To pre or not to pre
News article published on: 18th June 2009
The question “should I get a pre-nup?” is one that has caused suffering to the minds of many a matrimonial lawyer. The issue of the importance of pre nuptial agreements has again been considered by the Courts in England. In July of this year the Court of Appeal was asked to consider the case of Radmacher v Granatino. This is the latest of a number of recent cases (such as Crossley v Crossley and MacLeod v MacLeod) where Judges have considered the impact of pre nuptial agreements on divorces. The Court in Radmacher v Granatino was persuaded that the pre-nuptial agreement should have a significant bearing on the order made. The position, although still not altogether clear, is now that if the pre-nuptial agreement was made fairly and without breaching the UK’s laws regarding contract then it will have a significant effect on any final order.
Unlike in many other countries, the position in England in relation to pre nuptial agreements has been one of uncertainty. There has not been (and there still is not) a law saying that if you enter into a pre nuptial agreement then this agreement will be upheld. Traditionally the English Courts have looked at pre nuptial agreements with a degree of scepticism, perhaps at best it could be seen as one of many factors to be taken into account. In the past this has left matrimonial lawyers scratching their heads when asked “should I get a pre-nup?”. The rather unsatisfactory answer was that that you could enter into a pre-nup but it may or may not be upheld and it may or may not have any impact in a future divorce settlement. Perhaps the lawyers were then able to advise that if you both fully disclose your financial positions, obtain legal advice and as long as there is no big change in circumstances (such as the birth of children) then maybe the Court will be persuaded to make an order in the terms of the pre-nuptial agreement.
So has the answer changed now that we have the Court of Appeal’s guidance in Radmacher v Granatino? In one sense the simple answer is no. There is no statutory basis for pre nuptial agreements being considered binding contractual agreements and the Court at any level cannot change this. Ultimately, only parliament can address the issue of whether or not and in what circumstances pre nuptial agreements should be held to be binding. Whilst the Law Commission is now going to investigate this issue, the reform of matrimonial law is a political hot potato and neither of the major political parties have demontrated a real willingness to consider change. As Lord Justice Thorpe in Radmacher v Granatino himself notes, “In February 1998 the Solicitor General announced that the government intended to reform the law of ancillary relief as a matter of urgency to achieve greater certainty and predictability of outcome … The government however, retreated without further explanation from its earlier stated intention and experts were left to contemplate a future without legislative reform.” Further legislative reform may be perchance only a dream.
However, this is a rather simplified way to look at matters. The reality is that the Court decisions have shown an increasing support for pre nuptial agreements. For example, in Radmacher v Granatino there was a big change in circumstances in that two children were born during the marriage. This did not prevent the Court from being influenced by the terms of the pre-nuptial agreement, as the birth of children was forseeable. Whilst the Court cannot find that the pre nuptial agreements are binding, they are becoming more and more persuasive.
In the Radmacher v Granatino case there were complexities. Neither of the parties were English and the pre-nuptial agreement was reached in Germany (and in what seems an attempt to complicate matters further, the marriage was celebrated in the UK and Switzerland and the parties then lived in London and New York). As with most of the matrimonial cases considered by the higher courts the family was very wealthy and the husband and wife both had very different stories as to why they entered into the agreement. Although it is very unlikely that these particular circumstances are going to be repeated, the case should not be dismissed as a one off. Whilst the international elements were important factors in the Court’s reasoning, the conclusion that the Court reached was that the Court should take into account the
“marital property regime into which the parties freely entered”.
Now if the agreement were reached in England then by implication the laws about written agreements should also be taken into account. This implication was further reinforced the Court’s consideration of the difference between pre-nuptial agreements and post-nuptial agreements. Post-nuptial agreements do have some legal standing and there is significant and long standing case law upholding their persuasive value. The Court in Radmacher v Granatino, in an clear move away from the findings in the earlier Isle of Man case of MacLeod v Macleod (decided by the Privy Council, the House of Lords under a different guise), felt that there was little in reality to distinguish a pre-nuptial agreement from a post-nuptial agreement.
So we can see that the Radmacher v Granatino case has implications wider than the the very narrow set of facts in that case. There was not, and could not, be a deviation from the rules under which the Court must consider applications for ancillary relief and the Court of Appeal considered the factors listed in section 25 of the Matrimonial Causes Act and applied those factors in the Radmacher v Granatino case. The Court is not asked to consider these factors, it is specifically told that it has a “duty … to have regard to all of the circumstances of the case”. There is no doubt now that the Court considers that it has a duty to have regard to the terms of a pre-nuptial agreement and furthermore that it should take into account that the agreement was a freely entered into written agreement (assuming of course that this is not in dispute).
The Court of Appeal was strongly influenced by the terms of the pre-nuptial agreement in Radmacher v Granatino, to the extent that whilst the other section 25 factors were taken into account, the consideration of the husband’s financial circumstances and future financial circumstances appeared to be more on the basis of his role as a father than his role as a husband. The pre-nuptial agreement was of great persuasive value to the Court, and this was despite the issues surrounding the making of the agreement (such as the husband not having sought legal advice in relation to the terms of the agreement).
The case of Radmacher v Granatino has shown that the Courts will take into account the terms of a pre-nuptial agreement and furthermore that they can find these agreements very persuasive in making final orders regarding financial disputes. Whether or not the Law Commission will recommend change and parliament will effect change remains to be seen. However, the decision in Radmacher v Granatino does now change the reply to the original question. In many circumstances it may now be time to take arms against a sea of troubles through a pre nuptial agreement.
Of course, a pre-nuptial agreement may not be for everyone. The other factors in section 25 of the matrimonial causes act are all also to be taken into account in the division of the matrimonial finances and the first consideration is still the welfare of any child of the family. It is hard to envisage how this would change even if legislative reform does eventually happen. A pre-nuptial agreement is certainly something that should be considered carefully when there is a possibility that any future financial dispute will not be resolved solely on the basis of needs. What can be advised with more confidence than previously is that if a fair and reasonable pre-nuptial agreement is reached, without breaching the laws of the country in which the agreement is made, and the implementation of the agremeent would not impact upon the welfare of any children then it is now likely that the Court will uphold the agreement and make an order in similar terms.
So whether” to pre or not to pre” remains a question for the individual, but entering into such an agreement now provides more certainty than had previously been the case. It is now much more likely that a pre nuptial agreement will persuade a Court to make an order in those terms and it will almost certainly have some effect on the Court’s decision