Supreme Court to decide on the validity of prenuptial agreements

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Britain’s most senior judges will hear a landmark appeal this week over whether divorcing couples should be bound by pre-marriage agreements on how their assets will be split.

Nicolas Granatino, a banker-turned-student, will challenge his £1 million divorce settlement with Katrin Radmacher, a German heiress said to be worth £100 million. The keenly watched case, in the Supreme Court, could decide whether prenuptial contracts in England and Wales should be binding on couples when they divorce, as they are in most of Europe.

When the couple first met they were on a more equal financial footing and agreed before their wedding not to claim a penny of each other’s fortune if their marriage failed. Mr Granatino was a banker with JP Morgan earning up to £300,000 a year but he abandoned his City career in 2003 to pursue a doctorate at the University of Oxford. Now Ms Radmacher accuses her former husband of breaking his promise not to seek any of her fortune. The couple separated in 2006 and were soon divorced.

Last year the Court of Appeal ruled that the prenuptial contract agreed between the couple should be decisive in deciding on the split of their assets and ruled that Mr Granatino should have only £1 million.

At present, British courts regard prenuptial contacts only as persuasive when dividing assets, but not binding, as they are in most EU member states. Mr Granatino was awarded £5.85 million for his own use by a High Court judge in 2008.

The Court of Appeal then upheld a challenge by Ms Radmacher, cutting Mr Granatino’s £5.85 million award to about £1 milllion as a lump sum in lieu of maintenance for their children. The judges said that England should not be out of step with other countries and condemned the existing law – under which prenuptial contracts are not enforceable – as patronising and outdated. Lord Justice Thorpe said that any rule that prenuptial contracts were void seemed increasingly unrealistic and to reflect “the laws and morals of earlier generations”.

They also granted Mr Granatino a £2.5 million fund for a house, to be repaid when the younger of their two daughters, who is 7, is 22. His former wife also agreed to pay off his £700,000 debts.

In the original High Court ruling, Mrs Justice Baron said that it would be manifestly unfair to hold Mr Granatino to the prenuptial deal, given the respective financial strengths of both sides. She also had some concerns that the prenuptial agreement was defective in that Mr Granatino had not had independent legal advice and there there had not been full disclosure of assets.

Ms Radmacher’s lawyers pointed out that Mr Granatino, who is French, was heir to a family fortune of some £20 million. They also said that his plans had changed: originally on completion of his PhD he had planned to become an investment fund manager specialising in biotechnology companies but he now intended to remain an academic.

After her successful Court of Appeal challenge, Ms Radmacher said that the prenuptial agreement had been at her father’s insistence, as he feared “gold diggers”.

She said: “The agreement gave me reassurance that Nicolas was marrying me because he loved me as I loved him.”

Mark Harper, a family partner with Withers, the legal firm, said: “Why should prenups not be binding and a couple held to what they agree? They are binding in most US states, continental European countries, Latin America, Canada, Australia and New Zealand.

“Many wealthy men, and women, who consult me are appalled by the current state of the divorce law and are deterred from getting married without a prenup which works.

“Mrs Radmacher will say that her husband knew exactly what he was signing. He knew he was marrying into a rich family and that any rich person in continental Europe would have such a marriage contract preventing claims on divorce.”

Henry Brookman, partner with Brookman Solicitors, said that the Court of Appeal had “raised the stakes” on prenuptial agreements rather than clarifying the law. “Nobody can say with any certainty that a prenuptial agreement entered into will hold. We can only hope that the judges take the opportunity to make the law crystal clear.”

Meredith Thompson, a family lawyer with Mills & Reeve, said that the law was also contradictory — as senior judges sitting in the Privy Council have upheld postnuptial agreements. “So postnups are binding but prenups are not.”

Article from The Times Online