Book Review

Marital Agreements and Private Autonomy in Comparative Perspective, Jens M Scherpe (Editor), [Oxford: Hart Publishing, 2012, 532pp, hardback, US$120] ISBN 9781849460125

Reviewed by Keith Hotten

Hong Kong Law Journal

Following the Court of Final Appeal’s decision in LKW v DD (2010) 13 HKCFAR 537 and the pressing need for lawyers and scholars in Hong Kong to address the issue, this book contains a timely and informative collection of 16 essays on how marital agreements are approached in 13 different jurisdictions around the world.

The landmark United Kingdom judgment of White v White [2000] UKHL 54; [2000] 3 WLR 1571established that the overarching criterion to be applied in ancillary relief proceedings was not “reasonable requirements” (which invariably prejudiced the wife) but that of fairness. On 12 November 2010, the Court of Final Appeal in LKW v DD unanimously agreed that the principles in White should be followed in ancillary relief claims in Hong Kong. From this date, the Family Courts have approached s 7 of the Matrimonial Property and Proceedings Ordinance (the so-called “s 7” exercise), to achieve this objective, having regard to the statutory criteria that include the conduct of the parties and all the circumstances of the case.

Therefore, the question arose in the United Kingdom—under provisions which more or less mirror s 7 in Hong Kong—as to why any marital agreement, where the facts allowed, should not be taken into account and be enforced as a contract?  Indeed, this was noted when the question of marital agreements was addressed in passing in LKW v DD, per Ribeiro PJ (para105): “The ‘conduct’ heading is sometimes used in the case-law to refer to ‘positive conduct’ … It has also been suggested that prenuptial and post-nuptial agreements might be classified as instances of ‘conduct’. I would be more inclined to regard them as relevant matters brought in under the general rubric of … all the circumstances”.

Marital agreements, whether pre- or post-nuptial, remain unenforceable in Hong Kong as they do in England and Wales. However, following a number of Court of Appeal’s decisions which, on their facts, generally commended such a view, a clear consensus formed (see Crossley v Crossley [2007] EWCA Civ 1491; [2008] 1 FLR 1467, for example), that when considering the grant of ancillary relief, whilst a court is not obliged to give effect to marital agreements and the parties cannot by agreement oust the jurisdiction of the court, nevertheless the court may give appropriate weight to such an agreement.

Matters reached a head following the Privy Council’s decision in relation to a post-nuptial agreement in MacLeod v MacLeod [2008] UKPC 64, [2010] 1 AC 298, and in October 2010, the UK Supreme Court’s landmark decision in Granatino v Radmacher [2010] UKSC 42 provided a clear view of the court’s approach to pre- and post-nuptial agreements against the background of the scheme laid down in White and later Miller/McFarlane [2006] UKHL 24. In Radmacher, the court held (Lady Hale dissenting) that contrary to the previous line of authority that marital agreements were against public policy and therefore could not be relied upon to oust the jurisdiction of the courts (particularly where young children may be affected), they were now to be given effect so long as any agreement was freely entered into by both parties, who had been independently legally advised without undue influence or pressure, and informed of its implications.

Hong Kong has yet to consider Granatino v Radmacher in any major appellate decision (see ARAV v VP, LJ; [2011] 3 HKLRD 759), but this can only be a matter of time. Once a suitable case does reach the Court of Final Appeal, whilst the future is always contingent, Hong Kong is almost certain to follow Radmacher on marital agreements for the same reason it followed White on the proper approach to the division of assets upon divorce in LKW v DD. Namely, the two jurisdictions’ statutory provisions for dealing with ancillary relief claims are more or less identical. Certainly, it seems unlikely that local “cultural” norms would trouble the Court of Final Appeal here. When the issue was raised in LKW v DD, it was given short shrift when it was suggested that there might be cultural reasons for rejecting English decisions in Hong Kong as possible sources of guidance upon the breakdown of (Chinese) marriage. As was noted, per Ribeiro (at Para 37), counsel for the Respondent “sought to argue that one such reason might be that the values they incorporate are not values appropriate to the circumstances and culture of Hong Kong with its largely Chinese population.  I will say at once that I can see no basis for that submission”.

