Do you mean 'I do' or 'I sue'

In the world of pop culture ‘pre-nups’ are common – George Clooney was in a movie about one, Charlotte negotiated one in Sex and the City, and everyone from royalty to Kim Kardashian apparently has one.  Kayne West even wrote a song about them with the catchy shout out “holla, we want pre-nup: ‘We want pre-nup.’” But in Australia pre-nuptial agreements (known as Pre Binding Financial Agreements) are far less common and, increasingly, their continued use is far from certain.

The Family Law Act 1975 allows parties to enter into an Agreement before they get married, or commence a de facto relationship, which addresses how, in the event of the breakdown of the marriage or relationship, all or any of the property or resources of the parties is to be dealt with.  It sounds relatively simple but the problem lies in the requirements set out in the Family Law Act for the Agreements to be executed. Essentially, the Act requires each party to have received ‘independent legal advice’ prior to entering into the Agreement on the effect of the Agreement on their rights and entitlements and the advantages and disadvantages at the time that the advice was provided to that party of making the Agreement.

In a 2008 case the Family Court set aside an Agreement – which the husband did not want to comply with following separation – on the basis that the Family Law Act requirements (slightly different to the current legislation) had not been strictly complied with. This decision gave way to a rash of litigation with many other people wishing to avoid their obligations on the basis that their lawyers had not complied with the requirements meticulously. The Federal government responded by relaxing the requirements in the Family Law Act slightly in an apparent attempt to ensure that people could still enter into such Agreements even if there were inadvertent or minor technical errors. However, varying the requirements was something of a high-wire act for the government and many believe that they still have not got it right. Indeed there are currently two cases making headlines on this issue.

The first has been dubbed, in the media, “the pole dancer case”. In this case the husband met the wife at a Sydney club around the time he separated from his first wife in the late 90s and they married some time later in 2005. They entered into an Agreement before marrying which provided for the wife to receive $3.25 million if their marriage broke down in four years. It ended within two. The husband, who apparently has a net worth of around $16 million, claims that the wife acted fraudulently when she said she wanted to spend the rest of her life with him and have children with him. However, he’s also relying on an allegation that his solicitor did not give him the necessary independent legal advice. In 2011 the Family Court determined that the Agreement stood. The husband is currently appealing that decision.

The second case involves Olympian Grant Hackett. While his apparent outburst was splashed across front pages everywhere increasingly it is litigation against his former solicitor that is making the news. It’s been reported that the swimmer is suing the solicitor who drafted the Agreement he and his former wife signed less than a month before they married in 2007 alleging that the Agreement did not comply with the requirements when signed and that the lawyer did not rectify the situation when the Agreement was varied some two years later.

As a result of cases just like these two headline grabbing examples there is a considerable amount of legal uncertainty surrounding Pre Binding Financial Agreements. The Family Law Council of Australia has written to the Federal government on a number of occasions urging it to amend the Family Law Act to clarify the requirements for independent legal advice – especially how to show that the solicitor provided the advice, that it was received by the client, and that the client understood it. The Family Law Council notes that lawyers are increasingly reluctant to prepare these pre relationship or marriage Agreements due to the growing uncertainty regarding the requirements.

NB: Pre Binding Financial Agreement are distinct from Binding Financial Agreements entered into after separation has occurred.