November 5, 2010 7:43 pm

Divorce capital

In an office high above London’s Park Lane, Vincent Tchenguiz flourishes a colourful piece of paper and thrusts it across the table as if making an opening offer in one of his international property deals. On it, gobbets of text jostle with two-dozen yellow and blue bubbles and boxes. The entrepreneur explains that the diagram is his “methodical” attempt to explain the legal Byzantium that governs modern divorce in the world of the super-rich. Even for a man who lives and breathes financial complexity and uncertainty, English family law has, it seems, proved something of a conundrum.

“I was surprised,” he says, with the quizzicality of a thinker who has just discovered a problem with unexpected hidden depths, “that it is not straightforward.”

 

Lisa Tchenguiz: estranged wife. Younger sister to the multi-millionaire Tchenguiz brothers, Lisa is currently embroiled in a divorce from her super-wealthy husband Vivian Imerman

The driving force behind Tchenguiz’s new hobby is his sister, Lisa, who is sitting next to him in front of a window with views of Big Ben and the London Eye. In her designer Hervé Léger bandage dress and fishnet tights, Lisa is a poised counterpoint to the restless and rumpled Vincent, with his upturned collar and undone polkadot tie. She is also in the midst of a bad-tempered and drawn-out divorce from her husband, Vivian Imerman, a former owner of Del Monte Foods. She was embroiled in the courts over the summer after confidential documents belonging to her husband were secretly downloaded by her other brother, Robert, from a computer in the Mayfair office the two men shared. The court ruled Lisa couldn’t use the data, causing her to denounce the ruling as a “cheats’ charter” that would make it harder for estranged wives to check on whether their rich husbands were declaring all the assets they should (Imerman’s lawyers retort that he isn’t hiding anything).

Vincent’s critique of divorce law skirts the details of Lisa’s case – which he’s not allowed to talk about because of the ongoing legal proceedings – in favour of a tour d’horizon. He notes the complications introduced by a wave of recent court ­judgments. He observes how much harder it is to divide up the internationally dispersed assets of the super-wealthy – people like him, in fact – ­compared with the task of splitting the “cottage and sheep you could count 500 years ago”.

As his list of problems expands, an adviser sitting next to him notes drily: “Vincent has been clever enough not to get married.”

“And I don’t think he ever will,” Lisa responds, without missing a beat. “Very clever man.”

Tchenguiz’s split with her husband is one of a series of marital disputes that has thrown a spotlight on what ­critics say is the deepening muddle of ­English divorces involving rich individuals. The lawsuit concluded last month between Katrin Radmacher, a German industrial heiress, and her French ex-husband ­Nicolas ­Granatino was just one of what is becoming almost a football team of important case-names – including White, Miller, McFarlane, MacLeod, ­Charman, Crossley – pushing the law this way and that. The cliché that England is now the divorce capital of the world has been buttressed by a series of court ­pay-outs in the tens of millions of pounds.

. . .

The flow of litigation has raised deeper questions about whether marital law embedded over centuries now needs wholesale reform. Debate is ­particularly sharp over the degree to which, as in the Radmacher case, couples should be able to opt out of the court system by making private deals over how to divide their assets in the event of divorce. The Law Commission, the body that recommends legislative changes to the government, is due to put forward proposals for change next year. It will have to ­take on some big and contentious subjects, including how much autonomy individuals sacrifice in ­marriage, and whether the law as it stands is ­discriminating against either men or women.

For now, lawyers and their rich clients are ­grappling with a legal landscape that makes good copy for journalists but means stress and doubt for some very high-profile individuals – as well as ­putting a strain on the court system for which everyone pays. Lady Hale, one of the nine judges in the Radmacher case, noted that there was “not much doubt that the law of marital agreements is in a mess”. She added disarmingly that she, as one of the many people in the judiciary and elsewhere who had helped put the law where it is, “must accept some of the blame”.

