Supreme Court pre-nup decision: the human rights angle

21 October 2010 by Rosalind English

Radmacher (formerly Granatino) (Respondent) v Granatino (Appellant) [2010] UKSC 42 (On appeal from the Court of Appeal [2009] EWCA Civ 649) Read judgment

The Supreme Court has ruled that ante-nuptial arrangements should be binding and enforceable in ancillary proceedings.  Thus in future it will be natural to infer that parties who enter into an ante-nuptial agreement to which English law is likely to be applied intend that effect should be given to it.

Although human rights were not in issue in this litigation, there is an interesting question to explore here in relation to the parties’ rights to peaceful enjoyment of their possession without interference by the state (in the form of a court order reversing the provisions of a private settlement).  Now the Supreme Court has given nuptial agreements considerably more weight in the fall-out folllowing marital breakup the likelihood of a Convention-based challenge in this context falls away but does not disappear altogether because the statutory regime still obliges courts to interfere with agreements if they are considered unfair in any way, or prejudicial to the children of the marriage.

First, the following summary is based on the press release of the case published on the Supreme Court website.

This appeal concerns the principles to be applied when a court, in considering the financial arrangements following the breakdown of a marriage, has to decide what weight should be given to an agreement between the husband and wife made before the marriage (an ‘ante-nuptial agreement’, often referred to as a ‘pre-nuptial’ agreement).

The appellant and respondent were married in London in 1998. The husband is French and the wife German. They entered into an ante-nuptial agreement before a notary in Germany three months before the marriage at the instigation of the wife, to whom a further portion of her family’s considerable wealth would be transferred if an agreement was signed. The agreement was subject to German law and provided that neither party was to acquire any benefit from the property of the other during the marriage or on its termination.   The husband, who at the time worked as a banker, declined the opportunity to take independent advice on the agreement.

The parties separated in October 2006 after 8 years of marriage. They have two daughters, born in 1999 and 2002.  By this time the husband had left banking and had embarked on research studies at Oxford.

The husband applied to the court for financial relief. In the High Court he was granted a sum in excess of £5.5m which would afford him an annual income of £100,000 for life and allow him to buy a home in London where his children could visit him.  The judge took into account the existence of the ante-nuptial agreement but reduced the weight she attached to it because of the circumstances in which it was signed.   The wife appealed successfully to the Court of Appeal, which held that in this case the agreement should have been given decisive weight.  The husband should only be granted provision for his role as the father of the two children and not for his own long term needs. The husband appealed to the Supreme Court.

Judgment

The Supreme Court (by a majority of 8 to 1) dismissed the appeal.The substantive judgment was given by Lord Phillips (President), with an additional judgment from Lord Mance. Lady Hale dissented.

Lord Phillips observed that it used to be contrary to public policy for a couple who were married or about to be married to make an agreement which provided for the contingency that they were about to separate, on the basis that this might encourage them to do so, and the court paid no regard to them .  After 1957 separation agreements were given considerable weight, as increasingly were post-nuptial agreements, in marked distinction to the treatment of ante-nuptial agreements. But the reasons for sweeping away the old rule for separation agreements applied equally to ante-nuptial agreements.

There was not necessarily a material difference between the two and the court was entitled to overrule the agreement in either case .  The question was how the court should approach the task of deciding what weight should be given to an ante-nuptial agreement.

Three issues arose in relation to the agreement in this case for the court to consider:

(i) Were there circumstances attending the making of the agreement which should detract from the weight which should be accorded to it?  Parties must enter into an ante-nuptial agreement voluntarily, without undue pressure and be informed of its implications. The question is whether there is any material lack of disclosure, information or advice .

(ii) Did the foreign elements of the case enhance the weight that should be accorded to the agreement? In 1998, when this agreement was signed, the fact that it was binding under German law was relevant to the question of whether the parties intended the agreement to be effective, at a time when it would not have been recognised in the English courts. After this judgment it will be natural to infer that parties entering into agreements governed by English law will intend that effect be given to them.

(iii) Did the circumstances prevailing at the time the court made its order make it fair or just to depart from the agreement?  An ante-nuptial agreement may make provisions that conflict with what a court would otherwise consider to be fair. The principle, however, to be applied is that a 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.

A nuptial agreement cannot be allowed to prejudice the reasonable requirements of any children of the family, but respect should be given to individual autonomy  and to the reasonable desire to make provision for existing property . In the right case an ante-nuptial agreement can have decisive or compelling weight.

Applying these principles to the facts, the Court of Appeal was correct to conclude that there were no factors which rendered it unfair to hold the husband to the agreement. He is extremely able and his own needs will in large measure be indirectly met from the generous relief given to cater for the needs of his two daughters until the younger reaches the age of 22. There is no compensation factor as the husband’s decision to abandon his career in the city was not motivated by the demands of his family but reflected his own preference . Fairness did not entitle him to a portion of his wife’s wealth, received from her family independently of the marriage, when he had agreed he should not be so entitled when he married her .

Comment

The fact that the position in English law of nuptial contracts differs so significantly not only from Scotland but the rest of Europe and most other jurisdictions suggests that reform must be due and this judgment points the way. In the words of Lady Hale’s dissenting judgment, the law of marital agreements is  “in a mess” and ripe for systematic review and reform. The Law Commission has a current project to examine the status and enforceability of agreements and in 2012  detailed proposals for legislative reform will be available for Parliament to consider. That is the democratic way of achieving comprehensive and principled reform .

