Prenuptial Financial Agreements – Section 90B

Financial agreements – valid and binding?

Section 90B (pre-nuptial) Agreement

Pre-nuptial agreements are one form of Financial Agreement parties can sign and which are enforceable under the Family Law Act. It can be challenging and cause stress for couples to broach the subject with each other, as it can appear to put a negative spin on the relationship from the start.

Pre-nuptial agreements can be set aside, however, (even though the parties have obtained independent legal advice about the effect of the agreement on their rights) if there has been undue influence, duress or unconscionable conduct, or if one party has failed to disclose a material fact about his/her financial position.

Frederick & Frederick [2019] Fam CAFC 87

1.  Significance

This was an appeal from a decision of a Federal Circuit Court Judge, who had made a declaration that a Financial Agreement was valid and binding. The wife had applied to set aside the Financial Agreement on several grounds, one of which was pursuant to Section 90K(1)(d) of the Act, which relevantly provides as follows:

“90K Circumstances in which Court may set aside a financial agreement or termination agreement

“(1) A court may make an order setting aside a financial agreement… if, and only if, the court is satisfied that: …

(d) since the making of the agreement, a material change in the circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child … a party to the agreement will suffer hardship if the court does not set the agreement aside…”

2.  The Facts

The case concerned a Pre-nuptial Agreement that was entered into in 2007, the parties marrying later that year. They had two children, the eldest of whom was in 2009 diagnosed with atypical autism and mild functional impairment. At age 7, the child was still non-verbal and required a high level of care.

The Agreement limited the wife’s entitlements to a share of any increase in the value of the assets listed in the Schedule to the Agreement. The Schedule ascribed certain values to three parcels of real estate.

The trial Judge correctly accepted that the relevant test under s90K(1)(d) of the Act was to determine hardship by undertaking “some comparison between the position of the child, or the person with caring responsibility if the agreement remains in place and the position of that child or person if the agreement is set aside”.

At the trial, there had been no evidence of the properties, other than the values ascribed by the husband to the properties in his Financial Statement, and some concessions made by him in cross-examination. The trial judge described this evidence as “little better than conjecture”. He dismissed the wife’s application to set aside the agreement because the lack of evidence as to the current values meant that the Court was unable to compare “the different positions, if the financial agreement was, or was not, set aside”.

3.  The appeal

On appeal, the Full Court found that:

  • the insertion of values for the real estate in the schedule to an Agreement was unremarkable; and
  • it was clearly intended by the parties that any increase in value would be calculated by reference to the values nominated in the Schedule.

The husband should not be able to dispute facts that were agreed at the time of the Agreement and upon which the parties based their conduct.

The Full Court also found that the husband’s evidence as to the increased values of the properties should have been given at least some weight, though inevitably less weight than that of a professional valuer.

In conclusion, the Court found on the evidence that there had been an increase in the value of the relevant assets of up to $583,599, based on the values in the husband’s Financial Statement. If the agreement was set aside, the total value of the assets ($5,015,984) would be available for division. It found that the wife’s contributions, together with her ongoing care of the child, could not be adequately compensated out of the smaller pool. It, therefore, found that hardship had been established, and set aside the Agreement.

If you are considering a prenuptial agreement, or have been asked to sign one, please get legal advice to ensure you are protected.  Contact one of our specialists here.

Section 90B Prenuptial Agreement Lawyer Sydney

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