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Pre-Nuptial Agreements under the Family Law Act 1975 (Cth)

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There are three main types of binding financial agreements under the Family Law Act ("FLA") - before marriage, during marriage and after separation. A pre-nuptial agreement is the common phrase used for a financial agreement before marriage and can be made with respect to the following matters:

  • How in the event of marriage breakdown, all or any of the property or financial resources of either or both of the parties is to be dealt with
  • The maintenance of either party during the marriage and/or after dissolution of marriage
  • any incidental, ancillary or other matters to those above. The FLA provides no definition or examples of these terms. An ancillary or incidental matter is one which has a sufficient connection with the subject of property division or spousal maintenance during marriage and/or after dissolution

There are three main issues involved with a pre-nuptial agreement:

  1. What is a financial agreement? 
  2. Is the agreement binding?
  3. When can a binding agreement be set aside?

What is a financial agreement?

  • It is in writing
  • It is made in contemplation of the parties entering into a marriage
  • It is made with respect to the distribution of property, financial resources, spousal maintenance and incidental or ancillary matters in the event of a marriage breakdown No other financial agreement currently applies to the parties with respect to the above matters

Is the agreement binding?  

The agreement will be binding provided that:

  • The agreement is signed by both parties
  • The agreement contains a statement that each party obtained independent advice from a legal practitioner as to the effect of the agreement on the rights of that party and the advantages and disadvantages, at the time the solicitor provided the advice, to the party of making the agreement
  • An annexure (attachment) to the agreement contains a certificate signed by the legal practitioner stating that such advice on the above matters was provided.
  • The agreement has not been terminated or set aside by a court of law
  • Upon signing, the original agreement is given to one of the parties and a copy is given to the other
  • A separation declaration is made. The declaration is signed by one of the parties and must state that the parties have separated and are living separately at the time the declaration is made and in that parties' opinion, there is no reasonable likelihood of cohabitation being resumed. 

If these requirements are fulfilled, the court may make any necessary orders for the enforcement of the financial agreement.

When can a binding agreement be set aside?

No lawyer can provide a guarantee that an agreement, whilst binding, will not be set aside by the Family Court. A binding agreement does not stop a spouse from challenging the agreement. The main grounds under section 90K of the Family Law Act in which the Court can set aside an agreement are:

  • An agreement was obtained by fraud. For example, one spouse fails to disclose a matter material to the agreement such as ownership of assets / businesses.
  • A party entered into the agreement for the purpose of defrauding or defeating a creditor of the party or with reckless disregard to the interests of a creditor of that party. Therefore a party cannot use a binding agreement to divert assets away from creditors or a trustee in bankruptcy.
  • The agreement is void, voidable or unenforceable. For example, the requirements for a binding agreement were not fulfilled;
  • Since the agreement was made, a material change in circumstances that relate to the care, welfare and development of a child of the marriage has occurred ("material change"). As a result of the change, the child, one who has caring responsibility for the child or a party to the agreement will suffer hardship if the agreement is not set aside.
  • A party to the agreement engaged in unconscionable conduct in the process of developing the financial agreement (eg signing the agreement on your wedding day).  

It is predicted that the "material change" ground above will form the basis of many future applications to the Court to have agreements set aside. To minimise the chances of this happening, the agreement can make specific provision for these future contingencies (e.g. provide more property for the party who has the primary responsibility for the care of children) or alternatively, the initial pre-nuptial agreement can be reviewed and amended in light of the changes.

In addition, the court can make an order for spousal maintenance (despite what is in the agreement) if the court is satisfied that, taking into account the terms and effect of the agreement, a party was unable to support themselves without a pension.