Scherpe’s book contains three interesting and informative chapters on England and Wales including one that will inevitably be of central interest to Hong Kong lawyers and scholars by Professor Elizabeth Cooke. Cooke is the Law Commissioner leading the forthcoming Law Reform Commission Report on the suggested need for statutory reforms in the UK post-Radmacher. Although the volume is largely a comparative survey of the legal position on marital agreements around the world, the various essays in this book are instructive even though marital agreements may ultimately be considered in the light of English authority in Hong Kong. Certainly, the volume’s central thesis on the question of how to balance contractual autonomy whilst protecting the vulnerable in a democratic society will remain central to any consideration of the issues raised in any particular case. Secondly, given the increasing number of expatriate divorces coming before the courts in Hong Kong—many also trailing marital agreements contracted in Europe and elsewhere—this volume will give any busy practitioner an immediate insight into the law and status of the agreement in the country in which it was adopted.

As has been pointed out by the English courts post-Radmacher, see B v S (Financial Remedy: Marital Property Regime) [2012] EWHC 265 (Fam), per Mostyn J “there is a marked difference between a negotiated pre-nuptial agreement which specifically contemplates divorce and which seeks to restrict or influence the exercise of discretion to which the law gives access and an agreement made in a civil jurisdiction which adopts a particular marital property regime”. These “key features” are noted by Professor Cook in her chapter. For example, it is made apparent to English (and for the reasons outlined above Hong Kong) readers that it is not enough merely “… to give a balanced picture of the range of legal structures and approaches to marital property agreements but also to warn the reader away from misleading analogies … it is too simplistic to say that marital property agreements are enforceable throughout Europe and that they therefore should be enforceable in England and Wales”. Indeed, the Law Commission Consultation Paper No 198 “Marital Property Agreements” (11 January 2011) at para 4.6 itself states that “…the vast majority of European countries operate marital property regimes. These share three features. One is that they are systems of rules for the division of property on death, divorce or bankruptcy. That division is equal unless a couple have made it otherwise by contract. Another is that they are not concerned with what is usually referred to in the European context as maintenance, or income provision for spouses and children after divorce. The third is that they all involve the facility for couples to opt for a change of regime, before or after marriage, by contract.”

As outlined, the book makes clear that the legal position on marital agreements, certainly in Europe, is one that contrasts markedly with the position in England and Wales. It is nevertheless a useful—indeed currently, possibly the only—starting point for judges, practitioners and students who wish to understand the wider issues and how other jurisdictions approach nuptial agreements. In this context, Scherpe is to be commended in marshalling these well-written and informative international comparisons of pre- and post-nuptial agreements. They range from Australia and New Zealand, the United States and most of Europe, as well as Singapore and the UK Law Commission’s on-going work noted above, which will inevitably become a central point of focus in Hong Kong too.

One of the central questions posed by Scherpe to his various contributors, via the book’s initial questionnaire, is “how much autonomy legal systems allow or should allow spouses to regulate their financial relations themselves?” The resulting chapters are extremely informative. In most jurisdictions, this party autonomy and freedom of contract is, almost certainly, rightly, limited by law in situations where there is or may be an imbalance of power, as it is in consumer law or labour law as well as matrimonial law. Further, this has to be considered in the context of the rights and freedom of individuals to enter into contracts to regulate their relationships with other contracting parties. The question asked is why marital relationships should not be similarly privately regulated? At least in the United Kingdom, until Radmacher, the consequences of doing so were thought to be limited when exercised in anticipation of separation or divorce whether before, after or during a marriage. In considering the statutory criteria, the Supreme Court held [at paras 75–76] that a 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. Leaving outstanding the difficult question of the circumstances in which it will not be fair to hold the parties to their agreement to be determined by the facts of any particular case.

