There are stringent requirements that must be met for a Binding Financial Agreement to be Binding. Is your Financial Agreement Binding? We discuss those specific requirements and the circumstances under which a Binding Financial Agreement can be overturned on our Binding Financial Agreements page.
In this article, we cover the big-ticket cases over the last ten or so years where a Binding Financial Agreement has been challenged including a summary of the cases where Financial Agreements have been upheld and where Financial Agreements have been set aside.
‘Is my Binding Financial Agreement Binding?’
Financial Agreements declared not Binding
Ruane & Ruane – Legal Advice certificate not signed by an Australian legal practitioner
In Ruane & Bachmanne-Ruane [2009] FamCA 1101, the parties entered into a Binding Financial Agreement and the Husband subsequently sought a declaration that the Agreement was not binding.
On appeal the Full Court agreed with the Trial Judge that if the statutory requirements are to be strictly followed under s90G, the certificate of legal advice must be from an Australian legal practitioner.
Adame & Adame – Duress and non-disclosure of US asset voided the Agreement
In Adame & Adame [2014] FCCA 42, the Binding Financial Agreement was set aside on multiple grounds, including due to non-disclosure of material matters by the Husband. He failed to disclose his real estate in the United States and certain bank accounts. The Trial Judge did not accept that the disclosure requirement extended to providing values of assets, but he considered that parties were generally entitled to satisfy themselves about the values of assets and financial resources if they chose to do so. The failure to disclose was also found to be a misrepresentation. The agreement was voidable at the wife’s option.
Furthermore, the Court held that the Husband engaged in conduct that amounted to duress upon the Wife. The Husband had told the Wife that the Agreement was necessary to protect the family home from potential creditors. The Husband arranged the solicitor for the Wife to attend upon and took her to all meetings with that solicitor.
Sullivan & Sullivan – Agreement was made pursuant to the wrong section (pre/post Marriage)
In Sullivan & Sullivan [2011] FamCA 752, the Binding Financial Agreement, described as a section 90B Agreement was signed by the Husband four days after the parties had married (and should therefore have been described as a s90C Agreement).
The Court held that there was no Agreement between the parties.
The Court rejected the Husband’s argument that the Agreement could be made pursuant to two different sections concurrently as the requirements of neither section were met by Agreement signed as one party (the Wife) signed pursuant to one section before they were married and the other party (the Husband) signed pursuant to a different section after they were married.
Hoult & Hoult – Legal Advice not adequate despite signed Agreement
In Hoult & Hoult [2013] FamCAFC 109, the Husband and Wife entered into a Financial Agreement before they married.
At Trial the Judge made the following findings when he held that the Agreement was not binding:
1. The certificate of independent legal advice signed by the wife’s lawyer did not prove that the wife had received the required advice;
2. The wife’s solicitor had not kept a written record of the advice which she had given to the wife. Nor had she sent the wife a letter of advice. She gave evidence at the trial, which the Judge did not find helpful.
3. As a result, the Judge was not satisfied that the advice had been given and declared that the financial agreement was not binding on the wife.
Ultimately, it was held that the Binding Financial Agreement was not binding as the legal advice provided by the Wife’s lawyer was inadequate, but, it would be unjust and inequitable if the Agreement were held not to be binding. The Agreement was therefore upheld.
Both parties appealed.
The Wife appealed on the basis of the finding that it was unjust and inequitable not to uphold the agreement.
The Husband appealed the finding that the BFA was not binding and specifically argued against the finding by the trial Judge that the Wife had received inadequate legal advice.
The Full Court held that the trial Judge should not have dealt with the certificate of independent legal advice in the way that he did. Instead, the Full Court held that:
1. The production of a certificate of independent legal advice by the person seeking to rely upon the financial agreement should lead to an assumption of prima facie compliance with s90G, such that the required legal advice had been given;
2. It is then a matter for the person seeking to avoid the financial agreement to introduce evidence to the court which disproves or throws into doubt the assumption arising from the production of the certificate.
