Update: family

The last update considered how the credit crunch has resulted in a number of interesting cases coming before the court for review (Solicitors Journal 153/27, 14 July 2009). Of course the credit crunch is also having an impact on matrimonial practitioners, with the divorce rate hitting a 26-year low. Many clients are reluctant to commence costly proceedings at a time when the value of their assets is falling. There appears to be a strong correlation between falling house prices and the number of divorces in England and Wales.

Some practitioners, however, are seeing an increase in work; mediators and collaborative lawyers have seen a steady growth in recent years. The last update touched on the advantages of the collaborative process (Solicitors Journal 153/27, 14 July 2009) not least the confidentiality of the process; avoiding the need for attendance at court.

Lord Kerr of Tonaghmore was recently singing the praises of the collaborative process, and considering whether it might be extended outside the family arena, and I'm pleased to note that the LSC are now looking to extend public funding to cover the collaborative process for family work from October 2010.

Mediation has also been at the forefront of recent thinking and the justice minister, Bridget Prentice, has been discussing strategies with Lord Bach (solicitorsjournal.com, 26 October 2009) to increase public awareness and take up of mediation. This includes consideration of making mediation compulsory for all parties in private law cases before applications to the court are considered. This is already a requirement for those parties who seek public funding to issue either financial or child-related applications to the court.

However, while the collaborative process and mediation offer alternative ways of resolving disputes, we are of course all reliant on those cases which do not settle amicably, and which fall to be determined by the courts.

Pre-nuptial agreements

One area where many family lawyers have found themselves increasingly called upon to advise is pre-nuptial agreements. A succession of high-profile divorces resulting in large settlements which have received a considerable amount of press have resulted in an increase in such enquiries. A previous update considered the case of McLeod (Solicitors Journal 153/5, 10 February 2009) and now such agreements have been even more at the forefront following the decision in Radmacher v Granatino [2009] EWCA Civ 649 (Solicitors Journal 153/26, 7 July 2009). This has been described as a 'landmark ruling' and results from an appeal by Katrin Radmacher on the basis that a pre-marital agreement reached between the parties had not been given sufficient weight in the lower court's decision.

Ms Radmacher is of German nationality and an heiress to a considerable fortune; Mr Granatino of French nationality also from a wealthy family. They met in 1997 while they were both living in London, got engaged in June 1998 and entered into a pre-marital agreement on 1 August 1998. In 2001 Mr Granatino had given up his lucrative financial career at JP Morgan to study at Oxford University.

The pre-nuptial agreement was largely driven by Ms Radmacher's family '“ who wished to protect the family wealth '“ and was in fact drafted by her family notary. It provided, among other things, that neither party would have any interest in any property brought into the marriage by the other, that any resources accruing to either of them during the marriage would remain theirs alone and that in the event of divorce neither party would have any claim on the property or income of the other even in the case of extreme hardship. By the time of the divorce, Mr Granatino was heavily in debt.

In the High Court, various factors were considered as discrediting to the agreement, including the lack of financial disclosure at the time of entering into the agreement; the fact that Mr Granatino had received no independent legal advice; and the subsequent birth to the parties of two children, at the time of the divorce aged nine and seven.

Ms Radmacher appealed on the basis that the lower court had not given sufficient weight to the existence or content of the pre-marital agreement, and the appeal judges took the opportunity to comment on the law surrounding pre-nuptial agreements generally.

Thorpe LJ stated that it was increasingly unrealistic not to recognise the rights of adults to enter into agreements governing their 'future financial relationship'. He went on to say that 'subject to proper safeguards, agreements should be considered as an alternative to the stress, anxiety and expense of costly legal proceedings', while going on to emphasise that the courts will still have to decide whether any such agreement entered into would be manifestly unfair.

Consideration was given by all three appeal judges to the fact that the law in relation to such agreements is out of step with the rest of Europe, and the court held that a decisive weight should be given to the pre-nuptial as part of the section 25 criteria and that, while Baron J had factored in the pre-nuptial agreement when she considered the section 25 criteria, she had failed to give sufficient weight to the fact that the parties were German and French nationals and that in both those countries pre-nuptial agreements are standard and enforceable.

The outcome for Mr Granatino was that as provided for by the pre-nuptial agreement; he is to receive very little for himself from the financial settlement, but will receive the benefit of a significant home for himself and the children which will be held on trust for his exclusive occupation while his parenting duties subsist (akin to a schedule 1 of the Children Act Order). In addition, he will receive a capitalised maintenance award of a significant sum to meet his needs as a homemaker for the two children rather than a spousal award for life.

