UK: Pre-Nuptial Victory For German Heiress

The Court of Appeal has confirmed in a landmark decision on 2 July 2009 that, although a pre-nuptial agreement is not contractually binding under English law, it can be given decisive weight in divorce cases.

Facts

German paper heiress Katrin Radmacher has successfully overturned a High Court ruling which provided her former French husband, Nicòlas Granatino with £5.56m of her £100m+ fortune.
The parties married on 28 November 1998. At the time, Ms Radmacher ran a boutique in Beauchamp Place, London and Mr Granatino worked for JP Morgan where at the height of his career he was earning as much as £325,000 a year.
Prior to their marriage, the parties had signed a German style pre-nuptial agreement (otherwise known as a Marriage Contract), which barred Mr Granatino's financial claims against his wife.
At the time of their separation in 2006 Mr Granatino was studying for a D. Phil in biotechnology at Hertford College, Oxford and Ms Radmacher had amassed a personal fortune of over £100m from her family's paper company.

First instance

Although pre-nuptial agreements are not binding under English law, in the High Court, Mrs Justice Baron considered that Mr Granatino's award should be "circumscribed to a degree" to reflect the fact that he had signed a marriage contract. Mr Granatino was awarded £2.5m for a home, £700,000 to pay off his debts and £2.335m which he could draw on for the rest of his life to provide him with an income. Ms Radmacher was also ordered to pay Mr Granatino £25,000 for a new car and fund the costs of a furnished house in Germany for her former husband, to enable him to visit their children at the weekends.

Court of Appeal decision

  • The Court of Appeal unanimously agreed that the issue of the validity and effect of pre-nuptial agreements "is more appropriate to legislative rather than judicial development". However, they considered that the position that pre-nuptial agreements are void for public policy reasons was increasingly unrealistic in modern times, particularly so in a case involving international parties where the type of agreement they had entered into was commonplace and binding in their respective homelands.
  • Mr Granatino fully understood the terms he was agreeing to when he signed the marriage contract. He had had the opportunity to avail himself of the conventional safeguards of taking independent legal advice and requiring financial disclosure from the spouse, but had chosen not to.
  • The Court of Appeal reduced Mr Granatino's award by holding that his £2.5m home which Ms Radmacher should provide for him as father to their children should revert to her once their youngest daughter (who is 7 now) turns 22 (i.e. in 15 years time) and that the £2.335 lump sum he had been given to provide him with an income for life should be reduced to such amount as would provide him with an income for 15 years, when his financial responsibilities in providing for his daughters' as a home-maker will come to an end. This is the same approach as the English Court's adopt for unmarried parents.

Implications

  • Whilst European developments on international divorce law have, to some degree, floundered, the Court of Appeal were keen to emphasise in their judgment the judiciary's desire to reduce and not maintain rules of law that divide us from the majority of the Member States of the EU and beyond.
  • Questions will be asked as to whether the outcome of this case would have been different had the parties not had "all the hallmarks of internationality". One can speculate but ultimately, as with many family law decisions, this case turns on its facts.
  • This decision will give food for thought to those who wish to forum-shop and who may seek to file for divorce in England to take advantage of the English's Court generous approach to financial awards. The Court of Appeal has gone some way to address claims that the English Courts are overly paternalistic and the likely upshot of this judgment will be a greater incentive to the financially stronger party to enter marriage with a pre-nuptial agreements.
  • This is strong judicial encouragement for legislative reform. However the Law Commission are not due to produce a draft Bill on this issue until 2012.

Global trends

  • In support of reform of the law on pre-nuptial agreements, Thorpe LJ said that "we are in danger of isolation...if we do not give greater force and effect to ante-nuptial contracts."
  • Interestingly, the Court of Appeal's decision is consistent with a recent case in Singapore (TX v TR 2009 (SGCA) 6), where historically the Courts have followed the English rule that pre-nuptial agreements are unenforceable, the Singapore Court of Appeal in February 2009 upheld a Netherlands pre-nuptial agreements (entered into between a Dutch husband and a Swedish wife) which provided that each party to the marriage walk away with their own assets on divorce.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Authors
Claire Blakemore
 
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