Are Pre-Nuptial Agreements Legally Binding?
The decision by the Supreme Court in the case of Radmachur -v- Granatio has a significant effect on the way in which courts will now view Pre-nuptial Agreements. Whenever a couple divorce the Court can consider what financial claims the husband and wife can make against each other. Section 25 of the Matrimonial Causes Act 1973 sets out numerous factors which the court should take into account, to achieve a fair result in each individual case.
Although having no statutory basis, wealthy families have been in the practice of arranging for Pre-nuptial Agreements to be drawn up in an attempt to limit claims, based on the American legal system.
Following the decision of the Court in 2008 in the case of Macleod, courts no longer ignore Pre-nuptial Agreements altogether as “void” and contrary to public policy. Divorce courts have therefore taken the agreement into account along with the other Section 25 factors, as a factor to be considered. It was not, however, a deciding factor and very far short of a “killer punch”.
The recent decision of the Supreme Court gives Pre-nuptial Agreements far more weight. In that particular case the parties married in London in 1998. The wife was a German heiress and the husband French by birth. They separated in 2006 by which time they had two children aged 11 and 8. Prior to the marriage the husband had signed a Pre-nuptial Agreement at the instigation of the wife’s family. The husband did not seek legal advice before signing the agreement. After he had signed the agreement the wife’s family transferred further assets to the wife. On divorce the husband tried to claim against the wife’s assets.
At the first hearing the Judge did award the husband some of the wife’s assets contrary to what he had agreed in the pre-nup. However the Court of Appeal overturned that decision taking the view that the husband should be bound by the Pre-nuptial Agreement. That decision was upheld by the Supreme Court. Both the Court of Appeal and Supreme Court took the view that the husband should be bound by the agreement as he had entered into it of his own free will. He had clearly intended the agreement to be legally binding when he signed it, and there were no circumstances to suggest it would be unfair to hold him to this.
This does not mean that courts will now always regard Pre-nuptial Agreements as binding. Each case will have to be judged on its merits. However it is clear that the court will now start with the assumption that where there is a Pre-nuptial Agreement, the parties should be bound by the agreement provided that:-
a) they entered into it freely.
b) they had a full appreciation of its implications.
c) there are no circumstances at the time of the hearing which would make it unfair to hold the parties to it.
This could also be the position regarding a Post-nuptial Agreement (i.e. an agreement signed following the marriage).
As a result of this decision it is likely that it will be very difficult for anyone who has signed a Pre-nuptial Agreement to subsequently persuade a Judge that they should not be bound by its terms. Simply proving to the Court that the terms of the agreement do not represent “a fair settlement” and that the agreement gives the spouse less than they would have achieved in the absence of such an agreement, will not be sufficient.
There are some circumstances in which a Court might still be persuaded to overturn an agreement. This is most likely to relate to the existence of children since making sure that those children do not suffer as a result of the Pre-nuptial Agreement, will be a major aim of the court.
If you are considering asking your spouse to sign a Pre-nuptial Agreement, or have been asked to sign one, it is essential that you take expert legal advice.