Financial Agreements are often used as an effective way of protecting you from a spousal maintenance claim by your ex partner.
A Binding Financial Agreement, when prepared properly, is capable of ousting the court’s jurisdiction to hear a spousal maintenance claim, so you do not have to worry about your ex asking for you to pay them maintenance in the future e.g. if they are sick, caring for the children or unable to work for some other reason.
The Law in relation to Spousal Maintenance and Binding Financial Agreements
S90E (s90UH for de facto couples) applies to spousal maintenance clauses in Financial Agreements. Section 90E and s90H state that a provision for spousal maintenance in a financial agreement is void if it fails to specify who is to receive the maintenance and how much the maintenance is.
In other words, putting aside the necessity to identify the person who is to receive maintenance, there is a requirement that the spousal maintenance provision provides for:
- The actual amount provided for the maintenance of the named party; OR
- The value of the portion of the relevant property attributable to maintenance.
An example of a clause that might satisfy the second definition under s90E is where a financial agreement provides that $50,000 of the funds received by the Wife, in the event that separation occurs, is attributable to spousal maintenance to the Wife.
In the case of Guild & Stasuik [2020] FamCA 348, the court was required to determine whether a prenuptial Binding Financial Agreement was effective in ousting the court’s jurisdiction to hear an application for spousal maintenance by the wife after separation of the parties.
Guild & Stasuik – The
Facts
Prior to the parties marrying, they signed a prenuptial agreement in anticipation of their marriage.
The Binding Financial Agreement included provisions to the effect that it was a financial agreement pursuant to section 90B which allows parties who are engaged to one another to reach an agreement as to how to divide their assets in the event that they separate and also whether spousal maintenance will be paid.
The husband owned and operated a business. He received income from trusts that owned properties.
The wife worked part time and was the primary carer for the two children.
The wife alleged the husband had financially supported the family until 2018 and that they had enjoyed a comfortable lifestyle.
The wife sought an order that the husband pay spousal maintenance to her of $1,000 per week and other expenses associated with the matrimonial home where she continued to live with the children.
The Financial Agreement included a provision entitled ’No Claim for Maintenance’, which provided:
(The wife) agrees that in the event of separation occurring, that she will make no claim for maintenance for herself and will accept the provisions of this Agreement in full and final settlement of any claim for maintenance that she might otherwise have had.
The question for the Court was did this clause oust the court’s jurisdiction to consider a spousal maintenance claim?
The husband’s position was that the prenuptial agreement was effective in ousting the Court’s jurisdiction to make spousal maintenance orders in favour of the Wife.
The wife argued the absence of a specific amount in the agreement made that provision void.
Guild & Stusik – the decision
The Court considered that it was not reasonable to hold that the spousal maintenance clause affected the wife’s right to make a spousal maintenance claim as it was not certain and secondly, a reasonable person would have known that legal advice was given, noting the certificate of advice signed by both solicitors. By virtue of both parties having received legal advice, they each should have been made aware of section 90E of the Family Law Act.
In terms of the certainty of the spousal maintenance provision in the financial agreement, the court held that although the provision as to spousal maintenance contained the wife’s promise not to make an application for maintenance, it did not indicate she was barred from doing so. The intention of the parties when agreeing that the wife would make no claim was uncertain. The Court interpreted section 90E narrowly such that the provision was void & the Court heard the wife’s spousal maintenance claim.
Ellerton & Jennings – the Facts
Ellerton & Jennings arises from the following facts:
In 2006, the parties entered into a Binding Financial Agreement.
The parties separated on 11/12 May 2018, and agree that the financial agreement became operative at that time.
In February 2021 the Husband applied to the Court seeking orders that the spousal maintenance provisions in the agreement be set aside and further orders for periodic or lump sum spousal maintenance from the Wife.
The financial agreement provided the following terms with respect to spousal maintenance:
19. The parties acknowledge that they are currently self-sufficient and capable of supporting themselves, and that no provision of spousal maintenance is necessary or desired.
20. Both parties fully and freely waive any and all rights or claims they may now or in the future have to spousal maintenance under the Family Law Act 1975 and under any or all statutes now or later enacted in this or any other state or country having jurisdiction over the parties.
21. The parties agree and covenant that in the event of the breakdown of marriage and a claim being made for settlement of property, variation of property interests or spousal maintenance by either or both of them, the terms of this Agreement will determine the issues between them.
The Wife sought enforcement of the provisions of the financial agreement with respect to spousal maintenance and dismissal of the Husband’s application.
Ellerton & Jennings – the decision & the appeal
The Trial Judge held that the spousal maintenance clause (Clause 19) was not void and that the clause complied with section 90E. The Trial judge held that whilst clause 20 of the agreement did not meet the requirements of s90E as it did not identify what quantum of future spousal maintenance the parties were foregoing, clause 19 did meet the requirements of s90E as it made clear that there was to be ‘no provision of spousal maintenance’ and that no provision should be interpreted to mean nil/zero/none.
Nevertheless, the Husband’s application was successful and the spousal maintenance clause was void on other grounds, namely, that at the time the agreement came into effect, he was unable to support himself without an income tested pension, allowance or benefit (section 90F). The result exposed the Wife to a risk of a spousal maintenance order being made by the Husband.
Both parties appealed for differing reasons.
The Wife appealed on the basis that the Husband had not demonstrated that he was unable to support himself without an income tested pension, allowance or benefit.
The Husband cross appealed this decision stating that the Court should have found that clause 19 of the financial agreement was void due to non-compliance with section 90E. The basis of the husband’s appeal was that clause 19 made no reference to a monetary amount (i.e. a specific dollar figure) and that the language ‘no provision of spousal maintenance is necessary or desired’ was insufficient to meet the requirements of section 90E.
Both appeal grounds were unsuccessful, leaving the Wife open to a claim for spousal maintenance being made against her.
So, what if I am on a pension and cannot support myself?
Under s90F (married couples) & 90UI (de facto couples) a financial agreement relating to spousal maintenance is invalid and you can still apply for a maintenance order if at the time the agreement came into effect you were unable to support yourself without an income tested pension.
For more information in relation to this topic, click the link to our article: Spousal Maintenance & Financial Agreements & Income Tested Benefits.
Beware defective spousal maintenance clauses in Financial Agreements
It is interesting that the two cases of Guild & Stusik and Ellerton & Jennings, which were determined only a year apart, resulted in the opposite outcome. The very limited difference between the two different spousal maintenance clauses is that in the first case the clause read that the wife would make ‘no claim for maintenance’ whereas in the second case the clause read that ‘no provision of spousal maintenance was necessary or desired’.
The narrow and subtle difference between the clauses is important and acts as a reminder that financial agreements require great attention to detail, in order to withstand a challenge to them in the future.
The lesson to be learnt from these cases that it is very important that you have a lawyer who specialises in family law draft your financial agreement, so that you can be assured that the agreement will protect your income and assets in the future.
If you are contemplating entering into a financial agreement to protect yourself from a claim of spousal maintenance by your former partner, contact us on 3465 9332 to book a reduced rate consultation to have a confidential discussion about your individual circumstances.
