PRESS RELEASE
Radmacher v Granatino - Court of Appeal judgment delivered today: leading family lawyer from Stewarts Law LLP available for comment
The decision in this case concerning the enforceability of Pre-Nuptial Agreements has been handed down this morning confirming the increased importance of pre-nuptial agreements, especially since the 2008 decision in Crossley.
Summary of the Result
The Wife was successful in her appeal. H was given a greatly truncated award. Essentially, the major funds (housing and income) are to be provided for him in his role as father rather than as former husband.
Emma Hatley, partner in the divorce team will be available for comment on 0207 8228024 or ehatley@stewartslaw.com
Alternatively, please contact Stuart Dench, Marketing Partner, or Alon Riza, Marketing Manager, on 020 7822 8000 who will be able to arrange an interview.
Basic Facts
W (40) is a German heiress worth an estimated £100 million. H (38), a Frenchman, is a former investment banker who at the peak of his career was earning a salary of $470,000. He now earns £30,000 pa as an academic at the University of Oxford and has no intention of returning to the City. Prior to the marriage they signed a German Pre-nuptial Agreement. Following contested children proceedings a joint residence order was made (H:30%, W70%) and W returned to Germany with the children.
At first instance, before Baron J in the High Court, H sought an order based upon his needs calculated to be £6.9m. H maintained the PNA should be disregarded entirely because:
- he did not receive independent legal advice;
- there was no disclosure of W's wealth;
- it made no provision in the event of the birth of children
- it was manifestly unfair in that it made no financial provision for either party in the event of divorce
W's proposed H had only a limited claim (if any claim at all) because:
- H willingly signed the PNC
- There would have been no marriage without the PNC
- All of W's assets were inherited and separate property
- There was no matrimonial property and no owned matrimonial home
- W would not have her current level of assets had it not been for the PNC as her father would not have made over monies to her during the marriage
- W is primary carer of the children and she will have to fund them throughout their minority with no assistance from H.
She proposed to grant H a life interest in a home in England valued at £1 million nd the use of a residence in Germany. She agreed to pay child maintenance but in every other respect H should stand on his own two feet. Her secondary position provided for £35,000 p.a. maintenance until his retirement (not to be capitalised) on the basis that his reasonable needs are £60,000 and he can earn £25,588 net salary.
The Pre-Nuptial Agreement
Mrs Justice Baron gave very limited weight to the agreement having found that the agreement was flawed in the following respects:
- H did not receive independent legal advice. The basic terms were made clear to H, but given the shortage of time and the fact that the document was in German and based on German law, H did not have sufficient time to seek a proper translation or independent legal advice.
- There was no disclosure of the parties' assets.
- As a man of commerce, and coming from a jurisdiction where PNAs are enforceable, H knew that the consequence of signing such an agreement was to preclude him from making claim a claim on divorce under German law. However, neither that knowledge, his background, nor the information he was given are the same as understanding the full legal consequences of his decision or its later enforceability.
- The PNC made no financial provision for either party in the event of the birth of children.
- The most obvious unfairness is that the PCN provides no financial provision even in the event of real need.
The Effect of the Parties' Foreign Nationality on the application of English Law
Mrs Justice Baron found the basic position to be that when making an order for financial provision under the Matrimonial Causes Act 1973 the court always applies its own law, irrespective of the domicile of the parties.
Having said that, her view was that:
"the Court does not act in a blinkered fashion. Accordingly, where there are foreign elements involved, in fairness these factors must be weighed in the balance."
She took into account the 'cultural factors' as a 'circumstance of the case' to justify an anchoring of H's claims.
The First Instance Result
Mrs Justice Baron reiterated that there is no place for gender discrimination in the family courts. She recognised that the birth of children alters the relationships and priorities of both sexes. However, H has chosen to give up a lucrative career and is was unrealistic for him to expect W to fund a lavish banker's lifestyle for the remainder of the Husband's life. "The financial consequence of his decision must in truth be marked in the balancing exercise."
The award was based upon H's needs assessed as follows:
W to pay to H:
Housing in London £2,500,000
Debts £700,000
Additional capital £25,000
Capitalised maintenance (£100,000 pa) £2,335,000
Total: £5,560,000
In addition W was to provide £504,000 for the purchase and furnishing of a property in Germany to be held in her name and occupied by H on a Schedule 1 type basis until the children reach majority. This would enable him to spend time with the children.
W was also ordered to make child maintenance to H totaling £70,000 pa.
W appealed to the Court of Appeal. The appeal was heard in the Court of Appeal on 27 and 28 April 2009.
Appeal
The Court of Appeal found the following factors to be influential in their decision to allow W's appeal.
- The cases has all the hallmarks of 'internationality' and as a society we should be seeking to reduce the rules of law that divide us from the majority of the member states of Europe (where marriage contracts are standard practice).
- H was a man of great ability and had the opportunity to seek legal advice and engage in negotiations
- As a young couple it is assumed that they expected to start a family
The Court of Appeal were critical of Mrs Justice Baron in ultimately failing to make reference to the PNA in her award. Despite the appearance of the PNA as a factor, the overall impression is a negligible resulting discount.
The Court of Appeal substituted the award to give proper weight to the PNA so that H's housing fund of £2.5m would not be his absolutely but only held for him during his parenting years. Likewise the income fund was reduced to a capitalised sum to cover H's needs until the youngest child's 22nd birthday.
It is not known whether H will seek leave to appeal to the House of Lords.
The Law Commission is due to examine the status and enforceability of agreements between spouses or civil partners in late 2009 with a report and a draft bill expected in late 2012.
Commentary
Emma Hatley says:
"There now appears to be a clear trend that significant weight is to be attached to Pre-Nuptial Agreements. Although this decision does not go so far as to lead to such Agreements being automatically binding they may well be treated as highly influential subject to a single overriding safeguard of significant injustice."
"Clearly the cultural issues in this case were a magnetic factor and there was an unusual factual matrix whereby the Husband, having given up a lucrative career to pursue academic interests, then sought the Wife, from her separate and inherited resources, to maintain him in a lavish banker's lifestyle. That said, it may not be the end of the tale as the case seems ripe for an appeal by the Husband to the House of Lords."
"In light of this decision, it would be foolhardy for any clients entering a Pre-Nuptial Agreement to assume that they will not be held to the terms, regardless of whether, as many still believe, it is an immoral bargain. For the financially disadvantaged party they must think very carefully, having taken specialist advice, on the rights they are potentially giving up."