Share it

The much anticipated decision of the United Kingdom Supreme Court in Radmacher v Granatino ([2010] UKSC 42) was handed down on Wednesday 20 October 2010.  The case concerned whether and to what extent a court should take an ante-nuptial agreement into account in exercising its discretion under section 25 of the Matrimonial Causes Act 1973. Nine justices of the Supreme Court heard argument on the matter on Monday 22 and Tuesday 23 March.  They were Lord Phillips, Lord Hope, Lord Rodger, Lord Walker, Lady Hale, Lord Brown, Lord Mance, Lord Collins and Lord Kerr.

The history of the matter, and the context in which the final appeal came to be considered by nine justices, is sketched in the case preview. Save for a brief recap, the content of the preview is not repeated here, but should be read alongside this comment.

The ante-nuptial contract at issue in this case was executed in Germany in August 1998 by Ms Radmacher, a German national, and Mr Granatino, who was French.  When the ante-nuptial contract was concluded, both parties were well educated and affluent: Mr Granatino was employed by an investment bank at a substantial salary and Ms Radmacher came from a family with lucrative business interests from which she stood to gain a significant personal fortune, in consequence of which she was by far the wealthier of the two.  The terms of the ante-nuptial contract, which declared itself to be governed by German law, provided that neither partner would have a claim on the assets or income of the other. There was a mutual waiver of claims for maintenance following divorce, even in cases of need. The contract was valid and enforceable under both German and French civil law.

The marriage was solemnised in London, in November 1998. The couple was based in London, where two children were born, the first in September 1999 and the second in May 2002.  The couple separated in August 2006. The divorce and ancillary relief proceedings were heard in the English courts, under English law, where agreements making financial provisions in the event of separation have long been regarded as against public policy and unenforceable. With the passage of years, however, the reasons underlying an automatic refusal to give effect to such agreements have fallen away, but there has been lingering uncertainty as to their legal status.

The “strain and expense” to the parties engendered by such uncertainty has, increasingly, been a matter of concern to practitioners, the courts and the government (see [7] of the UKSC judgment).  In June 2008, the Law Commission announced a review of the enforceability of agreements between spouses or civil partners made before or after the marriage/civil partnership. A report and draft bill are expected late in 2012.

It was in this context that Baron J heard Mr Granatino’s claim for ancillary relief in 2008.   In the exercise of her discretion under section 25 of the Matrimonial Causes Act 1973, Baron J largely discounted the ante-nuptial agreement (her reasons for doing so, and why the Court of Appeal disagreed with her assessment, are outlined in the case preview).

The Court of Appeal set aside the order of Baron J and substituted it with an award which gave decisive weight to the ante-nuptial contract, with the result that the amounts awarded to the husband were geared to his responsibilities as father of the two daughters in common, and came to an end on the younger daughter’s 22nd birthday. By that stage, some 15 years hence, the father, whom it was considered had considerable earning power, would have had a generous period of time within which to become fully financially self-sufficient (for a helpful summary, per Rix LJ, [2009] EWCA Civ 649, [81]).

Between the judgment of Baron J and that of the Court of Appeal, the Board of the Privy Council had handed down judgment on appeal from the Isle of Man in Macleod v MacLeod [2008] UKPC 64; [2010] 1 AC 298. The Board comprised Lord Scott, Lord Walker, Baroness Hale, Sir Henry Brooke and Sir Jonathan Parker.

The Board in MacLeod were concerned with a post-nuptial agreement regulating the matrimonial property consequences of a couple’s marriage and divorce, but the Board, in a judgment delivered by Baroness Hale, made important obiter statements about the state of the law on ante-nuptial contracts.  It expressed the view that “the difficult issue of the validity and effect of ante-nuptial agreements is more appropriate to legislative rather than judicial development” (per Baroness Hale [31] and [35]).  The Board considered there to be

“… an enormous difference in principle and in practice between an agreement providing for a present state of affairs which has developed between a married couple and an agreement made before the parties have committed themselves to the rights and responsibilities of the married state purporting to govern what may happen in an uncertain and unhoped for future…”  ([35]).

