SCOTTISH FAMILY LAW Review
TURCAN CONNELL PRENUPTIAL AGREEMENTS NORTH AND SOUTH OF THE BORDER p4 OPTING OUT p6 THE SIMPLIFIED DIVORCE APPLICATION p7 We provide a comprehensive range of services on all aspects of Family Law which include the following: Child care arrangements Rights in the family home Interim financial support Assets acquired before marriage Business valuations Partnerships Farms Pension sharing Share options, incentive plans and co-investments Tax issues All issues relating to child related cases Trusts Cross border and international jurisdictional issues Court applications (for permission to relocate or to prevent relocation) International family law cases Prenuptial agreements Pre-civil partnership agreements Post nuptial agreements Cohabitation rights and agreements Our specialist Family Law services are supplemented by input from our colleagues within The Turcan Connell Group with expertise in the fields of Tax and Succession, Land and Property and Personal Financial Planning. We have a wealth of materials and further information which can be found at the following link: www.turcanconnell.com/familylaw 2
FAMILY LAW REVIEW Welcome Welcome to the first edition of the Scottish Family Law Review (SFLR). Alasdair Loudon, Partner and Head of Divorce & Family Law alasdair.loudon@turcanconnell.com Gillian Crandles, Partner gillian.crandles@turcanconnell.com This is intended to be a regular publication focusing on the differences between the laws of Scotland and of England and Wales in relation to family law. Many clients who come to see a family lawyer have no idea that their situation could be very different depending on which side of the border jurisdiction lies. For those of us practising north of the border, we frequently find clients telling us about news items they have seen in the national press reporting on English family law cases and we have to break the news that this has little bearing on the outcome of their own situation. However, depending on the client s particular circumstances, this can either be bad news or good news. In each issue of the SFLR we will deal with a topic which we hope may be of interest to our colleagues working south of the border. We will look to highlight the areas in which Scots family law differs, and perhaps offer some insight as to when Scots law may benefit one of your clients. This first issue of the SFLR looks at the differing approaches both sides of the border to ousting the jurisdiction of the court and how this manifests itself in the preparation of Prenuptial Agreements, Separation Agreements and the use of the Simplified Divorce Procedure. 3
TURCAN CONNELL A COMPARISON OF THE APPROACH AGREEMENTS NORTH AND SOUTH It is now fairly well recognised that the Scottish approach to various aspects of Family Law often differs from that in England. However, the extent of the differences can be underestimated. The question of enforceability of Prenuptial Agreements has for some time been a hot topic in English family law. Although the Supreme Court decision in Radmacher brought fresh attention in Scotland to the enforceability of such agreements in our jurisdiction, Prenuptial Agreements from a Scottish perspective have always been relatively uncontroversial. WHY ARE PRENUPTIAL AGREEMENTS LESS OF AN ISSUE IN SCOTLAND? Perhaps primarily because what Prenuptial Agreements have traditionally sought to do in Scotland does not depart significantly from the legislative provisions regarding financial provision on divorce as set out in the Family Law (Scotland) Act 1985 ( the 1985 Act ). In accordance with the 1985 Act, any assets which are acquired prior to the marriage (unless for use as a family home), or which are inherited or gifted by a third party during the course of the marriage, are ring-fenced from the matrimonial property, and therefore not part of the pot to be divided on separation and divorce. These are absolutes. This of course contrasts with the position in England where the non-marital status of an asset can be taken into account but is within the discretion of the Court. However, the protection offered in Scotland to premarital, inherited or assets gifted from a third party, only applies if the asset remains in the same form at the time of separation as at the time of marriage or the date when the asset was gifted or inherited. Therefore, difficulties can arise where non-matrimonial property becomes transmuted into matrimonial property during the course of the marriage and thus falls into the pot for division. Although a source of funds argument can still be advanced in these circumstances that the value of the new asset should be divided unequally in favour of the party whose non-matrimonial property funded it, the absolute protection is gone. Traditionally, therefore, Scottish Prenuptial Agreements have sought to extend the legislative protection offered in respect of non-matrimonial assets to include assets deriving from them as well. As a result, Prenuptial Agreements have often been drafted in Scotland as a common sense