Supreme Court ruling on Prenuptial agreement

Supreme Court ruling on Prenuptial agreement

Prenuptial agreement reduces German paper heiress's payout

A Supreme Court ruling regarding the case of a German heiress’ s fortune is being seen as setting a precedent for divorcing couples who have signed prenuptial agreements. The case could go as far as ensuring that all "prenups" between couples in England and Wales are recognised as binding in the courts, as they are in France and Germany.

Nicolas Granatino, who is French, and Katrin Radmacher, a German paper heiress worth an estimated £100m, signed an agreement not to make a claim against each other if they divorced. Such contracts are enforceable in France and Germany, where this one was signed, but not in England, where the couple married in 1998.

Divorce lawyers are awaiting the ruling which could be as early as June 2010.

Andrew Newbury, a family lawyer who has contributed to a Law Commission investigation into the validity of prenups, said that "If the supreme court ruled in Katrin Radmacher's favour, it could be seen as another step towards the UK finally falling into line with western Europe and America, where prenups are definitive." Newbury went on to say, "If intelligent couples want to strike such agreements, then why should the courts interfere?"

Following Granatino’s move to become a biotechnology researcher at Oxford University, the marriage broke down. The couple divorced in 2006 and a high court ruling awarded Granatino £5.8m but the Court of Appeal overturned this ruling last year, saying the prenuptial agreement should have been taken into account.

Appeal judge Lord Justice Thorpe said it had become "increasingly unrealistic" for courts to disregard prenuptial agreements. "It does not sufficiently recognise the rights of autonomous adults to govern their future financial relationship by agreement in an age when marriage is not generally regarded as a sacrament and divorce is a statistical commonplace," he said.

The Court of Appeal judges ruled that Granatino's payout of £5.8m should be cut to £1m as a lump sum in lieu of maintenance.

Radmacher was delighted at the verdict. "The agreement was at my father's insistence as he wanted to protect my inheritance – this is perfectly normal in our countries of origin, France and Germany. Like all wealthy parents, he feared gold-diggers," she said at the time. "As an heir himself, Nicolas perfectly understood this. The agreement gave me reassurance that Nicolas was marrying me because he loved me as I loved him... that we were marrying for the right reasons."

But Granatino, whose legal team includes Sir Paul McCartney's divorce lawyer, Fiona Shackleton, said that he faces financial ruin if his divorce settlement was not increased and appealed against the decision, which now presents the Supreme Court with the first case of its kind. Granatino said that he had had no idea his fiancée was worth so much and claimed that they had not discussed her family's fortunes before he signed the prenup.

At present, courts can take into account “all the circumstances of the case”. Thus, if a prenuptial agreement exists it will be considered by judges but will not necessarily be the determining factor in the division of assets and funds.

The danger, according to legal experts, is that a fair settlement may not be arrived at if greater importance was placed on prenups particularly if one of the partners in the relationship is stronger.

The Supreme Court may decide that the status of prenups is still unclear and suggest that parliament determine how to proceed, a move that would place pressure on the government to provide a definitive response.

The Law Commission is due to publish its recommendations on the validity of prenups next year.

Crossley v Crossley

Crossley v Crossley

Crossley v Crossley : Prenuptial agreement background details

It is not surprising that Stuart Crossley required Susan Crossley (nee Dean) sign a prenuptial agreement before he tied the knot, after all she had already benefitted from generous settlements from her previous 3 husbands Kevin Nicholson, heir to the Kwik Save fortune, Peter Lilley the adopted son of Thomas Lilley, chief of Lilley and Skinner shoes and racing magnate Robert Sangster, heir to the Vernon Pools fortune.

However, after a 14 month marriage Susan Crossley felt that the prenuptial agreement promising not to pursue her husband's fortune was invalid due to the discovery of an additional £60 million held in accounts in Monaco and Andorra which she did not know about when signing the agreement.

