PRE-NUPTIAL AGREEMENTS

Bylined article by John Macfie, Gillespie Macandrew

An interesting divorce case to make the headlines recently is that between German heiress Katrin Radmacher and Nicolas Granatino. Radmacher, who is said to worth more than £55 million, with an annual income in excess of £2 million, married her husband in 1998, after signing a pre-nuptial agreement.

The contract, signed under German law, states that should the couple get divorced, Granatino is not entitled to any of his wife’s wealth. However Mr Granatino now argues that: he had no independent legal advice before it was signed; that his wife did not disclose the extent of her wealth; that the agreement was put to him as a fait accompli without the chance to engage in meaningful negotiations; and that following the birth of the couple’s two children, the landscape of the marriage has been altered as he now has the children with him for about a third of the time.

English courts have always been suspicious of pre-nuptial contracts when it comes to divorce; but what would happen here in Scotland?

Pre-nuptial agreements were common both in Scotland and England in the 19th Century and earlier, when the families of rich heiresses tried to protect the property of their daughters from gold diggers by stopping the husband getting his hands on his wife’s money. Scottish courts looked at pre-nups like any other sort of contract freely entered into and generally supported them. However, as society changed, and as married women gained control of their own property, pre-nups became the concern only of the super-rich.

Nowadays, as marriage breakdown becomes more common, pre-nups are once more useful for the ordinary individual. This is because the default position in Scots law is to divide matrimonial property equally between husband and wife. For example, if you own a house or business before marrying and sell it after the wedding to buy something else, the new thing is matrimonial property and open to claims on divorce. This is known as ‘conversion’ and all converted property is at risk on divorce.

The Scottish courts will usually uphold pre-nups, providing they’re seen as fair and reasonable. They are reluctant to overturn an otherwise valid contract; so if you are grown up and not otherwise vulnerable, you are always free to strike a bad bargain if you want.

In Scotland, if Mr Granatino proved his case to the court, there would be fair chance that the court would support him, overturn the pre-nup and grant him what they considered a fair settlement.

However, he might still find an unpleasant surprise in Scotland. Matrimonial property excludes pre-marriage wealth and Ms Radmacher already owned most of her property before the marriage. There would probably be much less in the pot for the poor Ph.D. student!

What does this mean for mere mortals? Certainly, pre-nuptial agreements should be considered if you have even modest wealth when you get married, that might be converted afterwards. An amazing proportion of the cost of divorce settlements comes from arguing about what should happen to property of this sort. They should be considered if there is any significant ‘family’ property at the time of the wedding, such as shares in family companies, partnerships or farms. It can be disastrous when divorce disrupts otherwise well ordered and long established property structures. Finally, if you expect to inherit or be given significant sums during the marriage, say from a parent, which might be used to buy something new, improve a family home or buy any other asset, think of a pre-nup.

This sad saga also shows up one of the increasingly frequent wrinkles about modern divorce, that marriages often involve people from different countries, with different sets of rules and expectations. Mr Granatino is French, Ms Radmacher German, the pre-nup was entered into under German law, he now lives in England and she in Germany. In April, the High Court in London was told by experts that both French and German law would uphold the agreement. If there are foreign elements to the marriage, think about how other systems of law would deal with a divorce.

Naturally such agreements have a cost and your solicitor could advice you of what should be expected. If in doubt about whether it is worthwhile, think of the agreement as a home insurance policy; you might never have to claim but the risk of not having one is too awful to consider.

John Macfie is an associate in the Litigation department of Gillespie Macandrew.