When poor Mercutio gets embroiled in a familial punch-up between
the Montagues and the Capulets, he is the one that gets stabbed and
dies. Before collapsing off-stage, he curses the fight that brings
about his untimely demise. Such a curse might also fall from
unsuspecting and unprepared family lawyers who prepare financial
agreements for couples who may, perhaps years or decades into the
future, end up warring like Romeo and Juliet's mum and dad.
Much blood and ink has already been spilt in dire admonitions
and imprecations concerning compliance with the formal requirements
necessary to bind the parties to financial agreements set out in
section 90G of the Family Law Act 1975. We see no
coincidence that the case which demanded "strict compliance
with the statutory requirements" is named Black. Thankfully,
recent amendments to the compliance regime have ameliorated the
legal gymnastics required to ensure an agreement is binding. Having
said that, as Paul Doolan notes in his recent paper to the 10th
Annual Family Law Intensive in Sydney 1, prudent lawyers will take
the extra steps anyway.
This e-alert, however, concerns other difficulties with
Recently, I appeared before the Full Court in a case which is
now recorded as Kostres & Kostres  FamCAFC 222.
We acted for Mrs Kostres, who sought to uphold a financial
agreement drafted days before her shortish marriage. Happily for
Mrs Kostres, there was no dispute as to compliance with section
90G. Unhappily, the dispute concerned the interpretation of the
agreement and whether equity would interfere with the operation of
The Full Court struck down the agreement because it was
incapable of discerning the parties' intentions. I respectfully
disagree. We did not draft the Kostres agreement but, in any event,
took the view it was capable of execution and enforcement. So did
Wilson FM at first instance, although to be fair to his Honour, he
did have his reservations. But what we cannot disagree with the
Full Court upon is its own admonitions concerning drafting of
agreements. Their Honours said:
"...care in establishing the
mutual intention of the parties and drafting terms of the financial
agreements with precision assume the utmost
"As this unfortunate case
demonstrates, agreements designed to avoid costly litigation can
have expensive consequences if the intention of the parties is not
readily discernible from the drafting of the
of such agreements [must be] drafted with precision to ensure
effectiveness, especially as they may be dealing with future
acquired property or other interests in
It is relatively easy to draft clauses which state how property
already in the hands of the parties may be dealt with upon the
breakdown of a relationship. Difficulties will arise concerning
property the parties may acquire in the future. Often, newly formed
couples will instruct that anything they jointly acquire will be
shared in some form - either equally or perhaps pursuant to the
legal title. That is all very well, but as Kostres shows, great
care should be taken in defining the concept of acquisition. For
instance, as loomed large in Kostres, a clause which states that
"if one party buys it, they keep it" is potentially
ineffective if one party buys "it" using finance, even if
the finance is solely acquired. Similarly, gifts acquired by the
parties, especially by the parties' parents, may assume some
controversy. If a clause in an agreement says "any jointly
acquired property is shared," is a house purchased by the
wife's parents in the wife's name and gifted to the couple
for them to live in jointly acquired? Or acquired by the wife?
It follows that financial agreements not only should comply with
the statutory formalities regime, but should also clearly
the parties' present property and financial resources and
how they should be dealt with;
exactly how the parties may acquire future property or
financial resources, and then how that property is dealt with;
exactly how the parties determine their legal and equitable
interests in property they presently have, and may acquire into the
exactly what happens if property is acquired in a certain way,
and then disposed of or traded such as property may then be held in
a different way - i.e. traced; and
exactly how parties "contribute" to property such as
may enliven an interest upon the breakdown of a relationship -
contribution in the "family law" sense or otherwise?
There are, perhaps, other aspects of the drafting exercise
requiring precision and care. Each case will undoubtedly be
different. Slavish application of precedents will rarely suffice.
If the Court demands a very high level of precision before its
jurisdiction is ousted, clients will also demand the same
precision. Otherwise, we may be left bleeding to death off-stage
left cursing the nice young couple we met years ago.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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