Binding prenups? Almost
24th July 2009 by: Deborah Jeff
The Court of Appeal decision in Radmacher –v- Granatino on 2nd July has been much welcomed by family lawyers as a further step towards making prenuptial agreements binding.
The starting point for any pre-marital agreement is that it is not binding in the English Courts. A Court can ignore the agreement and historically has done so if it produced an unfair outcome. The Courts have taken a very paternalistic approach to prenuptial agreements until now and have sought to protect the financially weaker party, even when they had received legal advice regarding the arrangements they were entering into.
However, the Radmacher decision in the Court of Appeal was radical because it demonstrates that the Courts are now moving away from such an approach to prenuptial agreements. Until now, the onus has been on the party seeking to keep to the agreement to persuade the Court that it was reasonable to do so. Now however, the burden is on the person seeking to extricate themselves from the agreement to show why it should be disregarded. The presumption now is that the prenuptial agreement will be upheld.
Ms Radmacher and Mr Granatino entered into a prenuptial agreement in Germany in 1998 whereby Mr Granatino would receive nothing of Ms Radmacher’s considerable wealth if the marriage broke down. When the marriage did break down in 2006, Ms Radmacher issued divorce proceedings in England. In July 2008, the High Court held that it would be unfair to hold Mr Granatino to the prenuptial agreement, particularly in view of the fact that they now had two children, and awarded him a settlement of approximately 5% of Ms Radmacher’s assets. Ms Radmacher appealed. The Court of Appeal overturned the High Court's decision, upholding the prenuptial agreement subject to a loan from Ms Radmacher to Mr Granatino during their children’s minority to help house them to a similar standard of living to that which they will enjoy with Ms Radmacher. The crucial point is that such sum has not been given to Mr Granatino outright but reverts to Ms Radmacher when the youngest child leaves home. The compelling factor was that the husband knew upon signing the prenup that he would receive no financial support from the wife if their marriage broke down.
Although the Radmacher case did not make prenups 100% binding, it illustrates how the Courts will now allow consenting adults to agree their own financial settlements in divorce rather than intervening in the way they have historically.
The starting point for any pre-marital agreement is that it is not binding in the English Courts. A Court can ignore the agreement and historically has done so if it produced an unfair outcome. The Courts have taken a very paternalistic approach to prenuptial agreements until now and have sought to protect the financially weaker party, even when they had received legal advice regarding the arrangements they were entering into.
However, the Radmacher decision in the Court of Appeal was radical because it demonstrates that the Courts are now moving away from such an approach to prenuptial agreements. Until now, the onus has been on the party seeking to keep to the agreement to persuade the Court that it was reasonable to do so. Now however, the burden is on the person seeking to extricate themselves from the agreement to show why it should be disregarded. The presumption now is that the prenuptial agreement will be upheld.
Ms Radmacher and Mr Granatino entered into a prenuptial agreement in Germany in 1998 whereby Mr Granatino would receive nothing of Ms Radmacher’s considerable wealth if the marriage broke down. When the marriage did break down in 2006, Ms Radmacher issued divorce proceedings in England. In July 2008, the High Court held that it would be unfair to hold Mr Granatino to the prenuptial agreement, particularly in view of the fact that they now had two children, and awarded him a settlement of approximately 5% of Ms Radmacher’s assets. Ms Radmacher appealed. The Court of Appeal overturned the High Court's decision, upholding the prenuptial agreement subject to a loan from Ms Radmacher to Mr Granatino during their children’s minority to help house them to a similar standard of living to that which they will enjoy with Ms Radmacher. The crucial point is that such sum has not been given to Mr Granatino outright but reverts to Ms Radmacher when the youngest child leaves home. The compelling factor was that the husband knew upon signing the prenup that he would receive no financial support from the wife if their marriage broke down.
Although the Radmacher case did not make prenups 100% binding, it illustrates how the Courts will now allow consenting adults to agree their own financial settlements in divorce rather than intervening in the way they have historically.
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