Importantly in this case, the principle was set out that the onus of proof of establishing that the Agreement is binding falls upon the party asserting the fact (in this case the Husband – albeit the forensic difficulty of this in circumstances where the other party asserts not having received the requisite legal advice). Upon provision of the certificate of legal advice signed by one party’s solicitor, there is then a forensic obligation on the other party (in this case the Wife) to adduce evidence which would disprove or throw into doubt the inference drawn by production of the certificate (known as the burden of introducing evidence).
Parkes & Parkes – Duress, Unconscionable Conduct and material change in circumstances
In Parkes & Parkes [2014] FCCA 102, the Husband said to the Wife three days before the wedding, if the Binding Financial Agreement was not signed, the wedding was off. The Binding Financial Agreement was then signed two days before the wedding. The Agreement provided for the Wife to have no entitlement to any property of the Husband.
After five years of marriage, the parties had two children and the Wife had the major responsibility for the care of the children. The Wife was in full time employment when she entered into the Agreement but at the time of the Trial she was the full time carer for the children and reliant on centrelink payments. The only asset in her name in the Financial Agreement was her car which had been sold for matrimonial purposes and she had no entitlement under the Agreement to the matrimonial home, another real property and the Husband’s business.
The Binding Financial Agreement was set aside for a number of reasons including duress, unconscionable conduct and also because there had been a material change in circumstances since the BFA had been signed relating to the care and welfare of children of the marriage such that the Wife would suffer hardship if the BFA was not set aside.
Parke & Parke – Non-disclosure of super amounted to a misrepresentation and voided BFA
In Parke & Parke [2015] FamCA 486, the Binding Financial Agreement was set aside for non-disclosure amounting to a misrepresentation.
The husband omitted to disclose his self-managed superannuation fund in the Binding Financial Agreement, of which both parties were members although the wife did not know of its existence or even that she had a member’s account. The finding of the misrepresentation being false, rather than unintentional, was strengthened by the conduct of the applicant in the financial agreement proceedings where he did not disclose the fund. Its existence was only discovered as a result of a subpoena to the husband’s accountant.
Thorne & Kennedy – Unconscionable Conduct & Undue Influence
In Thorne & Kennedy [2017] HCA 49, the matter involved an eastern European woman, Ms Thorne, who came to Australia to marry Mr Kennedy. The Husband was worth between $18-20 million and told Ms Thorne that she must sign a financial agreement 10 days before the wedding, telling her the wedding would be called off if she refused to sign. Thorne’s solicitor advised her that the agreement was “the worst agreement she had ever seen” and not to sign it.
Despite detailed advice from her solicitor orally & in writing Ms Thorne signed the agreement four days prior to the wedding. Ms Thorne told her solicitor she felt she had no choice as she would have no home, no visa & no money if the wedding was called off. Her family had also been flown to Australia for the wedding by the husband & had no prospect of being able to return home if he did not assist with airfares.
Four days after the wedding the husband drove the wife to her solicitor to sign a second agreement, on the same terms as the first. Ms Thorne’s solicitor advised again that the agreement was not in her interest and that she should not sign. During her conference with the solicitor, Mr Kennedy telephoned Ms Thorne asking her how long she was going to be. Ms Thorne’s solicitor noted that this had occurred and that she should not sign if she felt pressured into doing so. Ms Thorne signed the second agreement.
The Trial Judge found that “Ms Thorne’s circumstances led her to believe that she had no choice, and was powerless, to act in any way other than to sign the pre-nuptial agreement. Her Honour held that the post-nuptial agreement was signed while the circumstances continued, with the exception of the time pressure.”
The Trial Judge set both Agreements aside on the basis of duress and listed six factors which she considered when determining her judgment in regards to the choice Ms Thorne had (or didn’t have). These six factors were considered carefully by the High Court & formed a significant part of their determination. They are as follows:
- her lack of financial equality with Mr Kennedy;
- her lack of permanent status in Australia at the time;
- her reliance on Mr Kennedy for all things;
- her emotional connectedness to their relationship and the prospect of motherhood;
- her emotional preparation for marriage; and
- the “publicness” of the original decision
The Full Court allowed the Husband’s appeal and upheld the Binding Financial Agreements on the basis “that the agreements had not been vitiated by duress, undue influence, or unconscionable conduct.” and that “a finding of financial inequality could never provide a reasoned basis for duress.”