extension of the relatively rigid principles upon which financial provision on divorce is founded in our jurisdiction. It is perhaps unsurprising, therefore, that from a family lawyer s perspective, Prenuptial Agreements have never really raised many eyebrows. ARE PRENUPTIAL AGREEMENTS ENFORCEABLE IN SCOTLAND? The short answer is, in all likelihood, yes. There is a long history of ante-nuptial marriage contracts in Scotland. The only reason a categorical yes cannot be given is that as matters presently stand As with any contract, if a Prenuptial Agreement is to be as watertight as possible in Scotland then careful drafting is required, and if there is any connection to Scotland then we are happy to assist to ensure that all bases are covered in terms of what a Scottish Court would expect to see. 4
FAMILY LAW REVIEW TO PRENUPTIAL OF THE BORDER Prenuptial Agreements have not been fully tested by the Courts under the 1985 Act. However, the generally held view amongst practitioners is that if an agreement of this nature were before the Court then in all likelihood the terms of the agreement would be upheld. Practitioners in Scotland take this view with such certainty because the 1985 Act makes specific reference to agreements made between the parties to a marriage in relation to financial provision on divorce. Agreements between parties to a marriage regarding financial provision on divorce (case law has now established that Prenuptial Agreements fall within this definition) can only be set aside in the context of a divorce action and only if the agreement is held to be unfair and unreasonable at the time it was entered into. Provided that each party has been independently advised or has at least had the opportunity to seek such advice, then it is highly unlikely that an agreement would be held to be unfair and unreasonable at the time it was entered into. Indeed, we have specific case law (albeit dealing with Separation Agreements) which makes clear that the fact that an agreement produces an unfair result, does not itself make the agreement unfair or unreasonable. Nor does a change in the parties circumstances. Therefore, provided that both parties have had ample opportunity to understand the effect of the Prenuptial Agreement at the time of signature, it is extremely unlikely to be set aside. In essence, therefore, the crux of enforceability is believed to derive from the circumstances surrounding the signature of the agreement, rather than the provisions of the agreement itself. That having been said, there might be some provisions in a Prenuptial Agreement which would cause even a Scottish Court to wobble over its terms. For example, practitioners speculate that if all rights to claim maintenance from a spouse were excluded, the Scottish Courts might take the view, depending on the parties circumstances, that this might render an agreement unfair and unreasonable when it was entered into. As with any contract, if a Prenuptial Agreement is to be as watertight as possible in Scotland, then careful drafting is required, and if there is any connection to Scotland then we are happy to assist to ensure that all bases are covered in terms of what a Scottish Court would expect to see. The bottom line for Scottish practitioners is that if there is a properly drafted Prenuptial Agreement which both parties have had an opportunity to consider and take legal advice on, we can say with as much confidence as possible (although there is never a guarantee!) that the terms of the Prenuptial Agreement will be upheld by the Scottish Court. 5
TURCAN CONNELL OPTING OUT Our advice to clients is that when it comes to negotiating a settlement with their spouse they can contract to do whatever they want, even if this is well outwith the realms of the legislative provisions. As indicated in the article relating to Prenuptial Agreements, the English and Scottish Courts have a very different approach to Prenuptial Agreements. This undoubtedly stems in part, from the differing level of Court intervention in the two jurisdictions when it comes to the issue of opting-out of the legislative provisions in respect of financial provision on divorce. It has long been common place in Scotland for separated couples to enter into agreements setting out the terms of the financial provision which has been agreed. As referred to in the article dealing with Prenuptial Agreements, a Separation Agreement will be binding on the parties unless, in the context of a divorce action, the Court determines that the agreement should be set aside as being unfair and unreasonable when entered into. In most cases Separation Agreements will be prepared with the assistance of legal advisers, and by and large will reflect an outcome within the range of outcomes which might have been expected had matters been determined by a Court applying the principles of the Family Law (Scotland) Act 1985 ( the 1985 Act ). However, that is not always the case. Our advice to clients is that when it comes to negotiating a settlement with their spouse they