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ANCILLARY RELIEF: Radmacher v Granatino [2009] EWCA Civ 649

Date:9 JUL 2009

(Court of Appeal; Thorpe, Rix and Wilson LJJ; 2 July 2009)

During the 8-year marriage the French husband and the German wife made their home primarily in England; they had two children. The husband applied for financial relief from the wife, who had inherited considerable wealth and was worth over £50 million plus an interest in family companies producing an additional annual income of about £2 million. The wife argued that the English court should enforce a German pre-nuptial contract signed by both husband and wife, which provided for strict separation of assets. The husband argued that the pre-nuptial contract should not be enforced. He had no assets, having, during the marriage, given up a successful career as a banker to become involved in biotechnology research; he accepted that he was not entitled to a share of the wife's inherited wealth, but sought about £7 million on the basis of need. The judge awarded the husband £5 million, plus the use of a property in Germany until the children's majority. She commented that, although judges were increasingly minded to look at the precise terms of nuptial agreements, seeking to implement their terms provided the circumstances revealed that the agreement was fair, a party who had made a pre-nuptial agreement could not sue on it as if it were a valid and enforceable contract. She considered that the pre-nuptial contract in this case was defective under English law because: the husband had received no independent legal advice; the contract deprived the husband of all claims, even in a situation of want, which was manifestly unfair; there had been no disclosure by the wife; there had been no negotiations; and two children had been born during the marriage. However, the husband's award would be restricted to reflect the fact that he had agreed to the pre-nuptial contract; the husband was a man of commerce, and he had been aware of the effect of the contract. The husband's claim should therefore be based upon his needs as judged against the lifestyle enjoyed by the parties during the marriage, bearing in mind that he had agreed that he did not intend to seek any financial award if the marriage ended. The judge considered it was relevant that the contract would have been binding in both the wife and the husband's respective home countries, Germany and France.

There was no presumption that a pre-nuptial contract was dispositive of an ancillary relief application, although such a presumption had much to recommend it. However, in the Court's view the distinction drawn by the Privy Council between pre and post-nuptial contracts went too far. Pending the report of the Law Commission, in future cases broadly in line with this case, the judge should give due weight to the marital property regime into which parties had freely entered. This was not to apply foreign law, nor to give effect to a contract foreign to the English tradition, but was a legitimate exercise of the very wide discretion conferred on judges to achieve fairness. Due respect for adult autonomy suggested that, subject to proper safeguards, a carefully fashioned pre-nuptial contract should be available as an alternative to the stress, anxieties and expense of a submission to the width of judicial discretion. The basic principles were that: (i) any provision that sought to oust the jurisdiction of the court would always be void but severable; (ii) any contract would be voidable if it breached proper safeguards or vitiated under general principles of the law of contract; (iii) and any contract would be subject to the review of a judge exercising his duty under s.25 if it was asserted to be manifestly unfair to one of the contracting parties. In so far as the rule that pre-nuptial contracts were void had survived, it was an increasingly unrealistic rule, reflecting the laws and morals of earlier generations, which did not sufficiently recognise the rights of autonomous adults to govern their future financial relationship by agreement in an age in which marriage was not generally regarded as a sacrament and divorce was a statistical commonplace. Society should be seeking to reduce and not to maintain rules of law that divided England and Wales from the majority of the member states of Europe, and, Europe apart, the jurisdiction was in danger of isolation in the wider common law world if it did not give greater force and effect to pre-nuptial contracts. The court was able to take advantage of the flexibility that s 25 of the Matrimonial Causes Act 1973 gave the court to alleviate injustice that would otherwise result from the jurisdictional rules introduced by Brussels II and the widely divergent legal and social traditions of the civil and common law states of Europe. In concluding that pre-nuptial settlements were not enforceable per se, but were a factor to be taken into account, the judge had directed herself correctly as to the current state of the law, but in finding that the pre-nuptial contract in the case was defective she had not sufficiently taken into account the following factors: (i) the husband, at the threshold of the marriage, had had great ability and was already well established in the field of international banking; (ii) in both France and Germany the execution of a contract providing for the property regime of the intended marriage was standard practice for the young engaged couple, and a considerable parental contribution to the process was equally normal; (iii) the husband had clearly had the opportunity to seek independent advice during the development of the contract. Although the final draft arrived only a week before the trip to Dusseldorf to execute the contract, clearly the husband could have sought advice during the drafting process; (iv) it was surely significant that no less than 4 months then elapsed from the execution of the contract without question or demur from the husband; (v) although the exclusion of an account of the wife's assets had been the intention of the wife and her father, the husband well knew that she was a daughter of a significantly rich family. What was hers at the date of the marriage was likely to be of lesser significance than what was to come to her as her generation took control; (vi) the absence of negotiations was of little moment, as it was the husband's choice not to initiate negotiations; (vii) it was to be assumed that the young couple had expected to start a family after marrying. Although the judge had acknowledged the contract as a factor, the overall impression of the award itself was that the contract had resulted in a negligible discount, whereas it should have been given decisive weight. In order to give proper weight to the pre-nuptial contract, the husband's award would be limited to his role as father, and therefore to the years during which he would be exercising parental responsibility: the housing fund of £2.5 million should not be his absolutely, but should be held only during parenting years, and the income fund should be capitalised to cover the husband's needs only until the youngest child was 22. The court called for legislative reform introducing a formal presumption that both pre-nuptial and post-nuptial contracts were dispositive.