial agreement but with important variations. Under it, the wife received a sum to invest, a monthly
allowance for herself and her grandmother, the costs of obtaining a further university degree and the husband's
half-share in the jointly owned property. On divorce she was to receive £1m, adjusted for inflation; the financial
needs of the children were to be addressed separately. The post-nuptial agreement declared itself to be 'the full and
fair settlement of the rights of both parties'.

On divorce, the wife applied for ancillary relief under the Manx Matrimonial Proceedings Act 2003 (the equivalent of
the Matrimonial Causes Act 1973 in England and Wales); she asserted that the agreements should be disregarded
altogether. The husband asserted that the post-nuptial agreement should be upheld. The Deputy Deemster gave
considerable weight to the post-nuptial agreement and only departed from the husband's case in relation to the
home to be bought for the wife and children. He rejected the husband's proposal that such a property should be
purchased on a trust until the children no longer required accommodation, and awarded the wife £1,250,000 by way
of housing entitlement, making a total lump sum of £2,525,000. Both parties appealed and their appeals were
dismissed. The husband then appealed to the Privy Council. The sole issue by now was whether the housing needs
of the wife and children should be provided for by lump sum or by a trust fund until the youngest child reached 23.

Held – allowing the appeal, and remitting the matter to the High Court for an appropriate trust deed to be drafted in
default of agreement –
(1)     It was not open to the Board to reverse the long-standing common law rule that pre-nuptial agreements
are contrary to public policy and thus not valid or binding in the contractual sense. Any change in the law
would involve considerations of difficult policy questions and was properly a matter legislative rather than
judicial development.
 Ancillary Relief – MacLeod v MacLeod [2008] UKPC 64

(2)(i)     Post-nuptial agreements were very different from pre-nuptial agreements. The couple were now
married and had undertaken towards one another the obligations and responsibilities of the married state.
There was nothing to stop a couple entering into contractual financial arrangements governing their life
together. There was also nothing preventing a married couple from entering into a separation agreement
which would be governed by ss 49–51 of the Manx Act (the equivalent of ss 34–36 of the Matrimonial
Causes Act 1973); these provisions were not limited to persons already separated or on the point of
separation. Such agreements were binding unless void or unenforceable for any other reason, such as
misrepresentation or undue influence; they were not now regarded as contrary to public policy. The statute
provided that such an agreement could be varied by the court where there had been a change in
circumstances or where it did not contain proper financial arrangements with respect to a child of the
family.
(ii)     The post-nuptial agreement in this case was a valid and enforceable agreement, not only with respect to
the arrangements made when the parties were still together but also with respects to arrangements for
them to live separately. However, the latter arrangements were subject to the court's powers of variation
and the provisions which purported to oust the court's jurisdiction, whether on divorce or during the
marriage, were void. The existence of the powers of variation did not deprive such agreements of their
utility.
(3)(i)     In determining the weight to be given to a post-nuptial agreement if an application was made to the
court, the statutory provisions governing agreements were the starting point; it would be odd if Parliament
had intended the approach to such agreements in ancillary relief proceedings to be different and less
generous. The same principles should be used as the starting point in both. The court would look to see if
there had been a change of circumstance which would make the arrangements manifestly unjust, or for a
failure to make proper provision for a child of the family. Additional considerations were an attempt to cast
onto the public purse an obligation which ought properly to be shouldered within the family (which was
contrary to public policy) and the circumstances in which the agreement was made, such as inequality of
bargaining power. The mere fact that the agreement was not what the court would have done was not
sufficient to have it set aside.
(ii)     An appeal court should be very slow to interfere with the exercise of discretion by a trial judge.
Nevertheless, the Deputy Deemster had erred in principle. On the facts there was no principled basis for
interfering with the post-nuptial agreement.

Comment

This case is of general significance because Manx law is for present purposes the same as the law of
England and Wales. In addition to its ratio decidendi, the advice of the Board contains a useful review of
the historical development of public policy in respect of agreements between spouses. Agreements to live
separately and apart were regarded as contrary to public policy by the ecclesiastical courts but enforceable
by the common law courts and eventually by equity: see eg Jones v Waite (1842) 9 Clark and F 101, Wilson
v Wilson (1848) 1 H of L Cas 538, Hunt v Hunt (1862) 4 de GF and J 221. A distinction was, however, drawn
between agreements (whether pre- or post-nuptial) providing for the consequences of an existing
separation and those providing for the consequences of future separation (Westmeath v Westmeath (1830)
1 Dow and Cl 519, Cocksedge v Cocksedge (1844) 14 Sim 244, Cartwright v Cartwright (1853) 3 de Gm and
G 982, H v W (1857) 3 K and J 382, Brodie v Brodie [1917] P 271. Hyman v Hyman [1929] AC 601articulated a
different aspect of public policy: it was contrary not only to the interests of a wife but to that of the public
to preclude herself from invoking the financial jurisdiction of the matrimonial courts. The result was harsh
for a wife whose promise not to go to court was the main consideration for the husband's promise to pay
and was not severable: Bennett v Bennett [1952] 1 KB 249 . Criticism of the law led to consideration of
separation and maintenance agreements by the Royal Commission on Marriage and Divorce 1951–1955,
Report 1956, Cmnd 9678 pp 192–195. The Maintenance Agreements Act 1957 followed. Further changes
 Ancillary Relief – MacLeod v MacLeod [2008] UKPC 64

