Prenuptial agreement should have 'decisive weight'

 

Radmacher (formerly Granatino) –v- Granatino

Neutral Citation (2010) UKSC 42

Supreme Court of England and Wales

Judgment was given by Lord Phillips, president, on October 20th 2010; with Lords Hope, Rodger, Walker, Brown, Mance, Collins and Kerr concurring. Lady Hale dissented from the conclusion.

Judgment

The Supreme Court upheld a ruling of the Court of Appeal which had found against a High Court judgment overturning the terms of an ante-nuptial (prenuptial) agreement and awarding the husband, who had agreed before the marriage to make no claim on his wife’s fortune, the sum of £5.56 million.

The Court of Appeal had ruled that in the circumstances the High Court judge should have given the agreement “decisive weight”, and the husband unsuccessfully appealed this judgment to the Supreme Court.

Background

The husband is French and his ex-wife German. When they met, he was working for JP Morgan Bank in London. She comes from a very rich German family, and considerable assets had been transferred to her. Her father intended to hand over more when she married, but only if she had an ante-nuptial agreement to ensure her husband would have no claim on her property if they divorced.

They signed the ante-nuptial agreement in Germany on August 1st, 1998, when he was aged 27 and she 29. Such agreements are enforceable under German law, and they agreed the relevant marriage law was that of Germany. The husband did not take independent legal advice either before signing the agreement or between signing it and the marriage, and the document was not translated into French, but an English version of it was read to him by the German notary who drew it up. It provided that neither had any claim on the property of the other.

The couple married in London on November 28th, 1998. They had two children, born in September 1999 and May 2002. In July 2003 he left his job at Morgan Stanley and embarked on a PhD in biotechnology. The couple separated in October 2006 and were divorced in July 2007. The court ruled that the children spend one-third of their time with their father and two-thirds with their mother.

The husband brought a claim for ancillary relief seeking both periodic payments and a lump sum. In June 2008, Ms Justice Baron awarded him a lump sum of £5.56 million, and periodic payments of £35,000 a year for each child while in full-time education. The issue at the heart of the judgment was the weight given to the ante-nuptial agreement.

The judge held that it fell foul of a number of safeguards set out in a Home Office consultation document on the subject, which has never been acted upon despite broad demands for legislation in the area. She held his award should be circumscribed to a degree to reflect the fact he signed the agreement, and should make provision for the children, whose arrival had not been anticipated in the agreement.

The wife appealed successfully to the Court of Appeal, which held that Ms Justice Baron had been wrong to find the circumstances in which the ante-nuptial agreement had been reached reduced the weight to be attached to it. “In the circumstances of the case she should have given it decisive weight,” the Court of Appeal said, holding that the award should have made provision for the husband’s role as father of the children, but not make provision for his own long-term needs. He appealed this decision to the Supreme Court.

Decision

The Supreme Court pointed to the Home Office 1998 consultation document. The document proposed that such agreements should be observed subject to six safeguards, and should not be legally binding where there was a child of the family who was not born at the time of the agreement; where under the general law of contract the agreement was unenforceable; where one or both parties did not receive independent legal advice; where the enforcement of the agreement would cause significant injustice to one of the parties or a child of the marriage; where there had not been full disclosure, or where it had been made less than 21 days before the marriage.

Lord Phillips pointed out that the principle that courts decided on the appropriate ancillary relief – not any prior agreement between the parties – was embodied in legislation, and there was no question of altering it. What was at issue was what approach should be taken to assessing the weight to be given to prenuptial agreements in considering ancillary relief.

It used to be contrary to public policy for a couple about to marry to enter into an agreement that provided for the contingency that they might separate, based on the idea that marriage involved a duty to live together, and no agreement should be entered into that could constitute an encouragement to separate. However, this was modified over the years, and judges in the Family Division of the High Court were now prepared to give some weight to such an agreement, he said.

In 2007 the Court of Appeal described an ante-nuptial agreement in a marriage of short duration where there were no children as of “magnetic importance”. In an appeal to the Privy Council from the Isle of Man, the council drew a distinction between ante and post-nuptial agreements, stating that allowing a married couple to provide for future separation should not be contrary to public policy. It considered there was a major difference between such an agreement and one by a couple who had not yet taken on rights and responsibilities of marriage.

Lord Phillips said the Supreme Court did not agree with this distinction. This was not to say there could be no circumstances where it was right to distinguish between them. However, the court should apply the same principles when considering both pre- and post-nuptial agreements. Turning to this case, he asked whether there were circumstances in making the agreement that detracted from the weight that should be accorded to it; whether there were circumstances that should enhance the weight to be accorded it, ie the foreign element; and whether it was fair and just to depart from it.

He concluded there were no circumstances that detracted from the weight to be given it, as the husband was highly educated and aware of the agreement’s contents. The “foreign element”, whereby they concluded the agreement under German law, indicated they intended it to be enforceable, although the applicable law was English law. The husband’s needs were not such as to justify departing from the terms of the agreement, except to make provision for the children.

Lord Phillips suggested the rule should be: “The court should give effect to a nuptial 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 full judgment is on www.supremecourt.gov.uk