We learn that Australia, for example which, as in England and Wales and Hong Kong, otherwise allows a wide statutory discretion to the courts to distribute marital property upon divorce, has recognised binding marital agreements (made prior, during or after marriage) under its Family Law Act since December 2000. Further, there is absolutely no need for any court to “approve” the terms of the contract but merely be satisfied, as with the terms of any contract, that it was not made under duress or was otherwise invalid and that the couple had signed certificates to prove they had each taken independent legal advice. New Zealand by contrast gives minimal statutory discretion to its courts under the Matrimonial Property Act 1976 (as amended in 2001) but allows wide discretion to parties to “contact out” of the statutory regime by way of a marital agreement.

Divorce provisions in the United States are regulated under State law rather than Federal law and therefore vary but, as is generally well known, most States give effect to pre-nuptial agreements in various ways. Interestingly, according to Ira Ellman’s chapter, whilst the current law appears to be unsettled, the complexity in the United States relates to enforcement of the principle of marital agreements—particularly across State boarders inter alia under the Uniform Premarital Agreement Act, which falls within the US Statute of Frauds—rather than the principle of marital agreements per se. By contrast, and less well known, perhaps, is that at the point of marriage in The Netherlands a “general community of property exists by operation of law” and this community property “comprises, in principle, all of the assets and all of the debts of both spouses” upon marriage. Unsurprisingly perhaps, the private autonomy of couples to enter into marital agreements is, whilst not unlimited, extremely broad and something the wealthy in Holland consider more or less unarguable. If the Netherlands is at one extreme in having a “universal community of property” upon marriage whilst allowing parties a very wide discretion to opt out by way of a contractual marital agreement, nevertheless the rest of the European States covered in this book have statutory provisions upon divorce which are generally in favour of recognising marital agreements in one form or another.

Whilst the Republic of Ireland and Singapore recognise marital agreements, their status in being ultimately unable to contact out of the jurisdiction of the court remains, in this respect at least, similar to the position in Hong Kong. In Europe generally though, the position is very different. In Austria for example, “on the whole, spouses have a considerable degree of freedom … in arranging matters of family law by mutual agreement” and there is a wide-ranging freedom of contract that results in “approximately 90 per cent of all divorces are settled by mutual consent”. In France and Belgium, “the default regime attaches huge importance to spousal solidarity by creating community property which is owned and administered by both spouses … [and where] … solidarity is achieved by an equal division of the community property after dissolution”. Unlike Hong Kong, the courts do not enjoy discretionary powers and husbands and wives “enjoy a large degree of autonomy to make a binding marital contract … this reflects the idea that, although marriage is a community of life, the spouses should decide to what extent the marriage should also be a community of property”. In Germany, spouses are generally free to determine their relations by marital agreements but some recent uncertainty has arisen where such private autonomy as previously existed has recently been “considerably limited by a system of judicial review which strives to avoid marriage-related disadvantages being borne by one of the spouses alone”.

Spain, we learn, “takes a favourable approach to the exercise of private autonomy in family relationships. The idea that spouses must be free to adapt the property and financial consequences of the marital relationship to their preferences is deeply rooted in Spanish legal culture … spouses, irrespective of whether they are subject to a system of community of property or to a system of separation of property, are allowed to conclude pre-marital or marital contracts with the aim of excluding the application of the default rules or making adjustments to them.” Finally, Sweden too has a statutory “default regime” often referred to as a “deferred community property regime”. Whereby usually “all property owned by a spouse becomes part of this regime upon marriage and is called ‘marital property’. Only that property which is excluded by a marital property agreement between the spouses falls outside this regime. This property is called “separate property”. Property that a spouse has acquired from a third person through inheritance, will or gift on condition that the property is to be the recipient’s “separate property” also falls outside the regime. It follows that spouses – or spouses to be – who wish to exclude property owned by either one of them from the deferred community property regime must conclude a marital property agreement to such effect.”

Given this wide-ranging analysis, there seems little doubt that this well-researched and edited book will be essential reading for all scholars, lawyers and judges who may have to grapple with the issue of the legal status of marital agreements in the coming months and years.

Dr. Keith Hotten