The majority of the High Court held that the appeal should be allowed and that the agreements should be set aside on the basis of unconscionable conduct and undue influence. Noting that “Ms Thorne’s vulnerability to obtain agreements which, on Ms Harrison’s uncontested assessment, were entirely inappropriate and wholly inadequate.”
The Court held there is no precise formula to determine unconscionable conduct and undue influence and that it is necessary for the Trial Judge to conduct a close examination of the facts in order to determine whether a claim for relief has been established.
Gongsun & Paling – Husband’s infatuation with wife resulted in finding of special disadvantage and unconscionable conduct
In Gongsun & Paling (2020) FLC 93 – 987, the Wife infatuation with the Husband and consequent vulnerability were circumstances of special disadvantage sufficient to establish unconscionable conduct.
The Trial Judge determined that the Husband (83 by the time of trial) intended to gift a property to the Wife because he was elderly, lonely and infatuated with the wife. The Trial Judge found and the Full Court on appeal agreed that the gift of the property was the product of undue influence and unconscionable conduct.
The Full Court held that the gift of the property to the Wife “was so improvident, judged in the light of the husband’s financial position, that it is explicable only on the footing that he was so emotionally dependent upon, and influenced by, the appellant (wife) as to disregard entirely his own interests”
Guild & Stasiuk – BFA set aside due to material change in circumstances – contemplation of children was not enough to uphold BFA
In Guild & Stasiuk [2020] FamCA 348, prior to the wedding, the parties signed a Financial Agreement under s90B.
The Wife sought to set aside agreement on the basis of a material change of circumstances, namely the fact that she had primary care of the children. This was not the situation at the time the agreement was executed. The changed circumstances were in summary:
- the Wife has primary care for the children;
- she will, by virtue of her role as primary carer have, overwhelmingly, the physical, emotional and financial responsibility for them;
- she once had two properties that no longer exist in her name;
- the business, CD Pty Ltd, failed;
- since separation, members of the applicant’s family have purchased groceries for the applicant and certain of the children’s extracurricular activities have stopped.
Those circumstances were alleged to relate to the care, welfare & development of children for which she would suffer hardship & included also her loss of opportunity to earn an income due to care of the children.
The Husband’s submitted that the agreement contemplated children & increased her entitlement in that circumstance and that it was implicit in the agreement that the Wife would be responsible for the children. He said that there were therefore no changed circumstances constituted by the extent to which she was responsible for the children.
The court adopted the approach in Fewster & Drake and held:
- The births of the children are a material change in circumstances for purpose of 90K(1)(d); and
- The mere fact that the agreement recorded the party’s contemplation of children was by no means determinative.
Daily & Daily – Agreement set aside because of material change in circumstances – wife primary carer of children
In Daily & Daily [2020] FamCA 486, the parties entered into a Financial Agreement in 2005. The parties were married for 22 years and the marriage produced 2 children.
The Wife sought that the Financial Agreement be set aside be set aside firstly because she did not receive adequate legal advice (s90G(1))b)) and secondly because of unconscionable conduct and undue influence.
The Husband asserted that the Agreement was binding and that the certificates evidenced that appropriate advice had been provided to the Wife and otherwise that it would be unjust & inequitable under s90G(1A)(c) if the Agreement were not binding.
The Wife argued that prior to signing the agreement, she did not receive advice regarding her rights & responsibilities in the absence of the Financial Agreement, the manner in which her rights would be affected by the Agreement and the advantages & disadvantages of the Agreement. The Wife contended she was advised by her solicitor that the Agreement would not be binding if she had children & she relied upon that advice when executing the Agreement. The Wife further contended that the Husband made handwritten changes to agreement and she attended upon her solicitor to initial those changes but was not provided any further advice regarding the handwritten amendments.
The Wife also argued that the agreement should be set aside on the grounds of unconscionable conduct and duress as she said the Husband told her he would not marry her unless she signed the Agreement.
The Wife’s solicitor could not remember the advice given.
