HJ comment on prenuptial agreement
22 | 10 | 10
On the 20 October 2010 the Supreme
Court dismissed an appeal brought by Granatino [the husband]
against the decision of the Court of Appeal, by a majority of 8 to
1. This case concerned the unenforceability of a pre nuptial
agreement. The decision makes it clear that the unenforceability of
pre nuptial agreements as a matter of public policy is becoming
increasingly unrealistic. It upholds the rights of
individuals to exercise autonomy over their financial affairs by
seeking to regularise those prior to entering into marriage.
Brief facts of the case
Miss Radmacher was of German origin coming
from a wealthy German family. Mr. Granatino was of French
origin. Both lived in London at the time of their
marriage.
The wife had
shareholdings from a family business worth £52M generating an
income of £2.7M and other liquid assets of approximately
£54M. The husband, when the parties met, had earnings of
£50,000 which increased to £300,000 in 2001. He,
however, gave this up to pursue an academic career. The
husband had heavy debts as a result of giving up work and going to
college. In 1998 the parties entered into a pre nuptial
agreement instigated by the wife and prepared by her lawyers, with
a view to protecting her family wealth and for her to ensure that
her husband was marrying her for love and not for money.
The marriage lasted for 8 years and there were
2 children born to the parties during the marriage.
Brief terms of the anti
nuptial agreement
- Neither party would have any interest in the
property brought into the marriage by the other.
- Assets built up during the marriage by both
parties would be solely theirs.
- Both during and after the marriage neither
would have any claim on the income or property of the other, even
in the case of extreme hardship.
- In the event of either party’s death during
the marriage, the survivor would have no rights against the
deceased’s estate, except those provided for under German law.
Decision of Mrs. Justice
Baron in the High Court
Upon an application for ancillary relief Mrs.
Justice Baron, whilst acknowledging the anti nuptial agreement and
indicating in her Judgment that she had considered it, awarded the
husband the following:
- House £2.5M
- Payment towards his debts £700,000
- Car £ 25,000
- Lump Sum – Capitalisation of Maintenance for
Life £2.335M
The effect was to award
him 5.4% of the total wealth. In addition, she gave him
600,000 euro for a house in Dusseldorf, on the proviso that
the property would be owned by the wife and placed on Trust,
returning it to her when the two children were grown up.
The wife appealed to the Court of Appeal on
the basis that Mrs. Justice Baron had not given sufficient weight
to the pre nuptial agreement
Decision of the Court of
Appeal
The Court of Appeal held that this was a case
where “decisive weight” should be given to the agreement as part of
the Judge’s discretionary exercise under S25 MCA 1973 £2.5m and,
therefore, amended the husband’s award to:
- House - £2.5m - which was to be given back to
the wife after “his home making duties were over” and was not given
to him for
life
- The issue of the award of £2.335M was
referred back to the High Court to be re-formulated to cover
expenses of the husband as a homemaker for the children, rather
than as an award for life.
The husband appealed against this decision to
the Supreme Court and his Appeal was dismissed.
Comments
on the Judgment
- It is clear from this decision that whilst
pre nuptial agreements are not enforceable per se, significant
weight will be given to them by the Court in exercising its
discretion under Section 25 of the Matrimonial Causes Act 1973
where, in the interests of fairness, they should not be
overlooked.
- For pre nuptial agreements to carry full
weight, the husband and wife must enter into it of their own free
will without undue influence or pressure, and informed of its
implications. The court will also consider whether there has
been any material lack of disclosure, information or advice when
determining the weight to be attached. Given the weight the
court have been inclined to attach to pre nuptial agreements, in
the future it will be natural to infer that the parties who enter
into a pre nuptial agreement to which English Law is likely to be
applied, that effect should be given to it.
- One of the essential facts to note in this
particular case is that the parties to the pre nuptial agreement
came from countries where such agreements were binding. They,
however, lived and divorced in England. The decision
made it clear that in the case of agreements made in recent times
and any agreement made after the Judgment, the question of whether
the parties intended their agreement take effect is unlikely to be
an issue, so foreign law will not need to be considered in relation
to that question.
- Although pre nuptial agreements remain
unenforceable on public policy grounds, this decision clarifies
that, where it is fair to do so, such agreements may be regarded as
a sufficient relevant factor to be decisive on the outcome of
ancillary relief proceedings.
- Pre nuptial agreements are unlikely to limit
the provision which the Court will make for the children of the
family, which could result in considerable indirect benefits being
given to the “homemaker” to enable him or her to fulfil that
role.
- There is now a greater reason for parties
intending to marry, or who are already married, to consider
entering into pre or post nuptial agreements. The
Judgment suggests that it is where the needs of the parties are not
met or where adequate compensation is not given to either of the
parties, that the Court would more readily render it unfair to hold
the parties to the pre nuptial agreement. Where these
considerations do not apply, fairness may well not require
departure from the agreement. In this present case the
Court held that the Court of Appeal was correct and concluded that
the needs of the husbands were not affected so as to render it
unfair to hold him to the terms of the pre nuptial agreement,
subject to making provision for the needs of the children of the
family.
In conclusion this decision enforces the view
of the Court in recent cases that in the right circumstances pre
nuptial agreements are carrying increasing weight, where fairness
would dictate that there should not be a departure from
them.
