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Pre-nuptial agreements: of any use in England?

20 October, 2009 15:52  EasyExpat EasyExpat

The Court of Appeal in England has recently re-made the law concerning the recognition of pre-nuptial agreements in England. So, what does this mean for you as an expatriate who may or may not have a prenuptial agreement in place with your spouse?

In July 2009 one of Germany’s richest women, Katrin Radmacher was awarded victory in her appeal to have her pre-nuptial agreement recognised in the English courts. Her former husband, Nicolas Grantatino had signed a pre-nuptial not to make any claims on her fortune if they split up, however he was awarded £5.85 million for his own use by a High Court Judge in 2008. The Court of Appeal overturned that decision.

To understand the present situation, we need to look at some of the history. The English courts have always maintained the rule that in matrimonial cases people cannot overrule the jurisdiction of the Court by contract. This was taken so far as to say that any agreement that tried to tell the Courts what decision they should reach was contrary to public policy and void.  It remains the law that parties cannot eject the jurisdiction of the Court, but more modern case law started to recognise pre-nuptial agreements in some respects.

The Matrimonial Causes Act 1973 sets out a number of factors that a Judge must consider when calculating a financial award following a divorce.  The first consideration has to be given to the welfare of any children. The Court must also consider:

  1. Income, earning capacity and other financial resources;
  2. Financial needs;
  3. Standard of living;
  4. Age;
  5. Physical or mental disability;
  6. The contributions each party has made etc.

The Courts also developed a practical working rule when assessing the overall justice and equity of the position, that they should consider ifthe parties had entered into a pre-nuptial agreement, and the outcome that would apply if the agreement was followed.  If application of the agreement would plainly be unfair, the Court would disregard it.  On the other hand if it appeared to be a fair and open attempt by the parties to avoid all the uncertainties of a discretionary judicial decision then the justice of the situation might well require that the agreement was upheld.  It was not therefore binding the hands of the Court, but it was evidence of what the parties themselves thought was appropriate, and should be given very considerable weight.

Most pre-nuptial agreements failed for obvious simple reasons. Very commonly they simply laid out what each party had at the start of the marriage, what they should keep, failing to anticipate the arrival of children, the accrual of assets predominantly in one name rather than the other, etc...

The other great difficulty was working out if the contract had been entered into under fair conditions.  If the would be bride, for example had no idea of her fiancée’s property and assets, how could she have a proper appreciation of what the contract meant?  Furthermore, there might well be elements of emotional coercion – e.g..  the would be bride might be expecting a child and in no realistic position to negotiate. The essence of negotiation is that you have the option to walk away from the agreement if your terms are not met. However the fact that so many countries recognise them and the rising demand in England that they be recognised led to considerable debate. In 1998 the Law Commission produced a Green Paper recommending that the pre-nuptial contracts become enforceable, but with certain safeguards. It considered that the safeguards which ought to be in place before the contract became enforceable were any one of:

  • Where there is a child of the family.
  • Where under the general law of contract the agreement was unenforceable. 
  • Where one or both of the couple did not receive independent legal advice.
  • Where the Court considers that enforcement of the agreement would cause significant injustice.
  • Where one or both of the couple have failed to give full disclosure.
  • Where the agreement was made fewer than 21 days prior to the marriage.

Moving back into the present day, when Ms Radmacher and Mr Granatino separated, Mr Granatino brought an application for a financial settlement in the divorce proceedings. Ms Radmacher’s lawyers responded that there had been a comprehensive pre-nuptial agreement which provided that she kept her own assets intact, he kept his assets intact, and there were no further claims to be made, other than any necessary assessment as to claims concerning the welfare of the children.  Mrs Justice Baron was the Judge at first instance.

She  came to the conclusion that the pre-nuptial agreement relied upon by Ms Radmacher was defective under English law for the following reasons:

  1. The husband received no independent legal advice;
  2. It deprived the husband of all claims even in the situation of want, and that was manifestly unfair;
  3. There was no disclosure by the wife;
  4. There were no negotiations;
  5. Two children had been born during the marriage.

The case was then taken to the Court of Appeal. The judges there disagreed with Mrs Justice Baron and took a different view of how the evidence should have been applied to each of those reasons:

  1. Lack of independent legal advice: However in this case the husband did not deny that he understood the contract nor suggests that he would not have entered into the contract even if he had received advice against doing so. Lord Justice Thorpe added that the husband was of great ability, and in both the husband’s and wife’s countries of origin a pre-nuptial contract was standard practice.
  2. Absence of disclosure: What was lacking here was any finding that if there had been accurate mutual disclosure, the husband would not have or might well not have entered into the contract.
  3. Absence of negotiations: The absence of negotiations only proved that the parties were aware of what the contract entailed.
  4. The birth of the children: The contract had been well drafted and it quarantined any possible claims in respect of the children themselves.  On that basis the Court was able to make a limited award in favour of the husband, by reference to the housing needs he would have as joint parent.  Otherwise though, it was to be assumed that the couple expected to start a family after marrying, and the fact that they did so was of no weight. 

In principle this should make pre-nuptial agreements much more secure, because each of those matters can be conclusively established in the contract itself. If the contract makes it clear that parties have the opportunity to seek legal advice, if it makes clear that they would enter the contract regardless of the size of the assets that the other had, and if it makes it clear they know what a pre-nuptial contract is intended to do, then that should be a conclusive answer to each of the points. Undoubtedly dissatisfied spouses will try to go behind the wording of the contract to say that, yes, they signed an acknowledgement to that effect, but no, they did not really mean what they signed.  It is possible that the background facts might support that, for example if the contract was presented as a “take it or leave it” ultimatum close to the wedding.  In most circumstances however the key is careful drafting that should enable the Court of Appeal’s criteria to be satisfied.

It is therefore safe to say that a well drafted pre-nuptial agreement, based on a proper understanding of the parties’ circumstances should hold good in English law.

By Henry Brookman, Partner and Founder of Brookman Solicitors

Brookman solicitorBrookman is a highly specialist boutique firm of international family lawyers.  The firm conducts the full range of family law services, but has a particular reputation in the field of complex, cross-border issues involving divorce, ancillary relief and children-related matters.  For further information visit the website www.brookman.co.uk or call +44 (0)20 7430 8470.

   



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