Divorce law has been in a state of flux for a decade now, after a seminal House of Lords ruling in 2000 that the starting point for dividing up the assets of a marriage should be to give an equal share to the breadwinner and the homemaker. This has led the English regime to become uniquely favourable to the economically weaker partner – usually the wife. ­Husbands haven’t been able to protect their assets by drawing up pre-nuptial agreements because, unusually, ­English courts haven’t enforced them and have instead preserved their judicial discretion. Pre-nups are common in both continental Europe and the US, although there are still important differences between countries – and, in the US, between states – over the extent to which they are upheld.

The result has been a steady procession of UK cases where women have walked away with large ­financial settlements. Beverley Charman, estranged wife of insurance magnate John Charman, received £48m, while Heather Mills, the former wife of Sir Paul McCartney and mother of their daughter Beatrice, was in 2008 awarded about £24m after four years of marriage. In 2005, Sandra Sorrell, former wife of Sir Martin Sorrell, founder of the WPP advertising empire, was awarded £29m, while Melissa Miller won £5m from City fund manager Alan Miller after a childless marriage lasting just two years and nine months.

These awards and others like them have sharply divided opinion, with some seeing them as overdue recognition of wives’ rights while others – not all of them men – argue that they encourage opportunistic marriages. Lady Ruth Deech, vice-chairman of the House of Lords all-parliamentary party group on family, says: “If you are a woman reading celebrity magazines you might think that if you marry a rich man and divorce you can get more money than during a lifetime of work.”

. . .

Another driver of the rise in big-money divorces between wealthy couples in England over the past decade has been the sheer amount of wealth ­accumulated by a super-elite often working in international finance. Millionaires have moved to London from all over the world, leading their estranged wives to petition for cases to be heard in England because of the generosity of court awards. This has led to some unseemly races between divorce lawyers to complete paperwork, with husbands trying to file in other countries before their wives can launch cases in England.

Lord Justice Thorpe questioned in July “whether there should not be a more stringent allocation of judicial time” to lawsuits involving wealthy couples where “the parties have slender connection with our jurisdiction”. He was ruling on the case of Russian couple Ilya and Elena Golubovich, who were married in Italy and then lived for a time in London. When they split up last year, Elena Golubovich wanted to get divorced in the UK, whereas her husband filed his petition in Moscow. Both used delaying tactics in the courts of the two countries and “embarked upon a crude race, pitting one jurisdiction against the other” and racking up legal costs of more than £2m, the Court of Appeal found.

The disparity between the law in England and in other parts of Europe surprises many lawyers on the continent, where court awards are far less generous and the weaker party will often only receive maintenance for a set number of years. The European Union is trying to codify which country’s laws apply when couples with links to more than one EU member state split up, but the system isn’t in place yet.

Véronique Chauveau, a French divorce lawyer, says: “In England if you marry Mr Nobody in 1994 who plays football, and divorce, you might get £200 a month. But if that Mr Nobody becomes Beckham you can go back [to the courts]. We are seeing harsh battles.”

. . .

Some lawyers say that the international dimension has been made even more convoluted by a Supreme Court ruling earlier this year that opens the door for wives who have received a paltry settle­ment after divorcing abroad to come back to the English courts for a better deal. The Supreme Court found in favour of Sikirat Agbaje, a Nigerian woman who took her case to the UK courts after disputing the divorce settlement she was awarded in Nigeria when her 38-year marriage ended. Agbaje, who has lived in Hertfordshire for some years and has dual British and Nigerian citizenship, was awarded £275,000 – just over a third of the couple’s total assets and almost three times what her husband had been ordered to give her by the Nigerian courts.

Once again, argument raged over whether the English divorce courts were taking an admirable role in ensuring fairness – or whether judicial activism was going too far.

 
Frances Hughes

Frances Hughes: lawyer for Vivian Imerman. As co-founder of Hughes Fowler Carruthers, Hughes has settled divorce cases for well over £100m

For all the contentious judgments hitting the headlines, one of the first things to strike anyone making closer acquaintance with the intimate world of English divorce law is how many disputes are resolved by large confidential payouts. Frances Hughes, the no-nonsense lawyer for ­Tchenguiz’s husband Vivian Imerman and the co-founder of boutique law firm Hughes Fowler ­Carruthers, says the public sees only the “tip of the iceberg” of big-money disputes. She reckons 95 per cent of her cases are settled privately, with more than three-quarters of them involving at least one foreign national. Her lower-end cases involve assets in the range of £5m-£10m, while at the top end she acts for billionaires. Asked if she has ever ­settled a case for more than £100m – more than double the highest-ever court award – she retorts: “Oh yes, and much, much more”.