“Post-nuptial agreements, however, are very different from pre-nuptial agreements. The couple are now married. They have undertaken towards one another the obligations and responsibilities of the married state. A pre-nuptial agreement is no longer the price which one party may extract for his or her willingness to marry“. ([36]).

The Court of Appeal, albeit not bound by MacLeod, acknowledged its high authority. Nevertheless, their Lordships in the Court of Appeal were more positively disposed to ante-nuptial agreements, and were politely sceptical as to the distinction between ante- and post-nuptial contracts (Thorpe LJ at [24-29]; Wilson LJ [125-128]). Their Lordships considered that substantially the same approach should govern the consideration of ante- and post-nuptial contracts, namely an assumption that each party to a properly negotiated agreement was an autonomous and competent adult, subject to an awareness of the risk of unfair exploitation of superior strength (Wilson LJ at [128], citing [42] of MacLeod).

Whether the Supreme Court would uphold and adopt the reasoning of the Court of Appeal, and if so, what it would say about the Privy Council decision in MacLeod, was a point on which the Supreme Court decision was eagerly awaited.  It may be that this very question prolonged the time needed to compose the judgment.  In the event, the majority of the Court, in a decision written by Lord Phillips, decisively upheld the judgment of the Court of Appeal, including the points on which it departed from MacLeod. Lord Mance wrote a short concurring judgment, and Lady Hale dissented.

Lord Phillips took as his point of departure the principle embodied in legislation that it is the court, and not any prior agreement between the parties, that will determine the appropriate ancillary relief when a marriage comes to an end. That said, the judgment aimed to “give some assistance in relation to the approach that a court considering ancillary relief should adopt toward an ante-nuptial agreement between the parties” ([7]).

In articulating that approach, the Court:

  • Agreed with the Board in MacLeod that the old rule that agreements providing for future separation are contrary to public policy is obsolete and should be swept away, but, unlike the Board in MacLeod, considered that this applied equally to ante- and post-nuptial contracts ([52]);
  • Agreed with Wilson LJ (at [125-126] of the CA judgment) that there was not a material distinction between ante-nuptial and post-nuptial agreements per se ([53-61]);
  • Considered therefore that “the Board in MacLeod was wrong to hold that post-nuptial agreements were contracts but ante-nuptial agreements were not. That question did not arise for decision in that case any more than it does in this and does not matter anyway. It is a red herring. Regardless of whether one or both are contracts, the ancillary relief court should apply the same principles when considering ante-nuptial agreements as it applies to post-nuptial agreements” ([63]).
  • Identified three heads under which the issues raised in relation to the ante-nuptial agreement should be considered ([67]), and the principles that should guide the enquiry under each head:

a. Factors attending the making of the agreement detracting from the weight that should be accorded to it. Entry into the agreement must be genuinely voluntary and properly informed. Any undue pressure, or material lack of disclosure, information or advice would be factors detracting from the weight to be attributed to an agreement. Further, each party should intend the agreement to be effective, and this would be the natural inference in relation to future ante-nuptial agreements:

“As we have shown, the courts have recently been according weight, sometimes even decisive weight, to ante-nuptial agreements and this judgment will confirm that they are right to do so. Thus in future it will be natural to infer that parties who enter into ante-nuptial agreements to which English law is likely to be applied intend that effect should be given to it” ([68-70]).

