Since changes to the Family Law Act (“the Act”) were made in 2000 permitting entry by eligible couples into financial (or “pre-nuptial”) agreements, a corresponding body of case law has developed in various instances where such agreements have been either set aside, or have been found not to have met critical requirements so as to be a binding Financial Agreement.
The requirements for a financial agreement to be binding are set out in sections 90G and 90UJ of the Act. These include the requirements for the agreement to be signed, not to have been terminated or set aside by a Court, for independent legal advice to be given on specified matters prior to the parties signing the agreement, and for certification by each of the lawyers involved in providing the advice both to have been provided and exchanged.
Several subsequent amendments were made to section 90G in the years between 2000 and 2009, with the changes principally focussed on the requirements for the provision of independent legal advice to each party, how that advice is provided, and how the agreement should evidence the provision of advice to each party by their respective legal advisors.
The specific facts underpinning why parties have later sought to set aside their financial agreements are unique to each case. However, a common underlying theme is that the outcome to one party, although purportedly acceptable at the time the agreement is accepted and signed, is later not considered so at the time the relationship breaks down.
Given a challenge to the adequacy of the advice given on a financial agreement is in broad terms, one of the two principal ways an agreement can be set aside, many family law practitioners now do not either draft financial agreements at all; or otherwise, will not provide the required independent legal advice on an agreement prepared by the other party’s lawyer, because of the potential risk for a complaint to arise years later, about the advice that was given.
For firms who specialise in Family Law, or practice groups within firms who provide specialist Family Law services, and are familiar with the stringent advice requirements for financial agreement, those risks may be mitigated and/or otherwise managed. However, for lawyers who do not regularly advise on family law matters, it is possible risks remain in providing such advice.
In the recent case of Kaimal & Kaimal a financial agreement was set aside in circumstances where it became apparent in cross-examination of the lawyer advising (in this case the Wife), that the requirement to advise – as per s90G – on the “effect of the agreement on the rights of that party, and about the advantages and disadvantages, at the time the advice was provided to that party of entering into the Agreement”, was not met. In that case, what had been provided, was instead advice about the provisions of the agreement, which thus failed to meet the advice requirements of s90G. The agreement in that case was set aside.
For those firms who continue to provide advice on financial agreements, the lessons from cases that are determined by the Courts clearly indicate attention to the specific advice requirements of s90G/UJ needs to be observed, with caution, for provision of that advice not to give rise to a level of unacceptable risk to the lawyer involved, or the firm, given a challenge to a financial agreement may not come for many years after the parties involved enter into the agreement.
For parties however looking either to make clear their respective wishes with respect to the future division of property in the event of a separation, or otherwise, to make clear those intentions as part of Estate Planning in circumstances such as a second (or subsequent) marriage later in life, a financial agreement may yet still provide the best means of doing so.
Whilst that remains the case, lawyers providing family law advice are likely to continue to be approached by clients seeking such advice. The decision thus needs to be made – often on a case-by-case basis, whether the risk of doing so can be managed and/or mitigated, or whether a more cautious approach and/or referral of the matter to a family law specialist should instead be given.
Further Information and contact details
Pigott Stinson regularly advises and acts for clients on a range of family law matters, including binding financial agreements. If you would like any further information, please contact our Family Law partner, Celia Oosterhoff.