Radmacher – not just another pre-nup?
Rarely does a divorce case capture the public imagination for what it says about the law, Radmacher v Granatino  UKSC 42 is an exception to this, the “Daily Telegraph” even wondering if it was the motive for a murder.
The reason is that the Supreme Court in deciding the case redefined the law on pre-nups without waiting for Parliament to change it. Pre Radmacher you could have a pre-nuptial agreement but subject to the caveat that it gave no guarantees for the future if your marriage ended in divorce. Their Lordships have now made it clear that, if there is a pre-nup, properly drawn up, post Radmacher, a court on divorce will assume that the parties meant it to be followed if their marriage broke down.
You would be forgiven for thinking that that makes a pre-nup entered into now a sure thing. You would however be wrong as it still needs to be “fair”. What is more, there is no definition of “fair” – undoubtedly because that will depend on the circumstances of each case.
That means that there will still be lots to argue about – a lawyers’ charter you might think. The reason for the “fairness” safeguard is not however to keep us divorce lawyers employed. Simply, what may be entirely reasonable arrangements for two people in their late twenties both with their own careers and earning power may create a gross inequality 10 years down the line. These two people may have had a couple of children by then and have decided that one of them will stay at home or work part time in order to focus on child care. Unless their pre-nup provided for that or has been reviewed (a post-nup), adherence to the original arrangements might produce an overall unfair outcome leaving one person at a substantial financial disadvantage. Indeed even Ms Radmacher has had to make some financial provision for Mr Granatino, if only while, their children are still dependant. That is outside the scope of their pre-nup.
If your pre-nup is properly negotiated through lawyers who have knowledge of all the finances, they should build in some provision for foreseeable changes such as the birth of children. They should also include review provisions, amongst them the elapse of a certain number of years. The problem is, that the couple then has to remember actually to review the arrangements. Even if there are no events which somebody without a crystal ball could not foresee, everyone’s lives change over time. There is little point in taking the trouble and spending the money to have a proper pre-nup if you don’t then keep up to it. What would serve after 5 years is likely to need adjustment after 30. You wouldn’t leave insurance provisions unreviewed. A pre-nup is an attempt to insure against uncertainty in the event of divorce.
The reality for most people is that, when starting out, they have no idea how successful or otherwise they will be, what sort of house they will be living in 15 years down the line or how global economics will affect them. Without periodic review, it is unlikely that many pre-nups will be future proofed to pass the fairness test.
Lawyers advising on negotiating and drafting a pre-nup should actually have an idea of how the law currently defines fairness. For example, if there is £400,000 in total to house each of a divorced couple but one earns £10,000 a year and the other £80,000, it isn’t hard to guess that “fair” means the lower waged half having a larger slice of the housing fund. It is impossible however to foresee how each couple’s fortunes will develop over time – which is why those reviews are so important.
Without more court decisions, assessing the position of pre-nups in a post Radmacher world is still, to a degree, informed guess work. It does seem likely however that there are two types of case where a pre-nup will afford far greater certainty than existed before Ms Radmacher pursued her case to the Supreme Court.
It seems likely that, as long as there has been no coercion (a prerequisite in every case) and that needs are met by the pre-nup terms, it will be reasonable to expect to safeguard pre-marriage family wealth. In a case where there is plenty of money, those needs will be assessed very generously. However it is likely that, if they are met, the shares in the family business or the family land can be safeguarded for the first time.
It also seems probable that a pre-nup entered into by an older couple who have perhaps been married before will be upheld in the event of divorce. Many people marrying late in life have been there, done that and both bring assets and income built up in a previous existence. They frequently have an entirely understandable wish to preserve pre-acquired assets so that they can be left to their own children. Provided that there is an inherent fairness in their pre-nup it is likely that they will be able to secure that position in the event of divorce.
So, whilst we are far from a situation where the terms of a pre-nup will be rigourously applied on divorce, we are now in a legal world where the existence of such an agreement entered into after the Radmacher judgment means that, on divorce, both people will be assumed to have intended its provisions to apply. To ensure as far as possible that those provisions will be followed, you will need to establish that the agreement was entered into freely. It will need to be “fair”. Remembering that the criteria for establishing “fairness” in the context of each marriage will often change over time, a pre-nup will need periodic review with any changes formally secured – a post nup.
The Radmacher decision has given these agreements a status in our divorce law which they did not have before. Further refinement will undoubtedly eventually emerge in future cases. We may finally have legislation which would align us more closely with much of the rest of the world. The achievement of the present change is a debt owed to a German heiress and a Frenchman who downscaled to become an academic. Those marrying and aspiring to secure a degree of certainty in the event of divorce, owe the pair a debt.
Anne Braithwaite, Family Partners