Like her peers at rival firms, Hughes – a keen viola player who initially intended to focus her legal career on the classical music industry – is eager not to be seen as a gold-digging divorce lawyer feeding on long and acrimonious litigation. Sitting down in a meeting room in her office overlooking Chancery Lane in the heart of legal London, the first thing she does is stress how keen she is to settle cases if possible. It’s a common refrain among her sub-clan of the legal profession, which has its share of feuds but also a minority group’s sense of ­solidarity. “You know everyone,” says Hughes. “It’s a very small world – it’s like being a lawyer in Dickens’ London.”

Hughes’ office, with a gentleman’s outfitter next door and copies of Vogue and art magazines in its reception, is a world away in atmosphere from the hardcore leading City commercial law practices. The divorce field is dominated by a few larger firms with big family law departments, such as Withers, Manches and Mishcon de Reya, as well as more specialised outfits such as the one run by Mayfair-based Camilla Baldwin, an émigrée from the ­distinctly less glamorous job of immigration ­tribunal judge. Rates of leading solicitors at top family law firms are generally thought to be pushing towards the £500-£600-an-hour mark – although the lawyers themselves would point to the risk of non-payment if they end up losing a case for a financially weaker partner seeking more money.

. . .

As the firms’ names, locations and charges suggest, they aren’t best known for their work dealing with marital scraps within poor families, or even prosperous upper-middle-class ones. One of the most high-profile lawyers in the field is Fiona Shackleton, who acted for Prince Charles and Sir Paul McCartney during their divorces. Nicknamed the Steel Magnolia, she is easily identifiable by a head of blonde bouffant hair that was once famously drenched and straightened by a glass of water thrown by Sir Paul’s ex-wife Heather Mills after a bitterly contested court hearing.

 
Ayesha Vardag

Ayesha Vardag: former lawyer for Katrin Radmacher, outside her office adjacent to the High Court

One of the newer kids on the divorce block is Ayesha Vardag, who is based just across an alleyway from the precincts of London’s neo-gothic High Court. Vardag – who, like most of her peers, male and female, is immaculately turned out – acted for Radmacher until close to the conclusion of her case (the brief was then picked up, for reasons that haven’t been disclosed, by Farrer & Co, solicitors to the Queen). She works from a converted house with trendy floral wallpaper in the signature colour of scarlet that she has chosen for her “very personal, very petite firm”.

Vardag switched to family law after a career with the leading commercial law firm Linklaters, including a spell working in Moscow and on finance for infrastructure projects such as power stations and diamond mines. She identifies the attraction of big divorce cases as being as much intellectual as financial.

“I’m always interested in cases … at the cutting edge of the law,” she says, “and where there are either ambiguities in the law or where I feel as if it is a time for the law to be re-evaluated in the light of social change or evolution of thinking.”

For all their soft edges and nods to legal tradition, firms such as Vardag’s and Frances Hughes’ are increasingly finding themselves involved in cutting-edge and brutal business disputes. In Imerman’s case, Hughes and the rest of his legal team ­persuaded the Court of Appeal to overturn ­conventional divorce law practice and to decree that up to 2.5 million documents taken from Imerman’s ­computer had been removed unlawfully. The result – which legal observers say is bad news for spouses wanting to track down their partners’ wealth – brings into the open a far-reaching friction between the way divorces are fought and the way commercial ­disputes are contested. “It’s going to have a fundamental effect on the way we practise,” Hughes says. The case has added yet another level of nuance to an already sprawling area of law that is consuming more and more of the time of England’s top courts. Hughes reflects that she had never expected one of her cases to go to the country’s highest court. “[Now] I’ve had two and am about to have a third,” she says. “I suspect there is just going to be mess until there is legislation.”