The circumstances of this case were similar to Parker in that there were amendments made to the BFA which the Wife initialed but the Wife said she did not receive advice re the amendments and the solicitor did not refresh the certificate. The Judge in that case said he did not think that the evidence regarding a lack of advice given and the failure of the Wife’s solicitor to refresh the advice certificate could be a matter of rectification and the Agreement was held not to be binding. In this case the Trial Judge held that under s90G(1)(b) the receipt of independent legal advice is an essential requirement and it would be unjust & inequitable if the Wife was bound by the agreement in circumstances where there was a finding she was not fully advised of the amendment to the agreement.
The Husband appealed and the appeal was allowed. The Full Court held that whilst it was open for the Trial Judge to say that the agreement did not comply with 90G(1)(b), the Full Court considered the Trial Judge adopted an unnecessarily technical and narrow view of the application of 90G(1A) (unjust & inequitable).
The Full Court said that whilst the correctness of the legal advice is not a relevant inquiry, if the evidence supported that notwithstanding the certificate, there had either not been any advice given or that the advice was cursory/tangentially related to the Agreement, that may allow a finding that no advice had been given.
In summary of the findings of the Full Court, it was held:
- The Court was not satisfied the Wife had received the required s90G(1)(b) advice therefore there was no compliance with the section and, subject to s90G(1A), the agreement was not binding.
- But it would be unjust & inequitable if the agreement were not binding because:
- Initialing of amendments by the Wife which were witnessed by her solicitor, satisfied the contractual requirements of an offer by the Husband which was accepted by wife;
- The Court did not consider it necessarily flows that the Agreement was not capable of declaration as a Financial Agreement as a result of non-compliance with s90G(1)(b);
- The Concept of injustice & inequity does not (as in Hoult) bring into account the terms of the agreement and should not be conflated with the concept of justice & equity under section 79A. The Court noted regarding the case of Thorne & Kennedy that the High Court deemed that the term ‘bad bargain’ is a potential indicator of undue influence/unconscionable conduct;
- It was a relevant consideration that the Husband could not have known whether the Wife’s solicitor had given the Wife advice prior to signing the amended document. It was reasonable for the Husband to assume that the advice had been given.
- The parties married in 2005. It was only after separation that whether the Financial Agreement was binding was raised;
- But there had been a material change in circumstances in relation to the care, welfare & development of a child of the marriage that would result in hardship if the Agreement was not set aside (there were two children of the relationship born following the marriage, the Wife had ceased full time employment to be the primary carer, the Wife’s expenses exceed her income, after separation the arrangements for care of the children material changed, the Wife’s ability to care for the children could not adequately be satisfied by the amount she was likely to receive consequent to the terms of the Agreement.
Hardship as a result of a material change in circumstances was established pursuant to s90K(1)(d) and the Financial Agreement was set aside.
Michaels & Vidal – Inadequate legal advice where advice verbal and not written, language barrier and no interpreter used (N.B However Language Barrier held NOT to be a special disadvantage)
In Michaels & Vidal [2022] FedCFamC1F 252, Mr Vidal and Mr Michaels were in a same-sex de facto relationship. They had affirmed vows in 2009. On 27 February 2010, the parties entered into a Binding Financial Agreement. In 2011, the parties had a child ‘X’ through a surrogacy arrangement in India (biological child of Mr Vidal).
Mr Vidal applied to have the BFA set aside for a range of reasons.
Firstly, Mr Vidal argued that there had been a material change in circumstances under s90UM(1)(g) in relation to the care, welfare & development of a child of the de facto relationship which he had care of and as a result of the change, he would suffer hardship if the agreement was not set aside.
Mr Vidal argued that the birth of the child was an unforeseeable occurrence in a same-sex relationship.
This argument failed as it was held that the birth of the child was being contemplated at the time the parties into the BFA. Mr Vidal had discussed signing the BFA “to protect any of our children in case I die”.
The Court further held there was no hardship suffered by Mr Vidal as a result the birth of the child such that if the agreement were not set aside, he would suffer hardship. The Court referred to Fewster and said the words “as a result of the change” are critical in interpreting this section. This section is “not enlivened only because a child is born” when that was contemplated.