were recommended by the Law Commission in its Report on Financial Provision in Matrimonial
Proceedings, 1969, Law Com no 25, paras 94–96. These were implemented in the Matrimonial Proceedings
and Property Act 1970 and consolidated as ss 34–36 of the Matrimonial Causes Act 1973, which deal with
maintenance agreements. One effect of the Board's opinion is to bring those hitherto commonly neglected
statutory provisions into the jurisprudential limelight.

The Board's opinion deals with two issues: (i) the enforceability as contracts of agreements made between
husband and wife, and (ii) the weight to be accorded to such agreements in subsequent ancillary relief
proceedings.

As regards the enforceability of agreements as contracts, the Board's opinion draws a sharp distinction
between pre-nuptial and post-nuptial agreements. It declined to modify by judicial means the well-
established common law rule that pre-nuptial agreements are contrary to public policy and thus not
binding, preferring to leave the field to the legislature, no doubt to be guided by the Law Commission in the
course of its current programme. However, the opinion is categorical in its recognition of post-nuptial
agreements as enforceable in the absence of a contractual vitiating factor, both at common law and under
the statutory provisions governing maintenance agreements. The Board considered that the old common
law rule that agreements which provided for future separation had disappeared, given that there was no
longer an enforceable duty on husband and wife to live together: see R v Reid [1973] QB 299 and the
abolition of the decree for restitution of conjugal rights by the Matrimonial Proceedings and Property Act
1970. Hence
'… the reasoning which led to the rule had disappeared. It is now time for the rule itself to disappear'.
That said, the vital question remained as to the weight to be accorded to agreements in ancillary relief
proceedings. The opinion of the Board reviewed the well-known case-law on both pre- and post-nuptial
agreements (including those negotiated to compromise ancillary relief proceedings) from Edgar v Edgar
[1980] 1 WLR 1410through to the recent decisions in Crossley v Crossley [2008] 1 FLR 1467 and NG v KR
[2008] EWHC 1532. The opinion of the Board appears to give more force to a post-nuptial agreement in
ancillary relief proceedings than had previously been the case in the reported authorities, according to
which it was a relevant consideration under s 25(1) or s 25(2)(g), the weight to be accorded to being
dependent on the particular circumstances of the case. Certainly a more principled approach is now
articulated. According to the Privy Council, the court will look to see whether there are reasons for
interfering with/departing from the terms of the post-nuptial agreement, such reasons being: (i) change of
circumstance producing manifest injustice; (ii) failure to make proper provision for children (these two
drawn by analogy from s 36); (iii) improper attempt to cast a family obligation on the public purse; and (iv)
circumstances in which the agreement was included, such as unfair pressure. Thus the grounds for
departure from the terms of a pre-nuptial agreement in ancillary relief proceedings are wider than those for
alteration of a maintenance agreement under s 36.

What of the weight to be accorded to pre-nuptial agreements in ancillary relief proceedings? The opinion of
the Board does not expressly pronounce on this important issue, despite declining to interfere with the
common law that such agreements are unenforceable as contracts (a different question). However, the
authorities on pre-nuptial agreements in ancillary relief proceedings (Dean v Dean [1978] Fam 161, F v F
(Ancillary Relief: Substantial Assets) [1995] 2 FLR 45, N v N (Foreign Divorce: Financial Relief) [1997] 1 FLR
900, S v S (Divorce: Staying Proceedings) [1997] 2 FLR 100, C v C (Divorce: Stay of English Proceedings)
[2001] 1 FLR 624, K v K (Ancillary Relief: Pre-Nuptial Agreement) [2003] 1 FLR 120, Ella v Ella [2007] 2 FLR
35, Crossley v Crossley (above) and NG v KR (above)) – the existing law – remains in place. A pre-nuptial
agreement is a consideration to be taken into account under s 25(1) or 25(g), all cases are highly fact-
dependent and the weight to be attached to the agreement is a matter for judicial discretion: it may be of
magnetic or peripheral importance, depending on the particular circumstances. Radmacher v Granatino
[2008] EWCA Civ 1304 (see the comment by Professor Douglas below) – on appeal from NG v KR (above) –
will no doubt be determined by reference to this wide discretion.
 Ancillary Relief – MacLeod v MacLeod [2008] UKPC 64

Rebecca Bailey-Harris

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