. . .

Shortly after the interview with Hughes, the Supreme Court finally ruled in the closely watched battle between ­Radmacher and Granatino over a pre-­nuptial deal that the latter wanted to ignore so he could get more money. ­Radmacher, sporting a deep tan and long, caramel-highlighted hair, had dressed for judgment day in a fashionable short cream dress, vertiginous heels and sunglasses that sat perched on her head. ­Granatino, with his thinning pate, jeans and blue sweater, looked the mature science student he had quit a $475,000-a-year investment banking job to become, save for one important detail – the £40,000 Breguet watch on his wrist, which Radmacher says was a present from her during happier times.

As the couple, their legal teams and the packed public benches sat in silence, Lord Phillips, Supreme Court president, delivered the blow that Granatino must have feared ever since the legal tide turned against him in a previous ruling at the Court of Appeal. The president went through one by one the reasons why the court, by a majority of eight to one, didn’t think Granatino’s arguments for annulling the pre-nuptial agreement were valid. Granatino would, as per the deal, receive £1.7m, a £2.5m home in London and property in the south of France until the younger of their two daughters turns 22, as well as a £25,000 car, £30,000 of ­furniture and £70,000 maintenance a year for the children. “Our conclusion,” Lord Phillips said, “is that in the circumstances of this case it is fair that he should be held to that agreement and that it would be unfair to depart from it.”

The easy story was that Radmacher had won, successfully defending the fortune bequeathed by her septuagenarian father and at the same time establishing the important principle that pre-nuptial agreements could hold sway under court challenge. But the Supreme Court justices stressed that their decision didn’t constitute a blanket endorsement of pre-nuptial agreements as having legal force in all cases. By making that qualification – the less charitable might call it a fudge – they had added yet another patina of uncertainty to the turbulent canvas of English divorce law.

It wasn’t just Granatino who was unhappy with the outcome of the Radmacher case. The majority ruling sufficiently irked the sole dissenting justice, Lady Hale, to write an impassioned statement that was unusually blunt about her fellow judges. The baroness, the only family law specialist and the only woman on the nine-member Supreme Court panel, attacked the idea she saw implicit in pre-nups that “wifely services were being bought by the year”. Her cri de coeur went to the heart of a bigger ­argument over whether the push for pre-nups is in effect a swing towards sexism, because of the curb it would put on the kind of big awards women have received over the past decade. In other words, have judges – perhaps lulled by the unusual circumstances of the Radmacher case, where the woman had the financial upper hand – created a Trojan horse that can be used by bullying male bankers to force their wives to accept punitive pre-nup terms? “There is a gender dimension to the issue,” Lady Hale wrote, “which some may think ill-suited to decision by a court consisting of eight men and one woman.”

. . .

Lady Hale’s dissenting judgment cast the emerging debate in even wider terms. She said the Radmacher case raised “some profound questions about the nature of marriage in the modern law and the role of the courts in determining it”. “Perhaps above all,” she wrote, “some may think it permissible to contract out of the guiding ­principles of equality and non-discrimination within marriage; others may think this a ­retrograde step likely only to benefit the strong at the expense of the weak.”

In the short term, lawyers expect to see growing use of pre-nuptial deals now that there is a good chance of the courts endorsing them if judges see them as fair and not the products of coercion. Some family law solicitors say clients who delayed ­signing their pre-nups before the Radmacher decision are now sealing the deals. Other lawyers say they have fresh bookings from people wanting to draw up accords. There is some anecdotal evidence of ­interest for the first time from individuals who are very wealthy but below the bracket of the super-rich, having assets of well under £1m.

Yet, while the climate has undoubtedly changed in favour of pre-nups, no one thinks the Radmacher case is the end of the story or anywhere near it. Litigation is expected on what validates and invalidates the deals, and on what weight courts should give them. Even if the Law Commission builds on the judicial lead and recommends enshrining pre-nups in statute, there is no guarantee legislation will follow. Many family lawyers fear that the government will see this area of law as a low ­priority affecting few voters.