b. Factors attending the making of the agreement that enhance the weight to be accorded to.  In this case, the question was whether the fact that the agreement was concluded in Germany, under German law, between a French and German national (“the foreign element”) meant that the courts should attribute decisive weight to the agreement. Given that the Court did not consider it to be material whether an ante-nuptial agreement is a contract or not, because it would remain open to the Courts to override such an agreement, whether contractual or not, on grounds of fairness, the only relevance of the foreign element was that it demonstrated that the parties intended to be bound by the agreement. That this was the intention of parties in England to ante-nuptial contracts would in future be the natural inference: “In the case of agreements made in recent times, and a fortiori, any agreement made after this judgment, the question of whether the parties intended their agreement to take effect is unlikely to be in issue, so foreign law will not need to be considered in relation to that question.”  ([74]).

c. Circumstances prevailing when the court’s order is made making it fair or just to depart from the agreement. The overriding criterion to be applied in ancillary relief proceedings is that of fairness. The three strands of need, compensation and sharing are relevant to the assessment of what is fair.  Of these, the first two are the most likely to make it unfair to hold the parties to an ante-nuptial agreement.

The majority articulated the test thus:

“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” ([75]).

Without laying down rules that might fetter the flexibility that the court requires to reach a fair result, there are a number of factors to consider in cases where no circumstances taint the conclusion of the agreement: an ante-nuptial agreement cannot be allowed to prejudice the reasonable requirements of the children of a family ([77]). Respect for individual autonomy is an important reason to give effect to nuptial agreements – the court should respect the decisions made by individuals as to the future regulation of their financial affairs ([78]), particularly in relation to pre-existing or other “non-matrimonial” property ([79]).  In the right case, an ante-nuptial contract may be accorded decisive weight ([83]).

Applying these principles to the facts of the case, the Supreme Court held that the Court of Appeal was correct to set aside the decision of Baron J and to replace it with a disposition that gave decisive weight to the ante-nuptial contract between the parties. The husband was very able, and his own needs would in any event to a large extent be met indirectly by the provision made for him to care for his daughters until the younger reached the age of 22.  There was no need to compensate the husband for sacrifices made on behalf of the family – his decision to give up banking was independently motivated. Fairness did not require that the wife share with him the money derived from her family independently of the marriage, in circumstances where he had by agreement renounced any claim to a portion of her family fortune.

As the author of the Board’s unanimous advice in MacLeod, and as the only woman on a nine judge panel, it is perhaps not surprising that Lady Hale is trenchant in her dissent.  The starting point of her analysis is that marriage (and, equally, civil partnership) in addition to being an agreement with legal consequences, is a status with an irreducible minimum, including the couple’s mutual duty to support each other and their children.  The issue before the Court, as she saw it, was “how far individual couples should be free to re-write that essential feature of the marital relationship as they choose” ([132]).

Here, as in MacLeod, Lady Hale’s own suspicion of ante-nuptial contracts is evident:

“Perhaps, above all, some may think it permissible to contract out of the guiding principles of equality and non-discrimination within marriage; others may think this is a retrograde step likely only to benefit the strong at the expense of the weak” ([135]).

It was of particular concern to Lady Hale that the facts of a single case concerning an ante-nuptial contract, and particularly this one, could obscure “the fact that, unlike a separation agreement, the object of an ante-nuptial agreement is to deny the economically weaker spouse the provision to which she – it is usually although by no means invariably she – would otherwise be entitled”. There is, therefore, “a gender dimension to the issue which some may think ill-suited to decision by a court consisting of eight men and one woman” ([137]).

The specific points on which Lady Hale disagreed  include the following (see [138]):

  • She persisted in the view that, from a policy perspective, there are indeed relevant differences between agreements made before as opposed to after marriage and that a comprehensive, rational approach to the enforcement of both categories of agreement is required ([162]).
  • She proposed a different formulation of the test to be applied by a court hearing an application for financial relief.  Although she broadly agreed with the majority as to the relevant factors to be taken into account, Lady Hale emphasised that the starting point is the statutory duty under section 25 of the 1973 Act. The question to be asked in exercising the court’s discretion under that provision is:

“Did each party freely enter into an agreement, intending it to have legal effect and with a full appreciation of all its implications? If so, in the circumstances as they now are, would it be fair to hold them to their agreement?”

