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Prenuptial Agreements cannot be disregarded

Prenuptial Agreements cannot be disregarded

Prenuptial Agreements cannot be disregarded

Monday, 04 January 2010 15:01

By Paul Firmin, Partner

 

The recent English Court of Appeal's decision in Radmacher v. Granatino will no doubt put pressure on the Hong Kong courts to follow suit, and accept the reality of this day and age that it is “increasingly unrealistic" as Lord Justice Thorpe said, for courts to disregard pre-nuptial agreements.

 

Although English decisions are no longer binding on the courts of Hong Kong, in the field of divorce law at least, Hong Kong courts have come to regard such decisions as highly persuasive when deciding local cases.

 

It must be expected therefore that it is only a matter of time before a landmark case involving a pre-nuptial agreement comes before a Hong Kong court. And when it does, it must also be expected that the case of Radmacher will be closely followed.

 

In Radmacher, a German wife and French husband had entered into a pre-nuptial agreement before they married, such agreements being common place and valid - both in Germany and France. The couple's marriage was said to have broken down after Mr. Granatino gave up a lucrative investment banker's job to become a biotechnology researcher at Oxford University. The couple divorced in 2006 and a High Court ruling last year awarded Mr. Granatino £5.8m.

 

Miss Radmacher appealed against that decision and the Court of Appeal ruled that Mr. Granatino's pay-out should be cut to about £1m as a lump sum in lieu of maintenance. In the process, Mr. Justice Thorpe observed that disregarding pre-nuptial agreements did 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 a " 'carefully fashioned contract' should be available as an alternative to the stress, anxieties and expense of going through the court".

 

Prenuptial agreement in Hong Kong

 

In Hong Kong, just as in England, there is no statutory provision recognising the validity of pre-nuptial agreements. Depending on the circumstances in which they were entered into, a pre-nup agreement in Hong Kong is no more than one of many factors for a judge to take into account when making decisions as to financial claims on divorce. If, as appears likely, Radmacher is to be followed in Hong Kong, a pre-nuptial agreement may now be the decisive factor in a judge's decision and, at the very least, is likely to be given far more weight than previously.

 

There are though potentially many pitfalls for the unwary. It would be no use to present your future partner on the night before the wedding with a pre-nuptial agreement saying it must be signed or the wedding is off. To have any expectation of being recognised by a court in Hong Kong, a pre-nuptial agreement ought to be entered into well before a marriage takes place, with both parties having the benefit of independent legal advice and full disclosure of each party's financial resources. This is precisely where OLN's Family Law practice and its experienced members can assist.

 

 

~~~ Update ~~~

(March 19th 2010)

 

Next week, the newly rebranded Supreme Court for the United Kingdom (formerly the House of Lords) will hear Mr. Granatino's appeal against the Court of Appeal's decision to reduce his payment by £2m. The case has generated so much interest that no less than 9 out of the 12 Supreme Court Justices will be hearing the appeal.

The appeal before the Supreme Court considered whether the Court of Appeal erred in finding that pre-nuptial agreements should be given decisive weight, where entered into freely by both parties. The Supreme Court (by a majority of 8 to 1) dismissed the appeal.

In Lord Phillips’s judgment, he observed that pre-nuptial agreements would not be contrary to public policy on the basis that this would encourage parties to separate by having a contingency plan in place. The distinction between pre-nuptial and post-nuptial agreements was also removed in this decision. The position in England, after this decision, is that the courts should give effect to pre and post nuptial agreements that are freely entered into by parties with a full appreciation of its implications unless it would be unfair to hold the parties to that agreement. It will be interesting to see whether the Hong Kong courts follow this position in the future.

This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.