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Case Law Developments on Pre-nuptial Agreements

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 Following on from our blog entry on 4 November 2010 concerning Radmacher v Granatino, I thought it would be worth commenting on the recent decision in Z v Z (2)

 In Radmacher v Granatino, a Pre-nuptial Agreement was upheld but the Supreme Court left a qualification that Pre-nuptial Agreements would be upheld by the court “unless in the circumstances prevailing it would not be fair to hold the parties to their agreement”.

 In the recent case of Z v Z (2), it was held that the agreement entered into by the parties should be binding.  To summarise the facts of this case, both parties were French and had been married for 14 years.  Before the marriage there was a period of cohabitation of approximately 4 years.  There were three children to the marriage. The parties moved to England in 2007.

 Before the marriage, the couple entered into a marriage contract, or Separation des Biens, in accordance with French law.  This contract was entered into voluntarily, and represented a normal step for the parties in their culture - many couples in France enter into agreements pre marriage to elect the relevant property regime their assets should be divided pursuant to, in the event of divorce. 

 If the divorce case was dealt with in France, the French court would have held the parties to their Separation des Biens.  The Wife issued divorce proceedings in 2008 in England and there followed a contested jurisdiction dispute. It was decided that the English courts had jurisdiction to hear the case, as the parties were both resident in England at the time the divorce proceedings were issued.

 The Husband would have been well advised at the time that the marriage was close to breakdown, to issue proceedings in France on the basis of his domicile to secure the French jurisdiction!  However, such a course would not guarantee success because of a European law that divorce cases, should be heard in the jurisdiction that is most convenient.  Therefore, if the majority of the parties’ assets were in England, there is a chance that the French court would transfer the case to the English courts in any event.

 At the time of separation, the assets totalled some €15,000,000.00. The terms of the agreement expressly excluded the sharing of assets.  However, the Wife in the case wished for all assets to be shared on an equal basis, following the principle established in White v White, pursuant to English law.

 The Husband was of the view that the agreement was binding and therefore sharing was excluded, but that ‘needs’ had not been excluded and could still therefore be considered. 

 The agreement between the parties in Z v Z(2) was upheld, but the Judge made provision for the Wife’s needs, as the agreement did not mention maintenance.  The Judge calculated the needs of the Wife and capitalised this using the Duxbury calculations. The ultimate share given to the Wife in this case was 40% of the total matrimonial wealth.  This was despite the fact that she would have care of the three children.  This would ensure that the Wife’s needs were met but did not cause unnecessary departure from the agreement reached.

 The principle of ‘fairness’ was considered in line with Radmacher test, and despite the fact that

i) neither party had had legal advice before entering into the agreement, and

ii) on separation the husband signed a letter to the wife setting out much more favourable terms that the agreement provided,

 the court upheld the agreement. It was felt that it was fair to do so as the parties had the opportunity to vary or revoke the agreement whilst married and never took steps to do so.

 It will be interesting to watch for further developments in this field, as it may be that legislation addressing the matter of pre-nuptial agreement is produced.  However, the Judges in both Radmacher v Granatino and Z v Z(2) seem to be applying a common sense approach and it is interesting to note that both cases involve Pre-Nuptial Agreements made in foreign countries.

 It certainly seems that pre-nuptial agreements are being taken more seriously by the courts. Contrast this with the position only years ago where such agreements were only considered as a relevant ‘conduct’ factor in divorce cases.

You can contact Justine Osmotherley from our Family team on 0113 336 3323 or by email at Justine.osmotherley@clarionsolicitors.com

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