An Introduction to Pre-Nuptial Agreements

The "Radmacher" Decision

It is now over three years since the Supreme Court of England and Wales ("the Supreme Court") handed down its judgment in the case of Radmacher (formerly Granatino) v Granatino. The hearing of this appeal by the Court of Appeal had taken place in March 2010 and concerned the case of German heiress Katrin Radmacher.

Ms Radmacher had an inherited fortune estimated at some £100 million. She sought to rely upon the terms of a pre-nuptial agreement ("the Agreement"), signed prior to her marriage to French national Nicholas Granatino, within the financial proceedings following their divorce in the English Courts.

The case received much publicity as the decision shed light on the validity of such agreements under English law. Although such agreements are binding in both France and Germany, they have not been persuasive in the English Courts.

The Agreement stated that Mr Granatino would make no claim against Ms Radmacher's fortune in any future divorce proceedings between them. Their Agreement was drawn up by a German notary appointed by Ms Radmacher and was signed before him. Mr Granatino appealed to the Supreme Court after the Court of Appeal reduced his original divorce settlement from more than £5 million to £1 million.

The Court of Appeal's view was that "decisive weight" should be given to the Agreement signed by the parties. By a majority of eight to one, the Supreme Court upheld that decision, the dissenting voice being that of Lady Hale, the only family judge involved with the hearing of the appeal.

The Supreme Court's view was that effect should be given to such agreements which were freely entered into and where doing so would not be unfair. The Supreme Court did not say that such agreements were now legally binding since only Parliament could make such a change in the law through legislation.

The Court further stated that such agreements cannot oust the Court's jurisdiction but "The Court must, however, give appropriate ("decisive") weight to such an agreement". Whether a Court will give "decisive weight" to such an agreement will be considered on a case by case basis and with regard to all circumstances of the case. This is clear from a number of cases that have been decided since Radmacher, in some of which agreements were taken into account and in others where they were not upheld.

Making Enforceability More Likely

To increase the likelihood of such an agreement being enforceable it would need to comply with the six safeguards recommended in the 1998 Home Office Consultation Document "Supporting Families".

"The Six Safeguards"

1. Where there is a child of the family, whether or not that child was alive or a child of the family at the time the agreement was made.
2. Where under the general law of contract the agreement is unenforceable, including if the contract attempted to lay an obligation on a third party who had not agreed in advance.
3. Where one or both of the couple did not receive independent legal advice before entering into the agreement (interestingly, Mr Granatino did not, although he was invited to do so).
4. Where the court considers that the enforcement of the agreement would cause significant injustice (to one or both of the couple or a child of the marriage).
5. Where one or both of the couple have failed to give full disclosure of assets and property before the agreement was made.
6. Where the agreement is made fewer than 21 days prior to the marriage (this would prevent a nuptial agreement being forced on people shortly before their wedding day, when they may not feel able to resist).

Should Pre-Nuptial Agreements Be Enforceable?

As with many other things, there are arguments both in favour of and against the enforceability of such agreements.

Arguments in favour of enforceability

• They provide greater certainty
• They may lower legal costs
• They lead to there being less distress/acrimony between the parties
• They encourage marriage
• They promote fairness
• They provide a couple with contractual autonomy
• They will lead to a reduction in what is known as "forum shopping" (that is, one or other party seeking to bring proceedings other than in the UK Courts).

Arguments against enforceability

• They are not "romantic"
• They increase the chance of divorce
• They can adversely affect the relationship between the parties since they have a high expectation that their marriage will end in divorce
• A fear that the more vulnerable of the parties could be disadvantaged, particularly if s/he has poorer bargaining power at the time that the terms of the agreement are being negotiated.
• There is the possibility that unfair agreements may be entered into
• The possibility exists that there will be expensive litigation over whether an agreement should be binding or not, the circumstances under which the agreement was entered into, etcetera
• Following on from the previous point, the parties could be looking at more legal costs than would otherwise be the case
• Public policy considerations. Traditionally the English Courts have held pre-nuptial agreements to be contrary to public policy on the basis that such agreements seek to exclude the discretion of the Court when dealing with financial and property matters following divorce proceedings.

The Position Following the "Radmacher" Decision

Family lawyers report that there has been a significant increase in the number of couples drawing up pre-nuptial agreements in the United Kingdom, although statistics in respect of this are difficult to find. There is no central register of pre-nuptial agreements. Obviously if a couple feel bound by the terms of such an agreement should they divorce, there would be no need for them to litigate as to the enforceability or otherwise of it.

The factors that may have led to an increase in the number of pre-nuptial agreements being entered into will include the high level of awards that can be made by the English courts; a perception that pre-nuptial agreements will become binding at some future time; a greater public awareness of the financial consequences of divorce and the rising legal costs of the financial proceedings that can follow relationship breakdown.

Similar comments apply to couples considering entering into a civil partnership. Anyone considering entering into a pre-nuptial agreement or civil partnership needs to seek independent legal advice well before the pending marriage/civil partnership and to make a full and frank disclosure of his/her financial position.

The Future

The Law Commission carried out a consultation on marital property agreements in 2012. On 11 September 2012 the Law Commission opened a supplementary consultation on needs and non-matrimonial property. That review is looking at two specific aspects of the law relating to financial provision on divorce:

• to what extent one spouse should be required to meet the other's financial needs, and what exactly is meant by needs; and
• what happens to property that one of the partners owned before the relationship or acquired during the course of it.

That consultation was open until 11 December 2012. The Commission will publish a report in 2013, making recommendations on marital property agreements (pre-nuptial agreements), needs and non-matrimonial property. Legislation, including with regard to such agreements, is likely to follow the publication of that report.

In the meantime, it is submitted that pre-nuptial agreements should now be seen as a consideration when contemplating either marriage or a civil partnership, and this is particularly the case where there is a disparity between the two parties in terms of the assets being brought into the marriage or civil partnership.

Bakerlaw Solicitors deals with the drafting of agreements for couples planning to marry or enter into a civil partnership. We also advise on the legal status of existing agreements in light of recent Court decisions.

For further information regarding any matters arising from this article, please telephone

BakerLaw on 01252 733770 or email enquiries@baker-law.co.uk

Our team offer initial advice in respect of many aspects of family law on a totally free of charge and no obligation basis.