Z v Z: a prenuptial agreement in a post-Radmacher world…

Relationships|November 18th 2011

I have previously written about my reservations regarding prenuptial agreements. When they are signed, couples are supposed to be committing to a lifetime together, through thick and thin, come what may. But there are so many unknowns in life. Can a prenup affect a marriage’s survival prospects, if one spouse has signed it with one hand tied behind his or her (and usually it is her) back, not knowing what may happen in the future?

If the relationship breaks down, she may find herself trapped in the marriage for fear of the consequences of divorce – and trapped if she leaves, because of the constraints of the prenup. She is at the mercy of her spouse. Such a scenario is not uncommon in other countries but in England and Wales, despite the ruling in Radmacher v Granatino last year, we still do things differently.

In my experience – and I accept, of course, that I am instructed when things go wrong – the existence of a prenup can cause resentment to build and anger to surface. Eventually, the couple’s relationship can wither on the vine. I’ve seen it happen, and I have also been contacted by readers of this blog who have been caught up in these types of agreement and don’t know what to do.

It can be argued that that you enter into a prenuptial agreement freely and of your own will. You are not forced to sign, and you know what you are doing. So why should you not be held to your bargain? It happens in Europe and it happens in the USA. The Supreme Court certainly thought so in Radmacher v Granatino. That case featured a prenuptial agreement signed in Germany and which, to many English lawyers, seemed grotesquely unfair. But the poorer spouse, in this case the husband, was held to his bargain. He had signed it and he had to live with the consequences, leaving his marriage with nothing from his heiress wife. He had signed away his entitlement to capital or income.

Or had he?

Radmacher v Granatino

When the Supreme Court handed down its judgment in the case, it left a window open:

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.

Although the judgment gave prenuptial agreements “decisive weight”, it is still not necessarily the case that prenups are upheld by English law. To fill the gaps and avoid any further possibility of “fairness” raising its irrelevant head, new legislation may be on the way next year.

In the meantime, how much wriggle room is there in reality?

There were critics of the Radmacher decision who wondered if a similar fate would have befallen a woman in front of the Supreme Court. Had the roles been reversed, and Mr Granatino had been the one worth £100 million, would Ms. Radmacher have left the marriage with nothing? Or would the court have found a way of meeting the needs of a wife and mother? Perhaps the effect of Radmacher v Granatino could only truly be understood when such a case came before the courts…

This then was the speculation swirling around the newly appointed Mr Justice Moor in one of his first cases, Z v Z [2011] EWHC 2878.

Z v Z

In this case, it fell to Mr Justice Moor to adjudicate the merits of a French prenuptial agreement – a Separation des Biens – between two French citizens living in London. In that agreement, the wife had surrendered any right to share in the couple’s shared assets. Only the assets in their own names would ever remain their own. However there was no mention of maintenance in the agreement.

Acting for the wife, Tim Scott QC won the first round before Mr Justice Ryder, securing English jurisdiction. It then took three years before the wife’s application for a financial settlement was finally heard, before Mr Justice Moor in October 2011. The judge had to decide whether to give full intent and effect to the draconian French agreement signed by the wife in France in 1994, days before the couple’s marriage.

The couple had gone on to have three children. The assets involved were £15 million, of which the wife had £1.3 million in her name. The husband was an extremely high earner: between 2006 and 2011, his average annual income was in the region of €3 million. His income was thereafter projected to drop, to exclude bonuses.

The husband’s position was that sharing, per White v White, was excluded as a consequence of the 1994 agreement. He accepted the narrow window afforded by that particular agreement – that the wife’s needs should be met – and, assessing and capitalising her housing and maintenance needs, he offered an overall total of 35 per cent of the assets.

The wife sought 50 per cent of the total assets. During the marriage she had hoped that he would agree to vary the agreement, but the court found it was never varied. Was she entitled to “share” in the assets, despite having given up her entitlement to do so? Otherwise was she entitled, at the very least, to have her needs met and to be compensated for having given up her job and having children?

Or was the case to be dealt with by reference to French law only, which would have applied had the parties been living in France?

 

The judgment

Mr Justice Moor rejected the argument about the application of French law. In England, English law is always applied. He then considered the state of the relevant law in England.

The judge referred of course to Radmacher, focusing on the Supreme Court’s comments about the various elements of any financial award: needs, compensation and sharing.

With regard to sharing, he pointed out that even though Lady Hale dissented in Radmacher, she still commented as follows:

In the present state of the law, there can be no hard and fast rules save to say that it may be fairer to accept the modification of the sharing principle, than of the needs and compensation principles.

It seems to me that this is what Mr Justice Moor did. He upheld the agreement and rejected the compensation argument. He then made provision for the wife’s needs, which he accepted could not be fully met out of her own capital. He awarded a lump sum for a house and capitalised her income requirements per Duxbury.

