England & Wales: Landmark ruling for pre-nuptial agreements

For many years there has been a stark difference in the treatment of pre-nuptials contracts by the English courts and by the rest of Europe. Historically the European courts have regarded a pre-nuptial contract entered into by a couple prior to the marriage as binding on them in the event of their future separation. By contrast the English courts have, in the past, regarded upholding pre-nuptial agreements as contrary to public policy. The existence of a pre-nuptial agreement was simply one the "circumstances" of the case to which the court would have regard upon dealing with a divorce.

There has over the past few years been a gradual change in England's approach to pre-nuptials and the eagerly awaited decision from the Supreme Court in Radmacher v Granatino [2010] UKSC 42, now represents a significant shift in the way the English courts will treat pre- and post-nuptial contacts going forward.

In Radmacher v Granatino a pre-nuptial agreement was entered into by a French national, Mr Granatino and German national, Ms Radmacher. The pre-nuptial agreement was entered into in Germany and had a German choice of law clause. In short, it protected Ms Radmacher's vast wealth.  Both parties knew that the pre-nuptial agreement would be valid and upheld by both the French and German Courts. Whilst Mr Granatino had ample opportunity and was advised to seek independent legal advice, he did not do so. The Supreme Court did not consider this to be a critical failing and what was crucial was whether or not Mr Granitino understood the relevance of entering into a pre-nuptial agreement. Bearing in mind his nationality and that he knew that pre-nuptials were binding in both France and Germany, it was felt that he did understand the relevance. The consequence of this was that the pre-nuptial agreement was effectively upheld and whilst the Husband received some monies in order to purchase a home in both England and Germany the monies would revert to Ms Radmacher upon the youngest child reaching the age of 22.

Going forward the courts will give appropriate weight to pre-nuptials and;

"The court should give effect to a pre-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".

The court was clear to emphasise that, notwithstanding the comment above, pre-nuptial agreements are not binding in England and that it is still ultimately the court that decides how a couples finances should be divided upon divorce. It would require a change in the law to make pre-nuptials absolutely binding. However, this landmark decision does mean that the likelihood of the court upholding a pre-nuptial agreement is now greater and pre-nuptials become an even more sensible option for marrying couples in England & Wales.

Nicky Howarth, TLT LLP  
t: +44 (0)117 917 7958   e: nicky.howarth@TLTsolicitors.com
Nicky specialises in ancillary relief, jurisdiction and cohabitation. She is recognised by Chambers 2011 as a leader in her field and is described as having "a growing reputation for matrimonial finance matters involving international jurisdictions".

November 2010