There has been yet another warning from the High Court of Australia for people who have a pre or post nuptial financial agreement in place (or are considering entering into one) to not assume that because you have one of these agreements, it will protect your assets in the event of separation.
It is no secret that pre-nups, or Financial Agreements as family lawyers call them, are often the topic of many legal arguments. They need to be carefully documented to ensure that they comply strictly with the Act, otherwise they may be set aside. See our article on Financial Agreements and how they can be set aside below.
This recent case will open up many Financial Agreements to being set aside where it is known that the Agreement is “grossly unreasonable” to one party. Specifically, the High Court majority stated that the existence of unfair or unreasonable terms in a Financial Agreement is a relevant consideration as to its validity. Further, “[d]espite usual financial imbalance in agreements of this nature, it can be indicium of undue influence if a pre-nuptial or post-nuptial agreement is signed despite being known to be grossly unreasonable”
This is significant because the context of this type of agreement is for one party (who is usually financially better off) to retain assets to the disadvantage of the other party, without interference of the Court’s “just and equitable” principles (ie, that the agreement be fair to both parties).
The High Court offered some relevant considerations which may indicate instances of undue influence:
- whether the agreement was offered on a basis that is not subject to negotiation;
- emotional circumstances in which the agreement was entered into, including any express or implied threat to end the marriage or relationship;
- whether there was any time for careful reflection of the terms of the agreement;
- the nature of the parties’ relationship;
- the independent advice that was received and whether there was time to reflect upon the advice.
It is crucial that if you are entering into a Financial Agreement, or you have a Financial Agreement in place and you separate, the Agreement is reviewed by an experienced family lawyer. Contact our Family Law team today at 02 4929 3995.