Update: family

Prenups in the spotlight

There can only be one place to start with a review of family law since the last update '“ the case of Radmacher v Granatino [2010] UKSC42. The case has generated a significant amount of national publicity and family lawyers have been long anticipating the judgment of the Supreme Court on the question of prenuptial agreements.

The French husband (Granatino) and German wife (Radmacher) were married in London in 1998 having entered into a prenuptial agreement in Germany some three months before their marriage. This had been at the insistence of the wife and her family and the agreement was subject to German law providing that neither party was to acquire any benefit from the property of the other during the marriage or on termination. The wife was a wealthy heiress and the husband, at the time, a high-earning banker. He declined the opportunity of taking independent legal advice regarding the agreement at the time it was signed.

The parties subsequently lived in London after their marriage and separated in October 2006, following the birth of two daughters in 1999 and 2002. By the time they divorced, Granatino had changed his career and was a researcher at Oxford University.

In the High Court Granatino was granted an award of £5.5m to enable him to buy a home in London where the children could visit him and which would provide him with an annual income of approximately £100,000. The judge did take into account the prenuptial agreement but reduced the weight attaching to it as a result of the circumstances under which it was signed.

Radmacher appealed to the Court of Appeal where the decision was that the agreement should be given decisive weight. The impact of this was to reduce the provision for Granatino such as to recognise his needs only in relation to his role as carer for his two daughters, and that in the long term his own needs should not be taken into account. He appealed to the Supreme Court.

The fundamental issue being the weight that should be given to an agreement between a husband and wife made before a marriage, freely entered into by the parties.

The majority decision of the Supreme Court, with Baroness Hale dissenting, was that 'the court should give effect to a nuptial agreement that is freely entered into by each party and with full appreciation of its implications unless in the circumstances prevailing it would not be fair to hold the parties to their agreement'. The upshot for Granatino in this particular case was that he would be held to the original agreement as the circumstances in which it had been entered in to were not so tainted that it should be given limited weight and his needs were not such that it would be unfair to hold him to the agreement.

In the wider context it now seems that the onus will be on the party seeking to challenge the application of the terms of a nuptial agreement within divorce proceedings to prove why they should not be held to it if it has properly been drawn up. Where, for example, upholding such an agreement might result in a party being unable to meet their basic needs the courts are unlikely to uphold it as inequitable.

There is still likely to be much litigation regarding such agreements, and until the government decides to introduce legislation on the issue practitioners will still need to advise their clients with caution. However, there has already been an upsurge in requests for prenuptial agreements which will keep practitioners busy. We will also need to consider keeping our cases under review to provide advice on the need for post-nuptial variation.

Breaching confidentiality

Another case where the facts will be well known is Tchenguiz v Imerman; Imerman v Imerman [2010] EWCA CIV 908, in which the court considered further the question of Hildebrand documents.

The wife's brothers worked, and shared an office space, with the husband. Following the issue of divorce proceedings, the brothers accessed and copied information and documents belonging to the husband from a server in their shared office. The information was initially passed to the brothers' solicitors, and, after checking the disclosure in an effort to remove possibly privileged documentation, the remaining seven arch lever files were passed to the wife's solicitors. They in turn disclosed their possession of the seven files to the husband's solicitors as Hildebrand documents in accordance with the principle established in the case of Hildebrand v Hildebrand [1992] 1 FLR 244, which determined that such documents were 'fair game' so long as promptly copied and the originals returned to their owner.

The Court of Appeal, however, held that the Hildebrand Rules were not authority for this established practice but only authority 'as to the time when copies obtained unlawfully or clandestinely should be disclosed to a spouse'.

It went on to say that 'the notion that a husband cannot enjoy rights of confidence against his wife'¦ seems to us simply unsustainable'. This means that a spouse taking such documents may well commit a criminal offence, including, for example, theft or offences under the Computer Misuse Act 1990 and will also be breaching their spouse's confidentiality.

The Court of Appeal ordered the wife's solicitor return all the files to the husband's solicitor without keeping copies and further restrained her from using any information obtained from her reading of the documents while directing the husband's solicitor regarding his disclosure obligations.

The judgment not only, therefore, puts at a disadvantage a spouse, usually the wife, who has limited information about their spouse's financial affairs, but also potentially the solicitor who might be asked to review documents obtained without the other parties' knowledge.

Such an individual may find themselves and their firm a defendant to the proceedings, and, therefore, practitioners need to be strong in advising their clients when then cannot be asked to review such documents.

'Excessive and reckless' lifestyle

In Robson v Robson [2010] EWCA 1171, the Court of Appeal was asked to consider the extravagant lifestyle lived by the parties during their marriage in relation to the wife's capital and income claims on divorce.

The parties had been married for 21 years and had two children, aged 20 and 17. Their significant wealth was largely the result of inheritance by the husband which included an estate in Oxfordshire valued at around £16m. His total resources amounted to £22.3m and at the time of the divorce the wife's resources totalled £343,500.

At first instance the judge determined that the parties' lifestyle during the marriage had been 'excessive and reckless' and found the wife's housing needs to be £5m and her income needs, which were based on spending during the marriage, to be £140,000 a year. The wife was 54 and the husband 66. The judge capitalised the wife's income needs, and, taking into account her legal costs, awarded a capitalised lump sum of £3m. Her total settlement was therefore £8m on a clean break basis and she was to receive child periodical payments of £15,000 a year.

The husband appealed on two grounds:

1. that the judge had been wrong to assess the wife's income needs on the expenditure during the marriage which he himself had found to be excessive; and

2. that a clean break was inappropriate and secured periodical payments would be the fairer solution.

In the meantime, the wife had actually rehoused herself for £4.3m. The Court of Appeal held:

1. The capital award of £5m was excessive, particularly taking into account the fact the wife had actually re housed for £4.3m.

2. In assessing the wife's income needs the court had failed to give sufficient weight to the extravagant lifestyle adopted during the marriage.

3. The wife had established an income need and was entitled to be self-sufficient. An ongoing periodical payment order would not give her security or piece of mind.

She was awarded a capital lump sum of £4.3m, £2m by way of capitalised periodical payments and £600,000 toward her costs.

Rules of engagement

Moving away from financial settlements on divorce, in the case of Dibble v Pfluger [2010] EWCA Civ 1005 the Court of Appeal dealt with a TOLATA claim on the significance of the parties being engaged.

The parties began cohabiting in 1992 when both had owned their own properties; the claimant outright and the defendant subject to a mortgage. During their relationship they bought and sold a number of properties, always with appropriate legal advice and reaching agreement as to how the properties would be held. The last property in which they lived together in the UK after the defendant had sold his was held as tenants in common in equal shares.

The claimant was Polish and her parents bought land in Poland in 2002 on which to build a home for the claimant. In 2003 a property was built on the land and in 2006 the parties moved into the property in Poland. The defendant had spent monies on the Polish property. By the end of 2006 the relationship between the parties broke down and they could not agree as to the defendant's interest in the property and the dispute became the subject of a four-day trial.

The question was whether the property could be considered as jointly owned as claimed by the defendant. At first instance the claim was rejected as was his claim for reimbursement of the monies expended on the property by the defendant.

The defendant appealed and during the appeal it was brought to the attention of the parties that everyone involved in the case had overlooked the fact that the parties had become engaged in 1994 and that it must be inferred that the agreement to marry terminated when their relationship broke down.

The Court of Appeal found that the recorder at first instance ought to have taken into account the fact of the parties' engagement to marry and therefore remitted the case to the county court for re-hearing by a different judge.