Prenuptial Agreements: Proposed amendments may be the paracetamol needed for some lawyers and people entering agreements
On 27 December 2000 the Commonwealth Government introduced financial agreements (including prenuptial agreements) with the intent If an agreement is binding, a court will not be able to deal with the matters with which the agreement deals. If an agreement is not binding, a court will be able to deal with the matters with which the agreement deals. A court will be able to deal with any property or financial resources of the parties that have not been dealt with by a binding financial agreement between them.
For the first 10-12 years following the introduction of the agreements successful court challenges to the agreements (largely due to a failure by lawyers and their clients to comply with the legislative requirements) saw many family lawyers make a conscious decision, rightly or wrongly, not to undertake any relationship agreement work due to the perceived risks. Many articles have been written about the reticence of senior family law specialists to prepare and advise on relationship agreements (for instance see “Prenups too risky for lawyers” Marianna Papadakis, AFR 24/7/15 p33; “Millionaire challenges $3.2m prenup with ex-dancer” Nicole Berkovic, The Australian 19/3/12; “Pole dancer appeal may end prenups”, Sydney Morning Herald 23/02/13; and “George Brandis acts on protect families from violence” Nicola Berkovic, The Australian 26/11/15).
Is perception the reality? Whilst many senior family law specialists notably in New South Wales opted not to undertake the work, that was not the case with specialists in other States and Territories. We have and continue to prepare and advise on agreements for our clients including high profile clients both nationally and internationally. In the past 12 months my workload on agreements has increased and I have worked on international agreements including 2 agreements where the combined wealth of the clients exceeds USD12bn.
The demand for relationship agreements has not abated, but increased.
With proper preparation, compliance with the legislation and regard to the reported judgements of the courts, thorough attention to detail in drafting the agreement and delivering the requisite advice, the risks associated with the agreements are manageable. Whilst controversial and not required under the legislation an agreement ought to be fair (which conceptually differs from the parties’ legal entitlements in property settlement absent the agreement).
As anticipated the family law courts have over the past 3 years provided clarity to lawyers and people entering relationship agreements. The message is loud and clear: if an agreement complies with the legislation and the parties make a conscious and fully informed decision to enter the agreement, then absent any vitiating factors (such as duress, undue influence, unconscionable conduct or misrepresentation), the court will hold the parties to their agreement even if it is a bad bargain for one of the parties. The Full Court in Hoult in 2013 stated:
“The point of the legislation is to allow the parties to decide what bargain they will strike, and provided the agreement complies with the requirement of s 90G(1) they are bound by what they agree upon. Significantly, in reaching agreement, there is no requirement that they meet any of the considerations contained in s 79 of the Act, and they can literally make the worst bargain possible, but still be bound by it.”
The Family Law Amendment bill introduced into Parliament by Attorney General George Brandis last week if passed is designed to ensure agreements are “worth the paper they are written on”; will bolster the integrity of financial agreements and will make it more difficult to challenge an agreement.
The bill represents the fourth substantive change made to the law about financial agreements since the inception of the agreements in 2000. Each tranche of amendments have been designed to overcome perceived problems with the legislation. In some instances the amendments have been retrospective to cure agreements with problems and provided salvos for the lawyers responsible for the agreements.
The latest bill introduces significant changes to the law about financial agreements which is understandably welcomed by family lawyers and is likely to see some of the senior family law specialists who abandoned the work migrate back into it. Some of the amendments that will bring real change to the practice include:
The design of the amendments will ensure a more robust approach to upholding the agreements and may assist the Government alleviate the current stressors on the court system which is overloaded, under resourced, suffering inordinate delays and frankly broken.
People enter relationship agreements to provide certainty as to outcomes and avoid the waste of time, costs, risks and emotional drain of court proceedings. The bill reinforces such aspirations of parties by introducing objects and principles into the legislation (see sections 90AM and 90UAB) and in particular that parties to a “prospective, current or former” relationship should be able to take responsibility for resolving matters about property adjustment and spousal maintenance without involving a court and to provide certainty that the agreement will bind those parties.
The Australian cases where the courts have upheld the agreement (whether a financial agreement that is binding or otherwise) implicitly recognise the parties’ freedom to contract and the autonomy of the individual. Unlike Australia, there is currently no legislation governing prenuptial and post nuptial agreements in the United Kingdom. The validity of the agreement is determined under common law. The courts of the United Kingdom have been prepared to uphold the provisions of a prenuptial agreement particularly in respect of the parties’ property settlement terms. The landmark (Supreme Court) decision in the United Kingdom is Radmacher v Granantino  UKSC 42;  1 All ER 373 (referred to in the Family Court decisions of Paul and Paul  FamCA 672 and Weldon and Asher  FCWA 11). Within the Court of Appeal judgment of Radmacher Lord Justices Wilson and Thorpe make the following observations about judicial intervention into relationship agreements:
Lord Justice Wilson said: “I suffer forensic discomfort about the lack of clarity about the treatment of prenuptial contracts under our present law and a loss of confidence in the justice of an approach which differs from that adopted by most of the other jurisdictions to which we have the closest link….. the very basis of our present law also concerns me.” He said it was “patronizing, in particular to women” to approach prenuptial contracts on the “unspoken premises [that] prior to the marriage, one of the parties, in particular the woman is by reason of heightened emotion and the intention of desire to marry, likely to be so blindly trusting of the other as to be unduly susceptible to the other’s demands even if unreasonable.” He said that he would “prefer the starting point to be for both parties to be required to accept the consequences of whatever they have freely and knowingly agreed”.
Lord Justice Thorpe said: “Due respect for adult autonomy suggests that, subject of course to proper safeguards, a carefully fashioned (prenuptial) contract should be available as an alternative to the stress, anxieties and expense of a submission to the whip of the judicial discretion.”
Such statements resonate in the current round of proposed amendments to the financial agreement provisions of the Family Law Act and underscore the motivations of the Government.