Pre-Nup Upheld When Implications Understood

Family judges will approach pre-nuptial agreements with greater respect following a landmark Court of Appeal ruling in a ‘big money’ divorce case. The Court agreed with Lord Phillips’ opinion in Radmacher v Granatino that failing to honour such agreements, if reasonable and freely entered into, on the basis that the Court knows best would be both ‘paternalistic’ and ‘patronising’.

The case concerned a middle-aged former couple who had been married for over 20 years and had three adult children. Their matrimonial assets were valued at £273 million. Much of that sum was family money inherited by the husband, a Swedish national, who had increased his fortune by successfully investing in property. On the day before their wedding in Stockholm, they had signed a pre-nuptial agreement to the effect that their assets would be kept entirely separate throughout the marriage.

Following their separation, the husband had offered the wife £38 million in cash and a stake in his company. That was well in excess of her assessed needs, which came to £22 million, and was also substantially more than she would have been entitled to on a strict application of the agreement. The husband’s approach was broadly accepted by a family judge, who awarded the wife a £51 million lump sum and a substantial shareholding in the company.

The wife challenged the award on the basis that the agreement should have been entirely ignored, in that she had not received legal advice before signing it, and that the equal sharing principle should have held sway. She sought an increase of her award to £116 million, which would still have left the husband with the lion’s share – 57.5 per cent – of the overall pot.

In dismissing her appeal, however, the Court noted that the judge had described her attempt to claim ignorance of the agreement’s wording and effect as dishonourable. She had fully appreciated the implications of the agreement, which was in effect part of their marriage, metaphorically taken with them wherever they went. She had taken an autonomous decision to enter into an agreement that was both commonplace and binding in Sweden and it could not be ignored simply on the basis that family judges know best.

The wife had also complained that the shares that formed part of her award could not readily be converted into cash and she had thus been denied a clear exit route from the husband’s financial domain. The Court accepted that that part of the award was not ideal and urged the former couple to seek a better solution by agreement or mediation.