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For richer, for poorer (unless you’ve got a pre-nup)

20 October 2010

In a long-awaited decision, the UK Supreme Court ruled today that a pre-nuptial agreement (also known as a ante-nuptial agreement) is binding in the case of a German paper company heiress.

Background to the case

  • In July, the Court of Appeal agreed that Katrin Radmacher, thought to be worth £100m, should be protected by the terms of a German marriage contract. Her former husband, Nicolas Granatino, has been fighting to get that ruling overturned.
  • Although Granatino had agreed not to make any claims on Radmacher’s fortune in the event of a split, he was awarded £5.85m in 2008 by a High Court judge.
  • Radmacher challenged that decision and the Court of Appeal agreed that the couple’s pre-nuptial agreement should have been taken into account. They slashed his lump sum payment to about £1m. He also received a £2.5m fund for a house, which would be handed back to Ms Radmacher when the younger of their two daughters (aged seven) reaches 22.
  • Asking the Supreme Court to reverse the decision, Granatino argued that being forced to accept the smaller settlement would leave him in financial ruin.
  • Before the appeal court judgment, it had been understood that pre-nuptial agreements were not binding or decisive on any subsequent divorce in this country, even though the courts had begun to attach far greater weight to them in a number of cases. Granatino, a French investment banker at the time of the marriage, and his German former wife signed their pre-nup in 1998. They spent most of their marriage together in London, until their divorce in 2007.

Comment

A Willans Partner has stated:

“This case has been seen as the ultimate test of whether ‘pre-nup’ agreements ought to be given decisive weight on any subsequent divorce in this country.

“Today’s decision certainly provides some much needed clarity. However, future cases will invariably turn on their own facts. A pre-nup will not be allowed to prejudice the reasonable requirements of any children. However, it now appears that, in circumstances where parties have freely and voluntarily entered into it with the benefit of all relevant information and are informed of its implications, a court is likely to uphold the contents on any subsequent divorce.

“Unfortunately, there is a ‘but’. The test of fairness will always be applied – although given the facts of this particular case, it is difficult to predict what factors would be deemed sufficiently unfair as to justify any departure from a properly drafted pre nup.

“I believe that there will now be a strong (albeit rebuttable) presumption in favour of upholding the terms of any pre nup, with the onus (a substantial one) being placed upon the party seeking to try and depart from it.

“Many lawyers expected the court to give more weight to pre-nups so as to clarify the position. However, the judges have made it clear that it is for Parliament to decide if they want to sweep away the current law and make pre-nups automatically binding. Lady Hale, in her dissenting judgment, commented: “There is not much doubt that the law of marital agreements is in a mess”.

“The Law Commission is already considering this question and is due to report in 2012 on whether there should be a change in the law to ensure that such agreements are fully enforceable.

“One particular concern is that, if pre-nups are automatically binding, they will allow a party to sign away their rights in an agreement that they might later regret. Further they may find that a court would have been far more generous to them on any subsequent divorce than the provision contained within the pre-nup.

“This country is one of the very few that has been so reluctant to accept pre-nups. In my view, the reason is that our courts value reasonableness and fairness above everything else. As the position stands, they are able to look at the objective values of fairness on a case-by-case basis.

“This case certainly provides greater clarity, although Parliament needs to address this issue urgently. Most of those who presently use pre-nups are the very wealthy—those with substantial private or business assets, family-owned businesses and land and often with the additional complexities of a previous marriage.

“For many, it can be essential to ensure that assets are protected before marriage or civil partnership.

“Our advice to clients is to take advice at the outset – before making any romantic gestures.  Drawing up a ‘post-nup’ in tandem with a ‘pre-nup’ is one way of adding a great deal more weight to such agreements.

“Post-nuptial agreements are very different from pre-nups.  The couple is now married, (or in a civil partnership) having undertaken the obligations and responsibilities of that status. Adopting this ‘belt and braces’ approach can help to make people feel more comfortable about taking such an important step.”

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Sharon Giles LLB (Hons)
Partner
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