can contract to do whatever they want even if this is well outwith the realms of the legislative provisions. An unfair outcome does not make it an unfair agreement in Scotland and it is not rare to see Separation Agreements, which go well beyond the realms of how a Court, bound by the principles of the 1985 Act, would have determined matters. If no financial provision is sought by either party, in granting Decree of Divorce, the Court makes no investigation at all as to the terms of financial settlement. Further, the terms of settlement do not require to be reflected in a Court Order. Essentially, separating couples in Scotland can opt-out of the Court system almost entirely, other than to the extent that the Court requires to formally grant Decree of Divorce. As indicated previously, if parties enter into a Separation Agreement then provided it was fair and reasonable at the time it was entered into then the agreement will stand. In practical terms, therefore, it is possible for separating spouses by agreement to more or less oust the Scottish Court s role in considering the question of financial provision on divorce. While a spouse could of course argue that a Separation Agreement was unfair and unreasonable when entered into, running such an argument successfully will always be an uphill struggle, no matter how unfair the agreement would seem. This contrasts with what would seem to this observer to be an over-riding principle in English family law that a Court may pay heed to what spouses have agreed previously, but ultimately the power to decide will always stop with the Court and not the parties. The interventionist versus non-interventionist approach is unquestionably mirrored when it comes to Prenuptial Agreements. 6
FAMILY LAW REVIEW THE SIMPLIFIED DIVORCE APPLICATION An additional aspect of the non-interference principles of the Scottish Courts when it comes to separation and divorce is the Simplified Divorce Application. The Scottish Courts will not grant Decree of Divorce where there is a child of the marriage under the age of sixteen years without making full investigations as to whether any orders require to be made in relation to that child. Therefore, even where financial matters have been agreed, if there is a child under the age of sixteen years then a full Action of Divorce requires to be commenced, albeit that it can then progress unopposed with affidavit evidence in relation to the children being submitted from the applicant and a corroborating third party in due course. Even though a full action must be commenced in these circumstances, it is worth once again noting that if no financial provision is sought, no investigation will be made by the Court into the financial issues. Where there are no children under the age of sixteen years and financial matters have been agreed, it is open to the parties to use the Simplified Divorce Application. Simplified divorce applications can be made where parties have been separated for one year and the other party consents to Decree of Divorce being granted, or where the parties have been separated for two years without consent. In the former case, one spouse completes the application and the other spouse signs the consent section of the form. In the latter, only the spouse seeking Decree of Divorce requires to fill out the application. Once submitted to the Court, the application is served on the Defender and if no response is received within twentyone days of successful service then Decree of Divorce will automatically be granted. Even if parties initially separated in England and Wales, if there is a Scottish connection and the finances have been resolved, then the simplified divorce application could prove a useful and cost-effective way to formalise the end of the marriage. However, by way of a health warning, in Scotland it is impossible (except in very restricted circumstances) to seek financial provision from ones spouse after Decree of Divorce has been granted. Therefore, a simplified divorce application should never be allowed to proceed unopposed until all financial matters have been resolved. 7
Key Contacts Edinburgh Alasdair Loudon, Partner and Head of Divorce & Family Law alasdair.loudon@turcanconnell.com Gillian Crandles, Partner gillian.crandles@turcanconnell.com Sally Nash, Associate sally.nash@turcanconnell.com Glasgow Noel Ferry, Senior Associate noel.ferry@turcanconnell.com Roger Mackenzie, Associate roger.mackenzie@turcanconnell.com EDINBURGH GLASGOW LONDON GUERNSEY Turcan Connell Princes Exchange I Earl Grey Street Edinburgh EH3 9EE Tel: 0131 228 8111 Email: enquiries@turcanconnell.com www.turcanconnell.com Disclaimer Turcan Connell is a Partnership of Scottish Solicitors regulated by The Law Society of Scotland. Turcan Connell Asset Management Limited, wholly owned by Turcan Connell, is authorised and regulated by the Financial Conduct Authority. Saltire Trustees (Overseas) Limited, wholly owned by Turcan Connell, and its associated companies, is fully licensed by the Guernsey Financial Services Commission.