Secondly, Mr Vidal argued that there had been unconscionable conduct by Mr Michaels under s90UM(1)(h) as:
- At the time of discussing the agreement, Mr Michaels told Mr Vidal that they would be together forever, and this induced him into signing the agreement (although Mr Vidal did not say that this is the reason he signed the agreement);
- The solicitor who advised Mr Vidal was a friend of Mr Michaels; and
- Mr Michaels encouraged Mr Vidal to use this solicitor and attended the office with him (not in the appointment) and paid the solicitors fees.
The Court did not accept these submissions as evidence of special disadvantage as there was no evidence that the solicitor acting for Mr Vidal colluded to give misleading or inaccurate advice, and Mr Vidal travelled with Mr Michaels to Mr Michaels’ appointment as well.
The Court held that unconscionable conduct requires that there being a ‘special disadvantage’ which is one that seriously affects the innocent party’s ability to make a judgment in their own best interests (Thorne & Kennedy) and that the other party unconscientiously takes advantage of this. It is also necessary that the other party (Mr Michaels) knew or ought to have known of the existence of the special disadvantage.
While Mr Vidal did have a limited command of English, this did not amount to a special disadvantage, as he understood when he signed the agreement that he would be prevented from claiming any part of Mr Michaels’ assets, i.e. his limited English did not seriously affect his ability to make a judgment in his own best interests.
Thirdly, Mr Vidal argued that he had not been provided with independent legal advice as required under s90UM(5)(a).
The Court noted the law applicable in this regard was as follows:
- If one party provides a certificate signed by the other party’s solicitor, it is the other party’s obligation to adduce evidence to throw into doubt the conclusion that is drawn from the certificate – i.e. that legal advice was given. This is known as the burden to introduce evidence, not the burden of proof (Hoult v Hoult);
- The requisite advice needs to be more than some unknown or undefined right being given up. Must have at least a general idea of present rights and entitlements and compare them with the provisions of the proposed agreement. It includes advising of the advantages and disadvantages of the agreement (Abrum & Abrum)
Mr Vidal’s first language was not English, and he was not provided an interpreter. His solicitor signed the certificate of legal advice that he had explained the effect of the agreement and the advantages and disadvantages of the agreement to Mr Vidal. The solicitor did not give evidence as he could not be located nor could his file be located.
It was accepted by Mr Vidal that his solicitor read the agreement to him, that he asked him if he knew what it meant, and he said no. His solicitor then told him that the agreement meant that he could not ask Mr Michaels for money if they split up. Mr Vidal then signed the agreement. No written advice was given by the solicitor to Mr Vidal. Mr Vidal asserted that this conversation took 10 minutes and Mr Michaes did not challenge this. It was in dispute as to whether Mr Vidal had read the agreement prior to the appointment with his solicitor.
When Mr Vidal had previously seen lawyers, he had been assisted by an interpreter. Mr Michaels’ solicitor stated that she was able to converse with Mr Vidal without an interpreter. Mr Vidal also evidence to the Court in relation to this matter in English (albeit he did have some issues understanding some of the questions).
The Court did not accept that Mr Vidal was given the appropriate advice per the certificate signed by his solicitor and the court did not accept that Mr Vidal understood the consequences of the agreement.
The agreement was held not binding.
Mr Michaels then argued that it was not just or equitable if the agreement was not binding because Mr Michaels had acted in accordance with the terms to satisfy the agreement.
This was unsuccessful as Mr Michaels had not done anything to his detriment in relying on the agreement and the Court’s decision was simply to allow Mr Vidal to pursue a property settlement with the court, which should itself be considered just & equitable.
Incidentally, Mr Michaels also made a child support application. This was dismissed as his lawyer had not served the Child Support Registrar (Lesley & Lesley).
‘Is my Binding Financial Agreement Binding?’
Financial Agreements declared Binding
Cording & Oster – held there is no general duty of disclosure
In Cording & Oster [2010] FamCA 511, the court held that there is no obligation on a party to a BFA to make comprehensive disclosure prior to its execution. The court held that in the absence of proceedings that attract that duty of disclosure prima facie, parties negotiating a financial agreement who are adequately resourced, legally represented, and at no special disadvantage, are not under any obligation to make disclosure to one another but equally the satisfaction of the s90G requirement of legal advice prior to signing the agreement does not dispense with the duty to disclose assets. The Court said it is for the client to contemplate after receipt of legal advice whether sufficient disclosure has been made.
