Pre-nuptial agreements truly enforceable?
05 May 2011
A landmark decision by The Supreme Court has changed the way that Pre-Nuptial Agreements are enforced in Britain. This could mean that marrying couples can set out the terms of their divorce before they even tie the knot. However the Court will still have the right to overturn truly unfair agreements.
On 20 October 2010, the Supreme Court delivered its long awaited Judgment in Radmacher v Granatino on the interesting issue of what weight should be attached to Pre-nuptial Agreements in divorce proceedings.
Mr Granatino, a French National and Katarine Radmacher a German National, met in 1997 when they were both living in London. They were married in November 1998.
Before their nuptials, on 1 August 1998, they had signed a Pre-Nuptial Agreement in Germany at the instigation of Katarine’s family who were extremely wealthy. At the time of the marriage, the husband worked for JP Morgan earning around £120,000 per year and had excellent prospects.
In October 2006 following 8 years of marriage, the couple separated. They then had two daughters aged 7 and 4. By the time the marriage broke down, and with his wife's support, the husband had left his job in banking to become a student.
The terms of the Agreement entered into before they married broadly provided for that during the marriage or on its termination neither party would acquire any benefit from the property owned by the other. Crucially, Mr Granatino did not take any legal advice prior to signing the Agreement, despite being advised to do so by the notary who drew up the Agreement who was not fluent in his native tongue.
Contrary to the terms of the Pre-Nuptial Agreement, when divorce proceedings were issued, Mr Granatino made a claim against his wife for both maintenance and a capital lump sum.
When the case was first heard, the Judge awarded him a large capital lump sum, having decided that limited weight should be attached to the Agreement because of the circumstances in which it had been signed.
On subsequent application to the Court of Appeal by the wife, it was held that the husband's award was wrong becuase the Agreement should have been given decisive weight. The case was referred to the Supreme Court who decided by a majority of 8-1, that the parties should be broadly bound by the Pre-Nuptial Agreement. It is interesting to note that the only dissenting Judge, was the only family Judge (and the only woman) sitting on the Supreme Court panel.
So what is the present position? The starting point in English law, is that a Court, when considering a financial application in divorce, is not obliged to give effect to Pre-Nuptial Agreements. Such Agreements are not binding by statute as a Court cannot be prevented from making an Order that it determines is fair in all the circumstamces. That said, the Court must give appropriate weight to any agreement reached between spouses and the Supreme Court suggested that the following general principles should be applied:
If an Agreement is to carry its full weight, both parties must enter into it of free will and be fully informed of its implications.
The Court may, when testing the Agreement, take into account a party’s emotional state and what emotional or financial pressures he or she was placed under to agree to terms.
The personal circumstances of the parties at the time of the Agreement will be relevant. These will include issues such as age and maturity, whether either have been married or been in a long term relationship before .
If the terms of the Agreement are unfair at the start that issue will be of less relevance than whether the Agreement appears unfair at the time of the breakdown of the marriage. Judging fairness will involve issues such as the length of the marriage amongst others.
The Court should give effect to an 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. The question of fairness will inevitably depend upon the facts of the case.
An Agreement cannot be allowed to prejudice the reasonable requirements of any children of the family.
After the publication of the Radmacher, elements of the press were very keen to report that Pre-Nuptial Agreements were as a matter of fact, now enforceable. That, in reality, is not actually the case. More enlightened commentators recognised the fact that Radmacher had in fact presented lawyers with a recipe for litigation. The Judgment of the highest English Court provided significant room for legal scrutiny, such as to the circumstances in which parties entered into an Agreement and the terms that were agreed (“fairness” looked at retrospectively).
The sole dissenting Judge in this case (Lady Hale), was the only full-time Family Judge who some might say could forsee the issues in practice that the judgment would create.
The decision in Radmacher is of enormous significance in that there is a shift of emphasis. The onus is now firmly on the spouse wishing to retreat from the terms of the Agreement, rather than the spouse seeking to rely upon it. What has become widely apparent is that diligent efforts must be made in preparing agreements of this type if they are to avoid calling foul of invalidity in the unfortunate circumstance of it being tested by the court. The selection of an experienced family lawyer is therefore essential.
Given the ongoing scrutiny in this area, the Law Commission has been charged with publishling a consultation paper in 2012. Whether or not a change in statute will follow, remains to be seen.
Pending more definitive guidance on this issue, one should not lose sight of the unusual features of Radmacher and not least that the parties were sufficiently wealthy and the sums involved were sufficient to warrant argument all the way to the Supreme Court.
This article was prepared by Matthew Aves
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