Mr Crossley’s legal team had asked the courts to short-circuit normal divorce procedures because the marriage was short and childless, both partners had independent wealth and a prenuptial agreement was in place.

In that document the couple had agreed that in the event of a divorce they would retain their own assets and make no claims against each other.

His team argued that the facts could be heard in one day rather than enduring the usual proceedings, which might entail three hearings, a delay of up to 18 months and significant costs.

The High Court judge Mr Justice Bennett agreed that the case could be heard in one day in February, when the prenuptial agreement would be evaluated and a decision made there and then over whether to throw out Mrs Crossley’s arguments..

Yesterday, Mrs Crossley’s legal team argued that in agreeing such a procedure Mr Justice Bennett was denying her access to the courts. She would have no chance to present evidence about undisclosed assets that she claimed rendered the agreement invalid.

Crossley v Crossley : Her appeal was dismissed by three Court of Appeal judges.

Lord Justice Thorpe, who sat with Lords Justices Keene and Wall, praised Mr Justice Bennett’s innovative decision and said that judges had a duty to look at ways to shorten the trial process where “very rich people are demanding full-scale trials” and limiting the courts’ overstretched capacity.

Lord Justice Thorpe, giving the ruling, also called for legislation to clarify the status of prenuptial agreements. In Britain they are not legally binding, although judges do take them into account.

He said: 'This is a quite exceptional case on its facts. If ever there is to be a paradigm case in which the courts will look to the prenuptial agreement as not simply one of the peripheral factors of the case but a factor of magnetic importance, then it seems to me that this is such a case.'

There was a 'strong argument' for legislation, he added, given that the European Union considered it important to tackle the differences that existed on property-sharing between member states.

Mark Harper, a partner with Mr Crossley’s solicitors, said that the ruling was 'a significant step forward for prenuptial agreements'. He added: 'The Court of Appeal has shown that when a prenuptial agreement exists, the English courts can take a pragmatic approach and short-circuit normal court procedures, saving time, money and emotional distress for all involved.'

Mr Crossley said: 'This is a fair decision. I am upset that our marriage failed.'

He met his future wife in the summer of 2005 and they were married 14 weeks later, in early January last year. But from June the couple lived largely separate lives and in August she filed for divorce.

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Cohabitation agreements

Cohabitation agreements

It is essential when setting up a home together that legal and financial affairs are put in order by getting a cohabitation agreement and Wills drawn up through a solicitor. A cohabitation agreement can be tailored to the individual couple's situation, but should set out, for example, how the property ownership is to be shared, how the parties' income is to be utilised, i.e. either pooling resources or maintaining separate accounts and provisions for changes in the future to the agreement should it be necessary.

Clawbacks and Overage Agreements

Clawbacks and Overage Agreements

An Overage (also known as a Clawback) agreement allows paid money to be taken back in special circumstances. This can be used to cover any cash deficiencies by using prior profits. This may also be an additional payment after a sale has completed, paid under agreed circumstances.

Overage payments on land pay the original owner of the land part of the land's future value - therefore a developer may enter into an Overage agreement to buy land at a lower price, paying a further sum to the original owner once planning permission has been granted, for example. It is recommended that if you are purchasing land as an investment that you avoid those purchases where Overage agreements already exists and buy the land outright.

An Overage / Clawback agreement should consider:

• Triggers which define when a payment should be made, for example the completion of a set amount of development.
• Timescale an Overage agreement can last up to 80 years. The timescale agreed should not restrict a buyer for too long, but also allow sufficient time for the agreed triggers to be reached.
• Security to ensure that an overage payment will be made when properly triggered.

Common devices used for security are restriction (preventing any further sale without the consent of the seller), charge (which is registered against the property) and restrictive covenants (barring development until overage is paid).

Overage / Clawback agreements can be extremely useful to protect your assets and investments. Contact us as soon as possible when considering an overage agreement to ensure that it is clear, successful and profitable!