The decision of the Supreme Court in the important pre-marital agreement case of Radmacher v Granatino was handed down yesterday.
The ruling represents a major step forward towards pre- marital agreements being regarded as enforceable and so an increasingly worthwhile tool in the wealth protection toolbox.
The Supreme Court held that the appeal judges were right to cut Nicolas Granatino’s divorce settlement from more than £5 million to around £1 million with additional funds being made available to him in his capacity as a father and so only until their youngest child was 22.
The majority of the Supreme Court judges (8:1) held that although pre marital agreements are not contractually binding as such, courts should give effect to a nuptial agreement that is freely entered in to by each party with a full appreciation of its implications unless in the circumstance prevailing it would not be fair to hold the parties to their agreement.
The court said that when deciding what weight to give to a pre marital agreement a court should adopt the following staged approach:
(a) were there circumstances attending the making of the agreement that detracted from the weight that should be accorded to it? Although the court stopped short of saying there were particular safeguards that are pre requisites for a pre marital agreement, it did indicate that a lack of “material” financial disclosure and/or the lack of “sound” legal advice may detract from the weight to be attached to such an agreement.
(b) were there circumstances attending the making of the agreement that enhanced the weight that should be accorded to it?. Here the court had in mind the so called foreign element; in this case the fact that Ms Radmacher and Mr Granatino were both European and that the pre marital agreement they had signed in Germany would have been binding there.
(c) Did the circumstances prevailing at the time the court was making its decision make it fair or just to depart from the agreement? On this point, the court made clear that as long as a pre marital agreement provided for the needs of each party (and their children) and any element for compensation, they would uphold the agreement even if the parties had agreed not to apply the sharing concept to their situation. It is the sharing principle that often leads English courts to make financial awards of approaching a 50/50 split.
Implications of the decision
The Law Commission had already been tasked with looking at the issue of pre and post marital agreements and is due to publish a consultation document in January 2011. So although this judgment does much to clarify the law, it may be that over the next couple of years the law will be refined still further with legislation on the issue.
The court has had to strike a balance between the right of people to exercise personal autonomy and obtain greater certainty around the financial consequences of a divorce with the need to protect the financially vulnerable and the ability of the courts to exercise discretion to tailor judgments to the individual circumstances of the case.
The decision has undoubtedly strengthened pre(and post) marital agreements and the role they can play in wealth protection. Although considered by many to be unromantic, the number of couples considering entering in to a pre marital agreement has been increasing steadily over the last few years and this trend is bound to continue following this decision. Indeed, mediation and collaborative law, being non – confrontational ways of resolving family issues, provide ideal environments within which couples can explore these and many other issues.