The Binding Financial Agreement was upheld.
Sanger & Sanger – Agreement not set aside where it produced a result that was not intended
In Sanger & Sanger [2011] FamCAFC 2010, pursuant to the Binding Financial Agreement, the Husband was to pay the wife $350,000. The husband did not pay this so the Wife sought to enforce the agreement. The Husband sought an order setting aside the Financial Agreement on the grounds that a subsequent sale of properties (intended to fund the payment) at below their value resulted in the Husband not receiving a 40% share of the net assets as had been intended.
In fact, the terms of the agreement reflected a different agreement than that which was intended. In the event that the Husband was unable to pay the $350,000, the Husband personally covenanted to pay the wife the shortfall. If the funds received from the sale exceeded $350,000, the Husband was to keep the excess.
The Court found that it was clear from the agreement that the parties had each accepted the risks of the agreement. In respect of whether or not the personal covenant by the Husband to pay the Wife gave rise to an impracticable agreement, the Court said that the Financial Agreement created, and the Wife accepted, an unsecured contingent entitlement for which she had to sue the Husband and that this was not fatal to the agreement. The Court affirmed that the provisions of section 90K, which set out in what circumstances a Court may set aside an agreement, do not allow a party to escape from a ‘bad bargain’.
In summary the Court said:
“There is a material distinction between an agreement which is unable to be put in practice and is thus impracticable, and an agreement which, although producing a potentially different outcome to that for which a party hoped, is able to be implemented or put into practice.”
Pascot & Pascot – Deficient legal advice of Wife did not result in BFA being set aside
In Pascot & Pascot [2011] FamCA 945, the Binding Financial Agreement was not set aside based on deficient legal advice from the Wife’s solicitor as it was held that it would not be fair on the Husband as that was outside of the Husband’s control.
The Agreement was however set aside on other grounds including undue influence and a material change in circumstances of the Wife regarding the care of children.
Parker & Parker – Financial Agreement not binding but unjust & inequitable if not binding
In Parker & Parker [2012] FamCAFC 33, the parties separated after a long marriage. The Financial Agreement had been prepared by the Husband’s solicitors. When the Husband signed a handwritten amendment was made. The Wife then signed and witnessed and her solicitor signed the acknowledgment. The Agreement was sent to the Husband’s solicitors and the Husband signed again at which time the Husband made a further handwritten amendment. the Wife then went to her solicitor and the handwritten amendment was initialed by the Wife and her solicitor. No amendment was made to the certificate of legal advice. It was then sent to the Husband’s solicitor.
The Trial Judge found (and the Full Court agreed) that the Agreement was not a binding financial agreement. The Court was satisfied with advice having been given to the Wife for the initial agreement provided to the Wife but it was not satisfied that the affect of the amendment had been explained to her.
The Trial Judge was also not satisfied that the Husband had received the requisite advice before signing agreement.
The Husband did not seek enforcement of the Financial Agreement as the terms had already been performed. He simply sought dismissal of the wife’s property settlement application.
The Full Court held by majority that the Trial Judge was correct in finding that the evidence of the solicitor did not demonstrate that the Wife had received legal advice about the advantages and disadvantages of the amended Agreement (i.e. had received advice about the original agreement but not the amendments to it).
However the Full Court held that:
- The Trial Judge did not apply the correct provisions of s90G;
- Regarding section 90G(1A), whether it was unjust & inequitable if the Agreement was not binding, the Court held the Agreement should be binding and that the Trial Judge did not consider whether it was unjust and inequitable if the Agreement were not binding under s90G(1A).
The Full Court confirmed in this case that the Courts may look behind a Statement of Independent Legal Advice and find that, even if the s90(G)(1) requirements are being met on their face, the Agreement is not binding. This means that a lawyer who has done everything necessary to meet the s 90(G)(1) requirements may ultimately be faced with an Agreement which is determined to be non-binding if the lawyer for the other party failed to meet the required standard.
