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(Supreme Court; Lord Phillips of Worth Matravers, Lord Hope of Craighead, Lord Rodger of Earlsferry, Lord Walker of Gestingthorpe, Lord Brown of Eaton-under-Heywood, Lord Collins of Mapesbury, Lord Kerr of Tonaghmore, Lord Mance of Frognal, Lady Hale of Richmond (dissenting); 20 October 2010)
The French husband and German wife signed their ante-nuptial agreement in Germany on 1 August 1998. They later married in London where they spent most of their married life and had two children. Following separation both petitioned in London and a shared residence order was made.
The ante-nuptial agreement provided that the governing law would be German law. There would be a separation of property with each managing his or her own assets independently. Equalisation of pension rights was excluded and maintenance claims waived. Neither party would derive any interest in or benefit from the property of the other during the marriage or on its termination. There was no provision for what would happen if they had children.
Baron J awarded the husband £5.56m considering that some weight should be given to the ante-nuptial agreement but this was limited because a number of the usual safeguards (disclosure, legal advice etc) had been omitted. This paid off the husband's debts of £700,000, gave him a housing fund for a property in London and a fund for maintenance. He would also receive child maintenance of £35k per child per annum and a sum to buy a home in Germany (to remain owned by the wife) where the children could stay with him.
The Court of Appeal allowed the wife's appeal holding that the circumstances of the agreement should not reduce its weight. The agreement should have been given decisive weight. The husband was provided for in his role as a father, but his own long term needs were not provided for. He would receive a fund for maintenance until the youngest child reached age 22, and at that point his English home would also revert to the wife. He would still receive the payment towards his debts and child maintenance.
The Court sets out the basic principles in relation to ante- and post-nuptial agreements at the beginning of its judgment:
- The English ancillary relief court is not obliged to give effect to nuptial agreements.
- The parties cannot by agreement oust the jurisdiction of the court.
- The court must however give appropriate weight to such agreements.
The Supreme Court identified 3 major issues to be determined in Radmacher:
1. Were there circumstances attending the making of the agreement that detract from the weight that should be accorded to it?
If an ante- (or post-) nuptial agreement is to carry full weight, both husband and wife must enter it of their own free will, without undue influence or pressure and informed of its implications.
The safeguards set out in the consultation document "Supporting Families" in 1998 are likely to be highly relevant in determining this, but there is no need for them in current state of law. It is right to ask whether there was any material lack of disclosure or advice. What matters is that each party has all the information that is material to his or her decision, and that each should intend the agreement to govern the financial consequences of the marriage coming to an end. In Radmacher, in so far as the safeguards were not satisfied, this was not material.
From now on, in light of this judgment, it will be natural to infer that parties who enter an ante-nuptial agreement to which English law is likely to be applied, intend that effect should be given to it.
In the usual way, fraud, misrepresentation and duress would negate the effect of an agreement, but lesser conduct such as undue pressure or exploitation of a dominant position will also reduce or eliminate its weight. All the circumstances of the parties at the time of the agreement will be relevant, including their age and maturity and whether the marriage would have gone ahead with or without an agreement (which may cut either way).
2. Were there circumstances attending the making of the agreement that enhance the weight that should be accorded to it; the foreign element?
As to whether the foreign elements of a case enhance the weight to be given to an ante-nuptial agreement, foreign elements may have a bearing on whether the parties intended the agreement to be effective. However this will not make any difference following this judgment.
3. Did the circumstances prevailing when the court's order was made make it fair or just to depart from the agreement?
The Supreme Court advanced the following test:
"The court should give effect to a nuptial agreement that is freely entered into by each party with a full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement."
While there are no rules as to when it will or will not be fair, some guidance is given.
- A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family.
- There should be respect for individual autonomy - especially where the agreement addresses existing circumstances
- The preservation of non-matrimonial property may be justified
- Where circumstances evolve so as to make it unfair to hold the parties to their agreement they should not be. It is the principles of need and compensation which will most readily render it unfair to hold parties to an agreement. Therefore it is sharing that is most likely to be replaced by the terms of the agreement.
Applied to the facts of Radmacher:
The relevance of the German choice of law clause in the ante-nuptial agreement was that it was relevant to the parties' intention that the agreement be binding on them.
The Supreme Court agreed with the Court of Appeal that the judge was wrong to find that the agreement was tainted due to lack of legal advice, disclosure and negotiations. The Court of Appeal had been entitled to replace the judge's award with its own assessment.
In relation to need, the husband is an extremely able individual and the generous relief given to cater for the needs of the children would indirectly provide for his needs in large measure. Therefore the husband's needs were not a factor rendering it unfair to hold him to the agreement subject to providing for the needs of the children.
There was no compensation element. The husband's decision to give up his career as a banker in favour of academia was not motivated by the demands of his family but reflected his own preference.
The husband was not entitled as a result of the marriage to a portion of the wealth that the wife received from her family before and during the marriage, but independently of it, where he had agreed he should not have any such claim. It would be fair to hold the parties to the agreement and unfair to depart from it.
The same principles should apply to ante-nuptial as to post-nuptial agreements. The Court considered that both should have contractual status, but this is a red herring as the divorce court is not bound to give effect to nuptial agreements. The Court therefore expressed a number of reservations about the Privy Council's decision in MacLeod.
Lady Hale dissented stating that marriage confers a legal status and there is an "irreducible minimum" which includes the mutual duty of the couple to support one another and their children. She observed that the law of marital agreements is a mess and pleaded for comprehensive reform by the Law Commission and Parliament.
She disagreed that there should be a presumption in favour of holding parties to an ante-nuptial agreement. The test should be "did each party freely enter into an agreement, intending it to have legal effect and with full appreciation of its implications? If so, in the circumstances as they now are, would it be fair to hold them to their agreement?"
She felt that the Court of Appeal had erred in equating married parenthood with unmarried parenthood. She also disagreed with some of the obiter decisions reached by the majority.
Case summary by Hayley Trim, Family Law PSL at Jordan Publishing and formerly a family solicitor practising in London.
She works on the Family Law online major works providing updating notes on cases and other relevant developments as they happen for The Family Court Practice, Children Law and Practice and Matrimonial Property and Finance online.
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