In any event, most jurisdictions accord contractual status to these agreements and hold the parties to them, subject in some cases to specified safeguards or exceptions. Under English law, on the other hand,  it is the court that is the arbiter of the financial arrangements between the parties when it brings a marriage to an end. A prior agreement between husband and wife is only one of the matters to which the court will have regard. This latest ruling has not altered the position, and the uncertainty as to the weight that the court will attach to such agreements has led to calls for reform.

The antipathy to nuptial agreements stems from the hallowed principle that individuals cannot agree between themselves to oust the jurisdiction of the courts in some future event, or as Lord Hailsham put it, nearly a century ago,

the power of the court to make provision for a wife on the dissolution of her marriage is a necessary incident of the power to decree such a dissolution, conferred not merely in the interests of the wife, but of the public, and that the wife cannot by her own covenant preclude herself from invoking the jurisdiction of the court or preclude the court from the exercise of that jurisdiction.” (Hyman v Hyman [1929] AC 601)

And this approach was codified in the Maintenance Agreements Act 1957 and reproduced in the 1973 Matrimonial Causes Act, although in the intervening years the feeling grew that the autonomy of freely determined separation agreements at least should be given some recognition. In Wright v Wright [1970] 1WLR Oliver LJ recognized that

the court must, I think, start from the position that a solemn and freely negotiated bargain by which a party defines her own requirements ought to be adhered to unless some clear and compelling reason, such as, for instance, a drastic change of circumstances, is shown to the contrary.

As for (both ante- and post-) nuptial agreements, Wilson J commented in S v S (Matrimonial Proceedings: Appropriate Forum) [1997] 1 WLR 1200,

Where other jurisdictions, both in the United States and in the European Community, have been persuaded that there are cases where justice can only be served by confining parties to their rights under prenuptial agreements, we should be cautious about too categorically asserting the contrary. I can find nothing in section 25 to compel a conclusion, so much at odds with personal freedoms to make arrangements for ourselves, that escape from solemn bargains, carefully struck by informed adults, is readily available here.

Although there is no mention of the European Convention on Human Rights and Freedoms in this judgment, nor indeed of the Human Rights Act, there is a compelling case for considering the law on nuptial contracts through the human rights prism. The courts in all these cases inevitably stub their judicial toe on what is the bedrock of rights instruments: autonomy. The very reason why the court should give weight to a nuptial agreement is that there should be respect for individual choice. Lord Philips says as much in this judgment:

The court should accord respect to the decision of a married couple as to the manner in which their financial affairs should be regulated. It would be paternalistic and patronising to override their agreement simply on the basis that the court knows best.

Lady Hale however was uncomfortable with the notion of withdrawing the court’s control: in her view, the nuptial contract is invariably tainted by the fact that one of the parties to the agreement, usually the woman, is in a weaker position, and  the object of an ante-nuptial agreement is to deny the economically weaker spouse the provision to which “she” would otherwise be entitled.  She also disapproved the majority view because it undermines the importance which English law attaches to the status of marriage; to her, the “most important question”

… is whether, and if so in what circumstances, couples should be allowed to contract out of the fundamental obligations of the married state which they are about to enter.

But what is the position of the parties to the fractured marriage, if they intended their agreement to be legally binding, not only upon themselves, but also on the courts exercising their jurisdiction (a) in the country where the agreement was drawn up and (b) where the marriage irretrievably broke down?  If the court interferes with the property arrangements they themselves have tied up in the agreement, is this not an interference with their possession rights under Article 1 Protocol 1, particularly where the ‘foreign element’ is present – in other words when the agreement was forged in a jurisdiction such as Germany where parties assume correctly that the courts would be bound by it? Responsibility for such interference would lie, not with the courts, but with the legislation which they are bound to apply; so the question to be asked then is whether Section 25 and the other relevant provisions of the Matrimonial Property Act 1973 are compatible with the freedom of individuals to make arrangements for their own property under Article 1 Protocol 1.

This question has not to the author’s knowledge been raised in an ancillary finance case but it is worth framing thus: does the UK courts’ non-oustible jurisdiction in this area amount to a “control of use” on property for the purposes of A1P1 in that it is incumbent on the state to justify having such legislation in place by pointing to a legitimate aim the means to which are appropriately proportionate?   If England were not so isolated in this regard, such a question, were it to be put, would not get off the starting blocks. Such “paternalistic” provisions as those in the 1973 Act would be justified by the legitimate aim of protecting the needs of children of the marriage as well as ensuring the fair outcome of financial matters in cases where one of the divorcing spouses is obviously the weaker economic actor. So, in an example advanced by Lady Hale, if a parent has irredeemably compromised her position in the labour market as a result of her caring responsibilities, she is entitled to at least some provision for her future needs, even after the children have grown up. If the party defending a nuptial agreement which made contrary provision claimed that this amounted to A1P1 interference, the court’s intervention under the relevant statutory provisions would invariably be found to be justified. But the fact that the rest of Europe and the common law world finds other ways to safeguard these interests, without trampling the freedom of individuals to settle their future proprietary interests, suggests that such a claim would not necessarily be doomed to failure.