The Court also confirmed that if the requisite legal advice is not given this does not render s90G(1A) inapplicable, and also the operation of the unjust and inequitable discretion is not confined to technical breaches.
The appeal was allowed and the matter remitted for rehearing.
Piper & Mueller – Agreement made pursuant to two different sections (de facto relationship, and intention to marry)
In Piper & Mueller [2015] FamCAFC 241 the Agreement was purported to be made under s90B (pre-marriage) and s90UC (in a de facto relationship) of the Family Law Act. The parties were engaged to marry but the marriage did not eventuate.
The Husband sought that the Binding Financial Agreement be set aside.
The issues for the Court were firstly whether the Agreement needed to be in two separate agreements and secondly, whether there was strict compliance with s90UJ of the Family Law Act regarding the requirement for legal advice to be provided about the effect of the agreement and the advantages and disadvantages of it.
At Trial, the Judge held that the agreement was binding. The Husband appealed.
The Court held on appeal, that:
- There was no requirement that the Agreements (s90B and s90UC) be in separate documents;
- Advice was received by the Husband about whether the Agreement was prudent and whether the terms were fair and reasonable;
- the evidence did not establish that there was a failure to provide the requisite advice to the Husband;
- It was unjust & inequitable for the agreement not to be binding on the parties.
Fewster & Drake – Material change in circumstances did not give rise to hardship it was the agreement that gave rise to hardship.
In Fewster & Drake [2016] FamCAFC 214, the Trial Judge set aside the agreement under s 90K(1)(d) due to a material change in circumstances as a result of which the wife who had caring responsibility for a child, would suffer hardship if the Agreement was not set aside.
At the time of entering the agreement, the wife was pregnant and there had been two miscarriages. A second child was born two years after the Agreement was signed. It provided in substance for the parties to retain their respective assets as at the date of the agreement and for any after-acquired joint property to be divided, after reimbursement of contributions with interest calculated at a daily rate, in the same proportions as the contributions. During the negotiations, at the request of the wife, the right of the wife to apply for spousal maintenance was re-instated.
The Trial Judge said that it was not difficult to see that the wife would have little expectancy to any interest in after-acquired joint property when, at the time of the agreement, she had no prospective capacity to make any contribution. He relied heavily on the case of Pascot. Some of the Wife’s other grounds for setting aside the agreement which were unsuccessful including duress, undue influence and unconscionable conduct might today be decided differently since Thorne v Kennedy.
On appeal, the Full Court held that the Trial Judge had not erred in finding that the birth of the second child and the mother having the overwhelming care of the children physically and financially after separation constituted a material change in circumstances that had arisen since the parties entered into the agreement. However, in relation to “hardship”, they said that it was “the changed circumstances which must give rise to the hardship, and not the agreement itself”. The Full Court referred to Hoult & Hoult (2013) & confirmed that there is no statutory provision which enables a financial agreement to be set aside “merely because it is unfair”.
The Full Court rejected the approach taken by the Trial Judge where he said: “If the Agreement is set aside, the wife would be able to make an application for orders under s 72 and 79 of the Act. It is safe to say that the outcome of such an application is likely to be very different to that brought about by the Agreement. In light of this, I would find that hardship on the part of the wife is established, and that setting the Agreement aside is the only remedy.”
The Full Court held that those findings (i.e. that the agreement is unfair) do not establish hardship on its own.
The husband’s appeal against the order setting aside the agreement was allowed as:
- The evidence did not establish how the wife’s circumstances had changed as a result of birth of or the care, development and welfare of the second child.
- The order did not permit a comparison to be undertaken between the financial position of the child, or the wife, under the agreement and the position that would exist if the agreement was set aside.
- There could be no determination that hardship would ensue if the agreement was not set aside.
In summary, the Wife had not established a material change in circumstances as the word hardship looks at the changed circumstances which must give rise to hardship, not the agreement itself.
An order for interim spousal maintenance had been made pending the determination of property proceedings. It was set aside and the application for spousal maintenance remitted for rehearing.
Post the High Court decision in Thorne v Kennedy, it is possible that the test for the hardship required might less stringent and closer to that used in Parkes and Pascot.
