Pre-Nuptial Agreements- a change in the law?

Much has been made in the press of the long-awaited decision of the Supreme Court in the divorce case of Radmacher v Granatino which was delivered recently. The Supreme Court decided by a majority of 8 – 1 that the Pre-Nuptial Agreement made between a German multi-millionairess and her French husband prior to their marriage in 1998 should be upheld. The Agreement was expressed to be subject to German law but the parties were living in England by the time of their divorce, hence the divorce took place here. The parties separated in 2006. In England, unlike some other European states, only English law is ever applied. A couple lives within the jurisdiction of the English court and the court applies English law; not the law of the country in which the Agreement was made, nor the law of the parties’ nationalities.

It remains the case that Pre-Nuptial Agreements are not automatically binding in law in England and Wales. Such an Agreement is only one factor for the courts to take into account when considering the factors set out in section 25 of the Matrimonial Causes Act 1973 which govern the financial settlement that a court will order. The overall aim is to achieve fairness which, for most parties, means meeting the parties’ “reasonable needs”. If a Pre-Nuptial Agreement is considered fair by a court, given the circumstances of the parties on their divorce, it will be upheld. If it is not, and needs take precedence, then it may still be taken into account in determining the final outcome even if the arrangement is not fully applied.

In this divorce case, it was considered that it was fair to hold the couple to the Agreement even though Mr Granatino had not had independent legal advice, which we would always recommend. The court commented that Mr Granatino was extremely able and his own needs would in large measure be indirectly met from the generous relief given to cater for the needs of his two daughters until the younger reaches the age of 22. 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.

It has to be remembered that this case is far from typical and in many cases, the court would not consider it fair for the parties to be bound by a Pre-Nuptial Agreement, particularly if their circumstances had substantially changed after, say, a long marriage with children. In more typical cases of this type, needs would dictate that one party should receive more generous financial provision than might provided by the Pre-Nuptial Agreement. The Law Commission is currently considering whether to make Pre-Nuptial Agreements automatically binding. The challenge will be to ensure that proper consideration is given to ensuring that less wealthy parties are not adversely affected by any change in the law.

For more information on this subject contact Deborah Prance.