Prenups in court: will they be upheld?
25 January 2017
The landmark case of Radmacher v Granatino, decided by the Court of Appeal in 2009 and upheld by the Supreme Court (the most important court in the land) in 2010, represented a significant development in the law on prenuptial agreements. It remains the most important decision concerning prenuptial agreements in England and Wales.
In that case, which involved an eight-year marriage between a German heiress wife and her French husband, which had produced two daughters, the husband received a £2.5 million housing award which reverted to his wife when their two children had both completed university education, money to clear his debts and buy a car, plus a lump sum to provide him with income until their youngest child reached the age of 22. The wife was worth about £100 million but the husband, who had previously worked in the financial sector, had given up his career to become an academic and had no capital of his own.
In effect, he was granted short-term needs-based financial provision, for his role as father of the two children of the family, rather than for his long-term financial needs, as the former husband of a very wealthy woman.
Many English family lawyers were surprised by the outcome of the case, especially since the agreement had been entered into without the husband receiving independent legal advice (although he had plenty of opportunity to obtain such advice) and without financial disclosure (although the husband was financially astute and aware of the wife's background of extreme family wealth).
The essential point of principle established by the Supreme Court decision is that:
"The court should give effect to a nuptial agreement that is freely entered into by each party with full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
This means that there is now effectively a rebuttable presumption that any kind of marital agreement (whether made before or after a marriage, or civil partnership) will be binding on the couple unless the agreement is found to be unfair at the time of any breakdown of the couple's marriage. It will be up to a spouse who wishes to renege from the terms of a marital agreement to convince a court as to why it would not now be fair to hold him or her to the terms of an agreement that was freely entered into with full understanding of its meaning and significance.
Whether or not will be fair to hold the parties to the agreement in the event of the breakdown of the marriage will depend on the particular facts of the case but the Supreme Court made it clear that:
i) the financial needs of any children of the family and of the economically weaker spouse must be met (so long as there are sufficient financial resources to make this possible);
ii) circumstances in which one of the spouses has suffered relationship-generated disadvantage as a result of the way in which the couple have organised their marriage (e.g. a highflying wife giving up her career to care for the children of the family and support her husband in his career) are also likely to make it unfair to hold the couple to the agreement;
iii) respect should be given to the couple's individual autonomy as to how they choose to organise their financial affairs, and the wish to protect/ring fence "non-matrimonial" assets in the event of a divorce, e.g. pre-acquired assets or inherited assets (whether received before or during the marriage) or assets derived from a family trust, or gifted by family to one of the spouses, before or during the marriage;
iv) if circumstances have changed over the course of the marriage (especially likely in the case of a long marriage) in ways which neither spouse could have envisaged, this is more likely to make it unfair for the couple to be held to the agreement.
The Supreme Court made it clear that in many ways the law remains unchanged, unless and until the law is altered by legislation, to make prenuptial agreements legally enforceable, (as was recommended by the Law Commission in February 2014).
So, it remains impossible for the parties to a marital agreement to contract out of the court's discretionary jurisdiction to deal with the financial aspects of a divorce, and it remains the case that prenuptial agreements are not legally binding in England and Wales.
A marital agreement is one of the circumstances that the court must take into account when dealing with the financial aspects of a divorce and the court must give such an agreement appropriate weight (according to the facts of the particular case) when exercising its discretion under section 25 of the Matrimonial Causes Act 1973.
The law on marital agreements, as enunciated in Radmacher, has continued to be explored and developed by judges in other important cases that have been decided. However very few cases on prenuptial agreements have reached the Court of Appeal and no further case on prenuptial agreements has been heard in the Supreme Court.
Subsequent cases turn on their own particular facts and, in the absence of new legislation, the law regarding prenuptial agreements remains somewhat uncertain.
Maeve O'Higgins Family Law Partner, Burlingtons Legal |
Email: firstname.lastname@example.org, Tel: +44 (0) 207 529 5420
This blog is intended for general information only and should not be considered as giving advice in relation to any individual case nor be taken as applying to any particular case. No liability is accepted for any such use of the information contained.