Graham & Squibb – BFA with hallmarks of internet download search upheld
In Graham & Squibb BFA upheld as common intention to enter BFA despite it having hallmarks of an internet download search and no reference to s90B or any other BFA section of the act:
In Graham & Squibb [2019] FamCAFC 33, the Binding Financial agreement was entered into before the marriage of the parties
The Agreement did not reference s90B or any other section of the Family Law Act. The Agreement had the hallmarks of a downloaded internet search and did not comply with the requirements of s90G.
When the parties separated, the Husband commenced proceedings and sought that the BFA be set aside.
Despite the Agreement having the hallmarks of an internet search, the Binding Financial Agreement was upheld by the Court due the common intention of the parties to enter into a Financial Agreement.
The Husband’s appealed on multiple grounds, one of which was that even if the Agreement was a BFA, it should be set aside on the basis that it was unjust and inequitable to rectify (uphold) it.
The Full Court rejected this argument and held that there is no legal requirement for the court to look into the content of the agreement and for the financial agreement struck between independently advised parties to be just, equitable or fair. The appeal was dismissed.
Frederick & Frederick – Agreement upheld as Wife did not provide sufficient evidence she didn’t understand the agreement/advice received
In Frederick & Frederick [2018] FCCA 1694, the Wife alleged that she had poor English language skills and that as a result she did not understand the agreement when it was signed, that she was pressured into signing the agreement, and that the document did not adequately provide for changes in circumstances as a result of having primary care of their autistic son.
This was one of the first decisions post Thorne & Kennedy, the High Court case which held that a Binding Financial Agreement is not binding where a person enters into the agreement whilst in a position of vulnerability / special disadvantage, so as to amount to undue influence and unconscionable conduct.
In this case however, the court did not set aside the Financial Agreement for two primary reasons:
- The court determined that the wife had not established that she would ‘suffer hardship’ if the agreement was not set aside; and
- The court found that the wife did not have sufficient proof that she did not understand the agreement, or that the legal advice she received when she entered into the agreement did not explain its effects.
Frederick tells us, particularly when read in contrast to Thorne, that if a court does not have a legally valid reason to set aside a Binding Financial Agreement, it won’t.
Frederick and Thorne both support the fact that if a Binding Financial Agreement is drafted properly and in accordance with the Act, and if both parties receive independent legal advice as required, then the Binding Financial Agreement can remain intact.
The Trial Judge determined that unreasonable or subjectively unfair terms are not the same as undue influence, & quoted the matter of Hoult v Hoult [2013] FamCAFC 109, where the court said:
“The point of the legislation is to allow the parties to decide what bargain they will strike, and provided the agreement complies with the requirements of Section 90G(1) [being the Section of the Family Law Act 1975 (Cth)] that sets out the formal requirements that make a Financial Agreement binding on the parties] they are bound by what they agree upon.”
What does Thorne & Kennedy & Frederick & Frederick tell us about Binding Financial Agreements where one party to the agreement is vulnerable / in a position of disadvantage?
What the cases of Frederick v Frederick and Thorne v Kennedy establish most clearly is that the terms of the Binding Financial Agreement, provided they comply with the Family Law Act 1975, are privately determined. What is not acceptable in the eyes of the court (and what is a common cause for those agreements to be set aside) is for a parties’ behaviour outside of those terms to be unjust or unethical, such as:
a) Failure to disclose large assets or information;
b) Threatening to end the relationship or cancel the wedding;
c) Failing to obtain adequate legal advice (or ensure the other party does the same); and/or
d) Trying to pressure/influence the other party where the circumstances surrounding the agreement are such that the agreement is signed without the other party having time to consider and/or obtain an adequate understanding of it.
Contact Us
Contact us and book a reduced rate consultation to obtain advice in relation to your specific circumstances, as to whether or not your Financial Agreement is binding.
For more information on Consent Orders versus Binding Financial Agreements, click the link to view Courtney’s helpful explanation video.
We can also help prepare a Prenuptial Binding Financial Agreement to help to protect you from having to divide your assets with your partner, should you separate in future.
