A recent case makes it clear that in the right circumstances, the existence of a pre-nuptial agreement, or as in this case a continental style marriage contract, can be a factor of decisive importance.

On 2 July, the Court of Appeal in London ruled that in the case of Radmacher v Granatino, the husband should effectively be held to the terms of a pre-nuptial agreement and in doing so made a key decision in English legal history.

Pre-nuptial agreements are not legally binding in England and it has been stipulated by the UK parliament that the English Courts have a duty to consider “all the circumstances of the case” and in doing so no one factor trumps all others. However, this case makes it clear that in the right circumstances, the existence of a pre-nuptial agreement, or as in this case a continental style marriage contract, can be a factor of decisive importance.

The German Katrin Radmacher and Nicholas Granatino, a French national, married in November 1998, having signed a German style pre-nup agreement prior to their wedding. This barred Mr Granatino from making financial claims against his wife.

When the couple filed for divorce in 2006 in England, Mr Granatino was studying for a D.Phil in biotechnology at Hertford College, Oxford, and Ms Radmacher had amassed a personal fortune of over £100 million ($161 million) from her family’s paper company. The High Court considered that Mr Granatino’s award should be “circumscribed to a degree” to reflect the fact that he had signed a pre-nuptial agreement and he was awarded £5.56 million in total out of Ms Radmacher’s £100 million-plus fortune.  Ms Radmacher chose to appeal and won.

While 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”, they considered that the argument that pre-nuptial agreements should be void for public policy reasons was increasingly unrealistic.

It did not reflect the rights of “autonomous adults to govern their future financial relationship by agreement in an age when marriage is not generally regarded as a sacrament and divorce is a statistical commonplace”, the court said.

This was 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. In this case, Mr Granatino fully understood the terms he was agreeing to when he signed the pre-nuptial agreement and had had the opportunity to avail himself of the conventional safeguards of taking independent legal advice and requiring financial disclosure from the spouse, although he had chosen not to. 

Accordingly, the Court of Appeal reduced his award by holding that his £2.5 million home, which Ms Radmacher should provide for him as father to their children, should revert to her once their youngest daughter turns 22 and that the £2.34 million 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 outcome clearly answers the question posed by many of whether pre-nups are worth the paper they are written on. They are – and although they may not yet have binding power in the letter of the law, there is strong support for reform.   

The English courts are no doubt concerned by the country’s reputation as the “divorce capital of the world” and are keen to warn international couples that the English Courts might not be as paternalistic as they have acquired a reputation for being.  In the words of Lord Justice Thorpe: “we are in danger of isolation…if we do not give greater force and effect to ante-nuptial contracts.”

Judicial support for a greater recognition of pre-nups is now evident and it remains to be seen what the legislative response will be. We are now in an uneasy situation where the courts are saying that on the one hand pre-nuptial agreements are not binding as of right, but at the same time saying that they are a matter to take into account.  In some ways this is the “worst of both worlds”.

The Law Commission draft Bill on pre-nuptial agreements is long overdue and will hopefully lead to clear guidance from Parliament on this issue.