Margaret Hatwood, Partner
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Only a castaway on a desert island could have avoided reading about the long running saga of the Granatino v Radmacher case.
Katrin Radmacher
Nicholas Granatino, a French born banker, is challenging a Court of Appeal ruling which reduced his divorce settlement from his former wife Katrin Radmacher from £5.85m to £1m. At the first hearing the wife argued that the husband should be bound by a pre-nuptial agreement whereby the husband had agreed not to make any financial claims whatsoever against the wife. The pre-nuptial document had been prepared by the wife’s notary in Germany. It should be noted that by the time of the marriage breakdown the wife was worth £100m. The Judge at the first hearing had no hesitation in saying that the husband was not bound by the pre-nuptial agreement for a number of reasons. Firstly he had had no independent legal advice. Secondly there had been no disclosure by the wife of her assets. Nor indeed have there been any negotiations about what might be appropriate to include in the pre-nuptial agreement. Following the first hearing the husband was awarded £5.56m, namely £2.56m for housing and a lump sum of £2.35m being capitalised maintenance.
The wife appealed the decision last year and the case went to the Court of Appeal who had no difficulty in holding that the husband was largely bound by the agreement. The order was changed so the housing fund of £2.56m reverted to the wife after the children had grown up. His capitalised maintenance award was set aside. An important factor in the court’s mind was that the agreement was governed by German law where such agreements are binding. The Court dealt with the concerns of the lower Court by saying that the husband was bright. He had been a very successful investment banker earning in excess of £300,000 per annum. He has given up this lucrative employment and has decided to work as an academic earning only £30,000 per annum. Although he did not have disclosure of his future wife’s financial circumstances he had known that she was very wealthy.
The case was heard by Supreme Court in March 2010. Judgment was eventually handed down on Wednesday 20 October. The decision upholds the Court of Appeal judgment so the husband remains largely bound by the agreement. There were nine judges in the Supreme Court, many of whom were not family lawyers. It is thought that there was much disagreement between the judges which explains the unusual delay in the judgment being handed down. The decision is a majority one with one judge, Lady Hale - a highly experienced and well respected family judge - giving the dissenting judgment. However even Lady Hale did not ignore the agreement. She asked three crucial questions:
Firstly, did the parties intend to give the agreement legal effect? She concluded they did.
Secondly, were there any contractually vitiating circumstances? She felt not.
Thirdly, was there anything in the circumstances in which it was made to suggest the wife was taking an unfair advantage of her fiancé? She thought not. He did not have an English translation and he did not have independent legal advice. However he did understand the essence of what he was agreeing to. "He was not a naïve young person in a vulnerable position. He was a financially sophisticated and highly educated young man". However, Lady Hale was concerned that the agreement did not cater for the fact that they might have children. The judge in separate proceedings concerning the children had decided that the children should spend time with each of their parents. The judge in the High Court thought it important that the children should be able to have the same standard of living while they are with their father as they have when they are with their mother. Lady Hale asked if it was appropriate for the husband's right to occupy English property should come to an end when the children left tertiary education. Lady Hale concluded that she would have varied the Court of Appeal's order so that the husband was entitled to his English home for life. However although many family lawyers will respect Lady Hale's comments hers was that dissenting judgment.
The remaining members of the Supreme Court agreed with the Court of Appeal and concluded that there were no factors which rendered it unfair to hold the husband to the agreement. The court found the husband was extremely able and that his needs would largely be met by the generous provision made for the children. The court also found that there was no compensation factor as the husband's decision to abandon his career as a banker was not motivated by the demands of his family but was his personal choice. The Justices concluded that "Fairness did not entitle him to a portion of his wife's wealth, received from her family independently of the marriage, when he had agreed he should not be so entitled when he married her".
The Justices held that the parties should enter into a pre-nup voluntarily without undue pressure and be informed of its implications.
Second the court looked at the foreign element of the case and felt that the fact the agreement would have been binding under German law was relevant to the question of whether the parties intended the agreement to be binding at a time when it would not have been automatically binding in English Courts. The other Justices agreed with Lady Hale that there was no compensation factor in this case. The husband's decision to abandon his lucrative career in the city for academia was not motivated by the demands of his family but his own choice. The court also considered the sharing principle and in particular whether the husband should be entitled to a share of the wealth the wife had received either before or during the marriage. They noted that when the parties married the husband agreed that he would have no entitlement. The final question considered was whether the circumstances at the time the agreement was made rendered it fair to depart from the agreement. The court took the view that in the circumstances of this case it was fair that the husband should be held to the agreement.
Were pre-nups ever binding before the Radmacher decision?
Over the last 10–15 years or so there have been a number of cases where pre-nuptial agreements and even agreements made after a marriage (“post-nups”) have been found to be binding or had been given some weight by the court. However, historically for the best chance of success of an agreement being found to be binding, certain safeguards needed to be followed:-
- The agreement needed to be enforceable under the law of contract.
- The agreement must be made not less than 21 days prior to the marriage - preferably a couple of months before the marriage.
- The agreement was not likely to be enforceable if the Court considers that the enforcement of the agreement would cause significant injustice to one spouse and to any child of the family.
- Both parties must receive independent advice from separate firms of solicitors.
- There must be mutual disclosure of assets.
It was because those safeguards had not been followed in Radmacher that the Judge who heard the case first decided the pre-nup was not binding. Even she gave the agreement a great deal of weight. Some would think a settlement of circa £5m when the other spouse has assets of £100m is not generous. That judge's view of course has been overturned firstly by the Court of Appeal and then by the Supreme Court.
In the case of Crossley v. Crossley in 2007, Mrs Crossley (formerly Susan Sangster) tried to argue that she should not be held to a pre-nuptial agreement. In this case the husband was 60 and worth £45m and the wife was 48 years of age and worth £18m. This was a fourth marriage for the wife. The husband had also been married previously. There was a clause in the pre-nup that neither party would make any financial claims against the other in the event of divorce. Both were independently advised. There were no children of this marriage. It was a very short marriage, the parties separated after just one year of marriage. Mrs Crossley's lawyers tried to argue Mrs Crossley was entitled to a half share of her husband's wealth because he had not disclosed all of his assets when the agreement was signed. The case went to the Court of Appeal on a procedural point. Thorpe LJ said "all these cases are fact dependent and this is a quite exceptional case on its facts, that if ever there is to be a paradigm case in which the Court will look to the pre-nuptial agreement as not simply one of the peripheral factors in the case, but as a fact of magnetic importance. It seems to me that this is such a case".
Having heard these remarks the wife decided not to pursue her case any further.
So will all pre and post nuptial agreements be binding following Radmacher?
Certainly not. However it does mean that pre-nups are likely to be given even more weight by the courts. It means that failure to comply with the safeguards outlined above will not necessarily render an agreement void or limit the weight to be placed on it.
If you wish the pre-nuptial agreement to be binding it would still be prudent to follow the guidelines in this article (if you wish to avoid a lengthy and expensive argument in court). It would be prudent never to exert any pressure on your spouse or future spouse to sign an agreement.
Civil Partnerships
There is no reason why a “pre-registration agreement” for civil partners would not be binding subject to similar safeguards being observed.
Cohabitees
It is now probable that such agreements would be binding as long as they contained appropriate provisions. Again to ensure that there is the best chance of the agreement being binding it would be sensible to observe the safeguards set out above.
Margaret Hatwood is a Partner in Anthony Gold's Family & Divorce Law department. For further information email Margaret Hatwood or call 020 7940 4000.
