A claim of two halves
31 August 2009
17 January 2011
27 October 2003
6 July 2009
24 January 2011
The Radmacher case heard in the Court of Appeal, which accepted the viability of a prenup against the ruling of the first instance judge, appears to
have allowed for an incursion of foreign law into English courts. By Henry Brookman
In July one of Germany’s richest women, Katrin Radmacher, claimed victory in her bid to get a prenuptial agreement recognised in the English courts. Radmacher won a ruling from the Court of Appeal that the prenuptial contract should be applied by the courts when they divide assets after a marriage fails.
It has to be discerned whether the decision was an ‘outlier’ on the basis of its own particular facts, or whether this judgment clarifies the English courts’ position on prenuptial agreements.
Mrs Justice Baron was the judge at first instance. The Court of Appeal commended her understanding of the law even as it departed from her view as to how it should be applied to the evidence. She set out the law by stating: “I am certain that English courts are now much more ready to attribute the appropriate - and in the right case decisive - weight to an agreement as part of all the circumstances of the case.”
She referred to the Law Commission’s 1998 green paper which indicated that, if one or more of the following circumstances was found to apply, the prenuptial agreement would not be legally binding:
• where there is a child of the family;
• where under the general law of contract the agreement is unenforceable;
• where one or both of the couple did not receive independent legal advice;
• where the court considers that the enforcement of the agreement would cause significant injustice;
• where one or both of the couple have failed to give full disclosure; and
• where the agreement was made fewer than 21 days prior to the marriage.
She found that the prenuptial agreement in Radmacher v Granatino (2008) was defective under English law for the following reasons:
• the husband received no independent legal advice;
• there was no disclosure by the wife;
• there were no negotiations;
• two children had been born during the marriage; and
• it deprived the husband of all claims even in a situation of want, which was manifestly unfair;
Nevertheless, the Court of Appeal overruled Baron J’s findings for the following reasons:
• Lack of independent legal advice: “Why is independent legal advice desirable?” Lord Justice Wilson asked. “Because proof of receipt of independent legal advice is often the only, and always the simplest, way of demonstrating that party entered into [the contract] knowingly. In this case, however, the husband did not deny that he understood the contract and did not suggest that had he taken independent legal advice and been advised not to enter into the contract, he would not have entered into it.
“In the national and cultural milieu of the husband [and the wife], the contract was a commonplace prelude to marriage.”
• Absence of disclosure: “More is needed before this vitiates the contract,” stated Wilson LJ. “There has to be a causative element. What is lacking is any finding that, had there been accurate mutual disclosure, he would not have entered into the contract.”
• Absence of negotiations: “Their absence was testament only to the fact that the background to the parties rendered their entry into such a contract commonplace,” said Wilson LJ.
• The birth of the children: the contract did not purport to affect the wife’s obligation for the girls and the husband’s right to claim to provision was unaffected by the contract.
• Preclusion of claims even in circumstances of real need (with respect to ‘unfairness’): the wife’s evidence was that, if the husband had not entered into the contract, she would not have married him. Therefore, if the husband had not entered into the contract, he would not have married the wife and he would not have been able to make a claim against her - even in circumstances of real need.
This seems rather a circular piece of logic. The reasoning seems to be that, while the outcome of the contract might be unfair to the husband, so might it be unfair to the wife not to have it recognised.
Furthermore, “the foreign dimension should have fortified a conclusion that the contract should carry decisive weight,” added Wilson LJ.
But if it is ‘decisive’, that is virtually ’application of foreign law’ by a different route.
Lord Justice Thorpe added that the husband was of great ability; in both their countries of origin a prenuptial contract was standard practice; the husband had the opportunity to seek independent legal advice; and it was to be assumed that the couple expected to start a family after marrying.
If the nationalities of the parties really were relevant because prenuptial agreements were commonplace in both their countries of origin, is this not dangerously close to allowing people to import their personal laws? Would the outcome have been different if both had been English nationals - albeit well-educated and well aware of the meaning of prenuptial contracts? Surely that could not be correct?
The Court of Appeal was at pains to say that there could be no question of application of foreign law. However, the outcome seems perilously close to having applied it.
The Court of Appeal has now indicated that there must be a deeper examination as to causation. The factors of independent legal advice and full disclosure are of far less significance.
The test of overall fairness now cuts both ways - the unfairness to one party who wishes the contract to be upheld must apparently have equal weight with the unfairness to the party who is held to its terms.
Henry Brookman is the founding partner of Brookman Solicitors