Although the test is very similar to that proposed by the majority, Lady Hale considered that it avoided “the impermissible judicial gloss” of a presumption or starting point that the court should give effect to a nuptial agreement unless it was shown to be unfair in the circumstances ([169]).

According to Lady Hale, this test should in principle be applied to any nuptial agreement, whether it be a compromise of the proceedings, a separation agreement, a post-nuptial agreement made while the couple are together, or an ante-nuptial agreement.   Too prescriptive an approach to the application of the test would fetter the flexibility required of the court in exercising its discretion, but it

“may be … that the court will generally attach more weight to a separation agreement, made to cater for the existing and future separation of the parties, than to a post-nuptial agreement, made while the parties are still together but also to cater for the possibility of a future separation, and more weight to such an agreement than to an ante-nuptial agreement, catering for a marriage which has not yet taken place and for a separation which the parties neither want nor expect to happen” ([171]).

Lady Hale disagreed that the approach of the Court of Appeal to the outcome of the case should be upheld. She considered that the award of the Court of Appeal undermined the importance attached to the status of marriage in English law, and the irreducible minimum obligations inherent in that status.  One such obligation, in the case of a parent who has irredeemably compromised her position in the labour market as a result of her caring responsibilities, is provision for her future needs even after the children have grown up.  It would be unfair for an ante-nuptial contract to deprive the economically dependent spouse of that protection, which, by English law, inheres in the status of marriage and survives its dissolution ([191-193]).  A further consideration is that parents often expect to continue to provide a base and a resource for their adult children. For these reasons, Lady Hale’s view was that although the judge who heard the case did not give enough weight to the agreement in this case, the Court of Appeal erred in treating these parents as if they had never been married.  She would have varied the judge’s order so that the husband was entitled to his English home for life ([192-195]).

Lord Mance agreed with the conclusion reached by the majority and with most of its reasoning, but like Lady Hale, expressed no view on the binding or other nature of an ante-nuptial agreement. He considered that the difference between the majority and Lady Hale in the formulation of the test to be applied in exercising the statutory discretion in cases where there has been an ante-nuptial agreement was unlikely to be important in practice, although his own inclination, in common with the majority, was to take as the starting point and agreement that was made freely and with full appreciation of the circumstances.

Lady Hale concluded her dissent with the words

“Marriage still counts for something in the law of this country and long may it continue to do so” ([195]).

Read out of the context of the dissent as a whole, and the corpus of her judgments in general and particularly on matters of equality in matters of gender and sexuality, this could be taken as a paean to conservative family values.  Cleary it is not – it is a warning that the legal protections afforded by the English law of marriage should not lightly be sacrificed in the name of legal certainty or apparent progress. Lady Hale is rightly anxious that presumptive validity of ante-nuptial contracts could further weaken the position of economically vulnerable (usually) women, and she is right to underline the need to protect parents from the long-term devastation that may be wrought to the earning capacity of the primary carer and home-maker. These concerns are not necessarily at odds with the approach of the majority.

According to Lady Hale, the muddled state of the law on marital agreements can be addressed only by systematic review and reform. There is a pressing need for the matter to be dealt with rationally and comprehensively by Parliament, based on detailed proposals by the Law Commission, following careful investigation of the full conspectus of relevant considerations. It was not an issue to be resolved in an individual case, particularly not one with a far from typical set of facts ([133-136]).

The Law Commission, in its current investigation of the issue, will doubtless have regard to the Radmacher judgment, but it is in no way bound by that judgment in making its proposals.  Whatever these may be, a proper legislative solution is likely to be many months yet in the making.  While that it is awaited, it is helpful to matrimonial practitioners and those whom they advise that the Supreme Court has provided guidance to the courts in their approach to ante-nuptial agreements.

Janet Kentridge, Matrix