 
Michael Gouriet

Michael Gouriet: lawyer for Lisa Tchenguiz. A partner at Withers, Gouriet believes there is friction between those pushing for pre-nups and the judges

Michael Gouriet of Withers, Lisa Tchenguiz’s law firm, says there remains a friction between those pushing for legislation to promote pre-nups and judges who want to preserve their role in the divorce process. “As we’ve become more global there’s a clash of concepts in the sense that we have a very paternalistic system here, with the courts wanting to make sure that everybody’s looked after,” he says. “The courts want control and they want to be able to use that to exercise their ­discretion and achieve fairness.”

Back in Vincent Tchenguiz’s Park Lane headquarters, his sister is describing how shocked she was to realise her lack of financial independence once her ­marriage broke down. Although Lisa has had professional interests – acting, for example, as executive producer of The World Unseen, a 2008 film about a love affair between two women of Indian descent in apartheid-era South Africa – she says she didn’t keep track very carefully of the money in her marriage. Beneath her early forties poise and glamour, she suddenly sounds like a girl in a world of powerful men. “It’s given me a sense of: ‘I’m not such a little kid any more,’” she says of the split. “I can actually grow up and look at it and decide, ‘I want to spend on this, I want to go on this holiday, but I don’t want to buy that.’”

If the divorce has been a kind of liberation, then it has been of the most painful kind. She even says she would advise her single girlfriends never to get married and risk submitting themselves to a ­laborious divorce system that needs to change – or else, say critics, perhaps kill the very thing it is supposed to protect. “It’s going to be a failed institution, marriage,” Lisa Tchenguiz says. “It’s not going to work any more.”

Jane Croft is the FT’s law courts correspondent and Michael Peel is the FT’s legal correspondent

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“I don’t find it unromantic. There’s nothing more romantic than to say, ‘I love you and not your money’”

 

Katrin Radmacher: German heiress. Radmacher won a landmark victory last month when the Supreme Court recognised a pre-nup that protected her £100m fortune

Katrin Radmacher doesn’t see pre-nuptial agreements as exploitative and unromantic, but rather as a useful – even essential – tool for couples that is already commonly used elsewhere.

Speaking to the FT in the first flush of her court victory, her initial reserve soon gives way to animation and frequent laughter. She rolls her eyes at the mention of her first meeting with ex-husband Nicolas Granatino at Tramp, the all-members Mayfair nightclub – a fact painstakingly documented in court papers. “We met on the dancefloor,” she says. “Basically I remember running away from another guy and then I just grabbed a hand and it was his and we started dancing.”

At the time Radmacher was running a fashion boutique in London with her sister Stefanie. Katrin had studied international management after being educated at schools in Switzerland and Germany, although she insists her upbringing was not ostentatious. Her father, Edmund Radmacher, inherited a chemicals company, which he built up into a flourishing business and, aged 78, is still “working every day”. “There was no jet-setting, there were no lavish holidays,” she says. “We were raised very simply, we had less pocket money than the other kids around, we didn’t have lots of toys. My father is still going around town today to see where the petrol is cheapest.”

During her short romance with Granatino, whose father was a senior IBM executive, one of her friends declared she would never sign a pre-nup. “I said, ‘Wow, I wouldn’t marry without one,” says Radmacher, adding that her sister and her parents all signed pre-nups. “I don’t find it unromantic. There’s nothing more romantic than to say, ‘I love you and not your money.’”

Shortly after Granatino proposed, her father insisted she sign a pre-nup. “For me it was not that my father insisted on it, but I felt it was the right thing to do.”

Not once did Radmacher believe that her pre-nup would be deemed invalid in England. She says her father “was quite shocked” about the initial High Court decision awarding more money to his former son-in-law. “From my father’s understanding this is unthinkable. Generations of my family have worked hard for this and saved and lived a simple life to pass it on to the next generation.”

She sees a fundamental distinction between her own marriage and one “where a woman has gone and dropped her career to go and raise the children and she’s entitled to compensation”. “There’s an entitlement which is very clearly there,” she says. “Whereas [with] my ex-husband there is no entitlement, he’s not been in that situation.”

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