Supreme Court Upholds German Heiress' Pre-Marital Agreement

In a decision that has shocked many legal commentators, the Supreme Court has slashed the £5.6m awarded to the ex husband of German heiress Katrin Radmacher by the High Court in July 2008. In doing so the Court also laid down a general principle that it should normally give effect to pre-marital agreements and that in the right case such an agreement can have decisive weight.

Nicolas Granatino, a French banker, married Ms Radmacher in 1998 and, after having two children, they separated in 2006. Shortly before the marriage he signed a German pre-marital agreement waiving all claims against her £100m inherited fortune. In divorce proceedings, the High Court awarded Mr Granatino money to buy a house in Central London and to provide him with an income for life as well as directing Ms Radmacher to buy a house that he could use when staying with the children in Germany. A year later the Court of Appeal reduced the income fund to that which was necessary to provide an income until the children grew up and held that the London Housing Fund should be a loan repayable once the children were of independent age. The Supreme Court has now upheld the Court of Appeals decision.

The story does not end there. The Court also indicated that there were circumstances where it would not be right to uphold a pre-marital agreement. For example, where doing so would leave either husband or wife in real financial need or if in the circumstances at the time of the separation it would not be fair to hold them to it. Such an agreement could never be allowed to prejudice the reasonable requirements of any children of the family. The Court also held that in order to be effective, a couple must enter into a pre-marital agreement voluntarily, without either placing undue pressure on the other and must be aware of the implications of the agreement. For some years conventional wisdom has been that there should be full financial disclosure to, but the Supreme Court held that was not always necessary – the question was whether there had been any material lack of disclosure, information or advice. If such a lack would have made no difference to whether the agreement was entered into, then it should not be a reason against upholding the agreement.

In fact as long ago as 1998 the British Government proposed that for any pre-marital agreement to be binding there should be financial disclosure, independent legal advice and a lack of undue pressure, and that a Court could overrule the agreement if it considered that enforcement of it would cause injustice (to children or parents). Crucially in this case the Supreme Court indicated that where a divorcing couples needs could be met without recourse to pre-existing or inherited assets, the likelihood of a pre-marital agreement being upheld may well be an overwhelming factor.

After this historic judgement it is likely that more couples will want to consider pre-marital agreements as a matter of course. Although some consider them unromantic (and even one of the Supreme Justices warned that the Courts ruling might undermine marriage itself) this case could give a boost to couples who want to marry, but also want to protect their assets against possible future claims. As the nature of society changes, and the average age and wealth of couples marrying for the first or second time increases, introducing more certainty into the equation may be no bad thing.