Pre-Nuptial agreements gain increased recognition

21/10/2010

Pre-nuptial agreements are not currently legally binding in England and Wales.  However, on 20 October 2010 the Supreme Court handed down its landmark decision in the case Radmacher v Granatino.  The Supreme Court said that it agreed that in the right case, pre-nuptial agreements can be given decisive or compelling weight in how a court divides the assets on divorce.  This takes the law of England and Wales much closer to that of the US and most European countries.

Historically, pre-nuptial agreements have been given little weight in dividing up matrimonial assets.  They have been viewed by the courts as being contrary to public policy as they undermine the concept of marriage as a life long union. This was a frustration to those who wished to have control over their finances when they decided to marry and sought to avoid expensive court proceedings in the event of a breakdown of the relationship.

The Radmacher Case

The case of Radmacher v Granatino involved a German pre-nuptial agreement signed by one of Germany’s richest women, Katrin Radmacher.

Katrin Radmacher and Nicolas Granatino signed their pre-nuptial agreement in Germany on 4 August 1998 and were married on 28 November 1998 in London.  They were married for eight years before they separated. The couple’s marriage was said to have broken down after Granatino, 37, gave up a lucrative job as a French investment banker in 2003 to become a £30,000-a-year biotechnology researcher at Oxford University. Miss Radmacher comes from a very wealthy German family and has personal wealth of around £100m. They had two children together.

The couple divorced in 2006 and the pre-nuptial agreement simply provided that they should each go their separate ways on divorce. Her former husband, Nicolas Granatino, had agreed not to make any claims on her fortune if they separate.  However, the High Court awarded him £5.56m for his own use plus a further £35,000 pa for each of the two children whilst they were in education.

The Court of Appeal dramatically reduced this settlement.  Mr Granatino was given a fund of £2.5m for a house in the UK on the proviso that the sum was to be returned to his ex-wife when the younger of their two children, now aged 7, reaches 22.  Mr Granatino’s debts of about £700,000 were to be paid by the heiress and the husband then just received £1m for his own use.   The Supreme Court has upheld the Court of Appeals award.

Effect on pre-nuptial agreements

So what does this mean for pre-nuptial agreements? For years pre-nuptial agreements were said to be void for public policy reasons as they undermine the institution of marriage. The Radmacher case is a landmark judgment as now prenups can be decisive in determining the financial division on divorce.

There have been a number of high profile divorce settlements in the last few years and London has gained a reputation as the divorce capital of the world.

Many believe the Radmacher ruling is likely to be received as a breath of fresh air to wealthy men and women across the UK who, before now, have felt too nervous to marry. It is thought by some that pre-nuptial agreements do not undermine the institution of marriage but take very seriously the future needs of married couples in a responsible way.  By enabling parties be protected by a contract may in fact encourage more people to get married.

However, Lord Phillips, president of the Supreme Court said that the Courts would still have the discretion to waive any pre nuptial or post nuptial agreement, especially when it is unfair to any children of the marriage.

In the meantime the Law Commission is planning to publish a consultation paper in 2012 at which time they will be reviewing the eventual timing for publication of a report and draft Bill. Clearly the outcome of Radmacher will have an influence on the findings of the report and draft bill.

Safeguards 
The courts have stated that for pre-nuptial agreements to have the best possible chance of being upheld, some minimum safeguards should be met:

  • Both parties should have received independent legal advice.
  • Full financial disclosure must be made.
  • The agreement has to be realistic and fair.
  • There should be no evidence of duress or undue influence before entering into the agreement and it has to be drawn up at least 21 days prior to the marriage.
  • Provision for children must be made in the agreement.

Unless the safeguards are met the agreement may be worthless.

The breakdown of any relationship gives rise to complex emotional, financial and practical issues. This is where our Family law team can help you and we will ensure that you receive straightforward, clear, common sense advice and support you though the divorce procedure

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