Pre-Nuptial Agreements: an update
It is 18 months since family lawyers welcomed the Supreme Court judgment of Granatino v Radmacher which changed the way Pre-Nuptial Agreements are considered by the courts of England and Wales. This landmark judgment determined Pre-Nuptial Agreements should be binding on couples provided they are not "manifestly unfair". The decision set down a number of factors to be considered when assessing what may be unfair and the weight that should be given to a Pre-Nuptial Agreement when determining the distribution of assets of a separating couple. It did not change the law, only Parliament can do that, and therefore, as expected, there has been litigation in this area over the interpretation of the principles laid down by the Supreme Court.
In summary those principles are:
1. The court should give effect to a Pre-Nuptial Agreement which is freely entered into by Parties with a full appreciation of its implications unless in the circumstances it would not be fair to hold the parties to the agreement.
2. There is no absolute rule that there has to be full disclosure of assets or independent legal advice - the relevance will depend on the individual circumstances of the case.
3. The presence of any vitiating factors of fraud, misrepresentation or duress will negate the effect that the agreement might otherwise have.
In determining fairness, the agreement cannot prejudice the reasonable requirements of any children. Respect should be given to how a couple freely choose to regulate their affairs, particularly when seeking to protect pre-marital wealth. The Supreme Court also said that it would likely be unfair to hold parties to an agreement which leaves one spouse in real need.
One of the principles which has been explored in subsequent cases has been the relevance of parties providing each other with full and frank disclosure of their respective assets and financial circumstances and also receipt of independent legal advice before entering into the agreement.
In Radmacher, the husband did not receive legal advice or have full disclosure of his wife`s assets but it was found that this did not prejudice him as he had a clear understanding of his wife`s general worth and what the agreement would mean for him if they separated.
In the case of Z v Z in late 2011 the court upheld a Pre-Nuptial Agreement drawn up by notaries in France who did not give any formal advice and there was no formal disclosure. In her evidence the wife said she had a full appreciation of the agreement`s implications and maybe more crucially the agreement met her needs.
In 2012 there have been two cases heard by Mr Justice Mostyn. Kreman v Agrest was a Post-Nuptial Agreement case involving significant wealth and an international element. The couple were Russian and had entered into a Post-Nuptial Agreement in Israel in 2001. They separated in 2007 after 16 years of marriage. The agreement gave the wife $1million and a house in Austria. The husband kept the rest and at trial he was found to have undisclosed assets of between £20 - £30 million. Despite its unusual facts the approach the judge applied to enforceability of this Post-Nuptial Agreement could have a wider application to Pre-Nuptial Agreements.
On the subject of disclosure and advice the judge went as far as stating
"it seems to me that it will only be in an unusual case where it can be said that absent independent legal advice and full disclosure, a party can be taken to have freely entered into a marital agreement with full appreciation of its implications".
He then awarded the wife £12.5 million because the Agreement was not fair as it did not meet her or the children's reasonable needs and she did not freely enter into the agreement or fully appreciate its implication.
The same Judge, the following month in the case of B v S again referred to his suggestion that the parties should usually need to receive advice on the effect of the agreement. The husband alleged after a 11 year marriage that there had always been an agreement to adopt the matrimonial property regime of the place they married - Catalonia. It was found there had been no proper discussions between the parties nor had they taken independent legal advice and the "agreement" was disregarded.
No doubt litigation over of Pre-Nuptial Agreements will continue and each case will turn on its own facts. The Radmacher presumption that such agreements should be binding if they are not unfair still stands - but now more so than ever, full disclosure of assets and both Parties receiving independent legal advice will help to lessen the likelihood of that presumption being rebutted.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.