Of course, we do not yet know whether there will be further litigation in relation to this matter, but for now it seems clear that the court's view of the position is that pre-nuptial agreements should be given recognition if not only to bring us into step with the rest of Europe. This seems to make sense '“ allowing couples to enter into sensible agreements regulating their financial affairs within their marriage, so long as they make their choices on an informed, free and fair basis, which do not have negative outcomes for any subsequent children.

Change in earnings

Another interesting case reported over the summer was Hvorostovsky v Hvorostovsky [2009] EWCA Civ 791, the divorce of a world renowned Russian baritone, Dimitri Hvorostovsky, whose matter has been dealt with by the Court of Appeal. Svetlana Hvorostovsky had been a ballerina when the parties married, but had given up her career to follow her former husband while he performed in opera houses around the world.

Thorpe LJ noted that she had given up her career for the benefit of her former husband whose career had gone from strength to strength during the marriage. In 2001, he had grossed approximately £552,000 pa, whereas, at the time when the matter came before the Court of Appeal, he was grossing £1.86m p.a. The parties have two minor children, who are twins. In the lower court, Svetlana was awarded periodical payments of £120,000 pa for herself and child maintenance at the rate of £12,500 per child p.a, together with their school fees.

Thorpe LJ held that given the current level of the husband's earnings, such a level of income would be comparatively little for Svetlana and the children to live on. The parties married in 1989, relocating to London from Russia in 1994. The twin boys were born in 1996. Some three years later, their relationship had broken down and they had divorced in 2001. Svetlana and the children remained in the former matrimonial home, where she remained at the time of her appeal.

On appeal, the court awarded Svetlana an increase in her periodical payments to £140,000 pa, and an increase in the child maintenance to £15,000 pa per child. Although various issues were raised on behalf of Svetlana in supporting her application for an increase, Thorpe LJ indicated in his judgment that the single factor of greatest significance leading to the allowing of the appeal was Dimitri's 'greatly increased income'.

Allowing the application for an increase in spousal maintenance provision on the basis of primarily a change in the former spouses earnings is one to watch.

Domicile of origin

K v K [2009] EWHC 1876 dealt with the issue of domicile. The wife was Australian, living in Australia. The husband was English, but lived in France for the purpose of his employment.

Following the parties' separation, the husband issued an application for financial ancillary relief in Australia, and the wife responded, acting in person. Despite this, a few months later, the wife issued a divorce petition in England on the basis of the husband's domicile of origin being England. The husband's Australian solicitors declined to accept service of the petition or did not return the acknowledgement of service of the petition, proceeding on the basis of their claim that the husband had abandoned his origin of domicile and adopted Australia as his domicile of choice; although they provided no supporting evidence.

In the meantime, the wife applied for substituted service of the divorce proceedings to the court in England relying on a letter the husband had sent to the principal registry informing them that he did not submit to their jurisdiction. The wife was eventually granted a certificate of entitlement to the special procedure process on the basis that the court was satisfied that she had sufficiently proven the content of her petition and was entitled to a decree. However, in the meantime, the husband's petition was heard in the Court for Divorce and the Australian lawyers sought to obtain an order from the Australian court prohibiting the right to proceed with the English petition.

The husband applied to the principal registry for permission to apply out of time to set aside both the directions for trial and the certificate and the wife's petition to be dismissed for want of jurisdiction. The matter was then transferred to the High Court. Ryder J stated 'domicile of choice has to be established on clear, cogent evidence, and the mere assertion of being Australian is hardly sufficient. His best evidence is that he wants to be an Australian citizen but has on two occasions given up the intent. This is not clear on cogent evidence'¦'

Ryder J went on to dismiss the husband's application for leave to set aside on the basis that there was no clear cause why the decree nisi should not be pronounced.

Fall in value of investments

Marano v Marano [2009] EWCA Civ 967 involved an application by Mrs Marano for permission to appeal a lump sum order in her husband's favour where the value of the property investments had plummeted.

The original order had made an award of £5m to the husband from the wife, who was independently wealthy. This was because the husband's property interests had fallen in value and now showed a deficit to the tune of £10m. In seeking a review of the decision, the wife argued that the outcome was 'demonstrably unfair'. This was partly because the valuation presupposed an immediate crystallisation by sale and this was unlikely to be the reality.

Thorpe LJ granted the permission, though 'with some hesitation' and has directed that the appeal should not be dealt with before the Michaelmas term to give the parties the opportunity of mediation through the Court of Appeal scheme. We will have to wait and see how this mediation progresses, and if successful the outcome of the appeal.