He assessed the wife’s income needs at £100,000 per annum. For most of us this is a small tax-free fortune each year, but surely not for a wife in these circumstances, with such a high-earning husband and a substantial lifestyle? The judge did, however, add £75,000 per annum for the three children.

When totted up, the total she received amounted to 40 per cent of the assets. What a neat sum – so neat, in fact, that I wondered if it had been in the judge’s mind and if he had worked back from there!

 

Final thoughts

I have put off writing about this judgment because I wanted to consider its overall effect. I think it is full of common sense. Mr Justice Moor made it clear that if there had not been a prenuptial agreement, the wife would have received 50 per cent of the assets. But because there was an agreement, and because the judge gave effect to that agreement, he was left with no alternative but to make sure that the wife’s needs were met.

What is wrong with that?

After 14 years of marriage, three children and vastly changed circumstances, it seems to me that the decision in this case was spot on.

What comes next year may change everything again but, in the meantime, I can see nothing wrong with the law as set out in Radmacher v Granatino, and applied in Z v Z. I said it when the Radmacher judgment was handed down and I’ll say it again: there is no need for any further legislation. The judiciary are doing a fine job of applying the law.

Author: Marilyn Stowe

The founder of Stowe Family Law, Marilyn Stowe is one of Britain’s best known divorce lawyers. She retired from Stowe Family Law in 2017.

Comments(12)

  1. Z v Z: a prenuptial agreement in a post-Radmacher world… « Untouched Smile | Care Your Child says:

    […] Z v Z: a prenuptial agreement in a post-Radmacher world… is a post from: Marilyn Stowe Family Law and Divorce Blog […]

  2. Divorce Blogger says:

    I am pleased that our judiciary do not interpret prenuptial agreements literally and recognise the need of the less affluent party.

    As you have pointed out, no one should enter into a marriage anticipating a divorce. Provided an individual’s intentions are genuine, then why would they not agree to sign such an agreement? Yes, requesting that your soon to be spouse sign away their rights may indicate a lack of trust, but a person could quite easily counter this by claiming that they are having such a document drafted at their family’s request and I’m sure that many – certain that their marriages would last forever – will freely sign away all of their rights in the event of a divorce. Love is a powerful emotion, after all.

    Like you say things, and people, change and I for one do not believe that people should be ‘left out in the cold’ because of this. Perhaps referring to emotional involvement when discussing a legally binding document is somewhat wishy-washy, but I can’t help but feel that it’s relevant, even though it won’t be pertinent in all circumstances.

  3. Lukey627 says:

    ” Perhaps referring to emotional involvement when discussing a legally binding document is somewhat wishy-washy”

    Oh, I think it is worse than wishy-washy 🙂
    People often don’t understand what they are legally committing to in marriage but for those that do it cannot be argued that one contract (i.e marriage) is binding but another (i.e the pre-nup) isn’t – that’s absurd.

    I would also add that somebody is only ‘trapped’ if they want to leave a person but are too mercenary to do so whilst giving up the lifestyle that person gives them.

  4. Marilyn Stowe says:

    Lukey
    In certain circumstances a marriage too may be void or voidable. See ss11 -13 Matrimonial Causes Act 1973.
    Marilyn

  5. Lukey says:

    Marilyn,
    I understand that, but here the argument is that the pre-nup is invalid because one of the individuals that has signed it has changed their mind and doesn’t like what they have signed – if they are trying to invalidate that then surely to do so means they have gone into the marriage under false pretences.
    I don’t see how it is reasonable to enforce the current law (as family court chooses) based on a marriage contract that had an agreed pre-nup contract into which both parties signed and yet is cast aside because one party no longer likes what they signed up to !

    If an individual doesn’t like the pre-nup it is really simple – get their prospective spouse to agree it isn’t required or don’t get married ! Nicolas Granatino lost his case and rightfully so in my view.

  6. Lukey says:

    By the way Marilyn I do appreciate that you completely disagree with my view of personal responsibility when it comes to relationships so I am grateful that you are gracious enough to continue to allow me to post my opinion, thank you.

  7. Marilyn Stowe says:

    Lukey
    It doesnt matter that we may not agree. I’m always happy to post your opinion. I’m grateful to you too for reading my blog!
    Best wishes
    Marilyn

  8. Discretion and uncertainty in the division of matrimonial assets - Marilyn Stowe Blog says:

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    […] In my last post concerning the case of Z v Z we saw how limited wriggle room in the prenuptial agreement had permitted Mr Justice Moor to ensure that the wife’s reasonable needs were met. The agreement excluded future sharing of capital, but had not excluded income-based settlements. Therefore, Mr Justice Moor was able to provide both a housing and a capitalised income fund for the wife. So she left the marriage after a long legal battle, but with her reasonable needs met. […]

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    […] M “Z v Z: a prenuptial agreement in a post-Radmacher world” athttps://www.stowefamilylaw.co.uk/2011/11/18/z-v-z-a-prenuptial-agreement-in-a-post-radmacher-world/ accessed on […]

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