Supreme Court finds in favour of prenuptial contracts in Radmacher

The Supreme Court has found in favour of Katrin Radmacher and held that the Court of Appeal was correct in allowing the enforcement of a prenuptial agreement. 

The case concerns the question of whether the Court of Appeal erred in finding that prenuptial contracts ought to be given decisive weight, where entered into freely by both parties, in an assessment under section 25 of the Matrimonial Causes Act 1973; and also whether the Court of Appeal decision amounted to impermissible judicial legislation, in contravention of the decision of the Privy Council in MacLeod v MacLeod (Isle of Man) [2008] UKPC 64.

In July 2009 Katrin Radmacher won her Court of Appeal case to enforce a prenuptial agreement that protects her personal wealth from legal claims by her former investment banker husband, Nicolas Granatino. The German heiress, worth £100 million, succeeded in reducing the payout to her French ex-husband from over £5.5 million to £1 million plus another £2.2 million-pound loan for a home that will have to be returned when the couple's two daughters grow up.

The couple executed the prenuptial contract in Germany three months before they married in London in 1998 with Mr Granatino agreeing not to claim against his wife if they separated.

In dismissing the appeal by a majority of eight to one, the Justices found the Court of Appeal was correct to conclude that there were no factors which rendered it unfair to hold the husband to the agreement. The Court found that Mr Granatino is "extremely able" and his own needs will in large measure be indirectly met from the "generous relief" given to cater for the needs of his two daughters. The Court further held that there is no compensation factor as Mr Granatino's decision to abandon his career in the city was not motivated by the demands of his family but reflected his own preference.

The Justices concluded that "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".

In reaching their conclusion the Justices considered three issues that arose in relation to the agreement.

Firstly, the Justices considered the circumstances in which the agreement was made. The Court held that parties must enter into a postnuptial agreement voluntarily, without undue pressure and be informed of its implications.

Secondly, the Justices considered if the foreign elements of the case enhance the weight that should be accorded to the agreement. The fact that it was binding under German law was relevant to the question of whether the parties intended the agreement to be effective, at a time when it would not have been recognised in the English courts. It follows that after this judgment, it will be natural to infer that parties entering into agreements governed by English law will intend that effect be given to them.

Finally, it considered whether the circumstances prevailing at the time the court made its order make it fair or just to depart from the agreement. It considered that a prenuptial agreement may make provisions that conflict with what a court would otherwise consider to be fair. The principle, however, to be applied is that a 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. A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family, but respect should be given to individual autonomy and to the reasonable desire to make provision for existing property.

Responding to the judgment Resolution's Andrew Greensmith said: "Today's judgment is a major step forward. We know that financial uncertainty is one of the most stressful elements of any divorce, and a pre-nuptial agreement can be a useful tool for couples wishing to reduce this uncertainty.

"However, until today the enforceability of pre-nups has been very uncertain because they were seen as contrary to public policy and an attempt to override divorce laws. That principle has been swept away by today's judgment, which paves the way for these agreements to become more mainstream and less the preserve of the rich and famous."

He continued: "With second marriages on the rise, people marrying later, and many couples entering marriage with money and property already to their name, it is likely that there will be more and more demand for pre-nuptial agreements. This much-needed judgment clarifies their status and is a victory for fairness and common sense".

Family Law is pleased to announce a training event, Pre-Nuptial Agreements post-Radmacher, which will be held in London on 23 November 2010. The key speaker will be barrister Nicholas Francis, Head of Chambers at 29 Bedford Row.