Everyone hoped the law would be crystal clear about whether or not a pre-marital agreement (PMA) was enforceable under English Law, after the case of Radmacher (formerly Granatino) –v- Granatino heard in the Supreme Court in October 2010.
The couple had entered into a PMA. In this case, the wife came from a very wealthy German family and had assets of about £54 million which generated an income of £2.7 million per annum. The husband, who was French, earned £50,000 in the City. His earnings peaked at £300,000 in 2001 but he gave up his financial career to pursue an academic life.
The case went to the High Court in July 2009 but the wife appealed to the Court of Appeal.
The Court of Appeal said that it had to be assumed this young couple had expected to start a family at the time they entered into the agreement. This meant that the birth of the children had not impacted upon the validity of the agreement, which had only made financial arrangements for the adults.
The husband appealed to the Supreme Court which was heard by a nine Justice Court. The decision of the majority, and a key principle which emerged, was this. The 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.
However, this does not say that PMAs are contractually binding. At the beginning of the Judgement it was made clear that the parties could not oust the jurisdiction of the Court. Rather, it is a question of the appropriate weight to be given to the agreement.
The majority view, that of eight out of the nine Justices, was that three issues had to be determined:
1. Were there circumstances attending the making of the agreement which should detract from the weight which should be accorded to it?
2. Were there circumstances attending the making of the agreement that enhance the weight that should be accorded to it: the foreign element?
3. Did the circumstances prevailing when the Court’s order was made make it fair or just to depart from the agreement?
In this case, the fact that both parties in the marriage came from countries where the PMA was the norm was relevant to their intention to be bound by it.
The only female Justice and only family lawyer of the nine, Lady Hayle, dissented from the majority judgement. She stated that the real difference between her and the majority is that there should not be a presumption or starting point of upholding the agreement as this was “impermissible judicial gloss”. She wanted the marital agreement to be just one of the factors that the Court took into account when deciding whether or not fair provision was being made.
When will the Court hold a PMA enforceable? Both parties must enter into it voluntarily and fully understand its implications. They should intend to be bound by it. The Court will want to ascertain whether it was balanced, whether it was fair. In the USA, they video the parties at the PMA.
It is not necessary to have independent legal advice. Both parties can use the same solicitor, but sound legal advice is required.
If all of these factors are present, the Court is likely to hold it enforceable. However, there is a problem if there are children. There needs to be a generous provision for them, or the Court must be allowed to make generous provision for them. If the agreement means that the children’s needs are not met, then it is unlikely the Court would hold the PMA enforceable.
There can be no guarantees offered but the Radmacher case at least sets down the criteria which a PMA has to satisfy to have a chance of being found to be enforceable under English Law.
© Bonell & Co 2011. This article was published in May 2011 as part of the Resources section of our website.