Was the binding financial agreement unfair? Did the court set it aside? Which case won?
What is a binding financial agreement?
A binding financial agreement (also commonly known as a prenuptial agreement or “prenup”) is an agreement made between two people that sets out how they want their affairs to be arranged if their relationship ends. These agreements can be made before, during or after a marriage or de facto relationship, including for a same sex relationship.
A binding financial agreement is a formal document made under the Family Law Act 1975 (Cth) but it is not reviewed or approved by the Family Court and, so long as it complies with the requirements set out in the Act, the court has no jurisdiction to adjust it.
Husband and wife enter into binding financial agreement
In 2002, a husband and wife entered into a binding financial agreement under the Act. They agreed that:
- the husband would sell the property that he owned and deposit the funds into a joint bank account,
- the wife would deposit into the same joint bank account the proceeds of a personal injury compensation claim,
- they would then be purchase a family home with the funds in the joint bank account, and
- in the event of separation, they would sell the family home and the proceeds would be split equally.
Agreement signed before wife’s personal injury claim finalised
An agreement was signed on 3 September 2002, and then slightly amended three days later. Both parties sought and obtained independent legal advice prior to signing the agreement, as required under the Act.
After the agreement was signed, but before the wife’s personal injury claim had been finalised, the husband and wife purchased a family home.
The wife’s personal injury claim was ultimately settled out of court for an amount smaller than anticipated and therefore her contribution ended up being less than the couple had expected at the time they’d entered into the agreement.
Couple separates and husband seeks to have binding financial agreement set aside
In May 2003, the parties separated.
The husband brought an application to the Family Court, claiming that the binding financial agreement should be set aside on the basis that a 50/50 split of the couple’s assets was not fair in the circumstances.
The trial judge dismissed the application on the basis that the agreement had met the requirements of the Act and therefore the court had no jurisdiction to adjust the split of assets.
The husband appealed the decision to the Full Court of the Family Court.