The Facts

What is a binding financial agreement?

A binding financial agreement (also commonly known as a prenuptial agreement or "prenup") is an agreement made between two people that sets out how they want their affairs to be arranged if their relationship ends. These agreements can be made before, during or after a marriage or de facto relationship, including for a same sex relationship.

A binding financial agreement is a formal document made under the Family Law Act 1975 (Cth) but it is not reviewed or approved by the Family Court and, so long as it complies with the requirements set out in the Act, the court has no jurisdiction to adjust it.

Husband and wife enter into binding financial agreement

In 2002, a husband and wife entered into a binding financial agreement under the Act. They agreed that:

  • the husband would sell the property that he owned and deposit the funds into a joint bank account,
  • the wife would deposit into the same joint bank account the proceeds of a personal injury compensation claim,
  • they would then be purchase a family home with the funds in the joint bank account, and
  • in the event of separation, they would sell the family home and the proceeds would be split equally.

Agreement signed before wife's personal injury claim finalised

An agreement was signed on 3 September 2002, and then slightly amended three days later. Both parties sought and obtained independent legal advice prior to signing the agreement, as required under the Act.

After the agreement was signed, but before the wife's personal injury claim had been finalised, the husband and wife purchased a family home.

The wife's personal injury claim was ultimately settled out of court for an amount smaller than anticipated and therefore her contribution ended up being less than the couple had expected at the time they'd entered into the agreement.

Couple separates and husband seeks to have binding financial agreement set aside

In May 2003, the parties separated.

The husband brought an application to the Family Court, claiming that the binding financial agreement should be set aside on the basis that a 50/50 split of the couple's assets was not fair in the circumstances.

The trial judge dismissed the application on the basis that the agreement had met the requirements of the Act and therefore the court had no jurisdiction to adjust the split of assets.

The husband appealed the decision to the Full Court of the Family Court.

case a - The case for the husband case b - The case for the wife
  • It is not just and equitable to divide our joint assets equally, given that we did not contribute equally to the purchase of the family home.
  • The court should take a literal approach to the interpretation of the Act and insist on strict compliance with all the requirements.
  • In this case, there wasn't strict compliance because we should have each received independent legal advice after the agreement was altered, but this did not happen.
  • The binding financial agreement should therefore be set aside.
  • The agreement should stand because it accurately reflects what our intentions were at the time we entered into it.
  • If my ex had wanted to amend the agreement, he should have sought to do that when I settled my personal injury claim, but he didn't.
  • There was substantial compliance with the requirements of the Act and the court should take a purposive approach, as the trial judge did. That is, the purpose of the agreement was to divide our assets equally if we separated.
  • The court has no jurisdiction under the Act to adjust the distribution of assets in the way my ex is seeking.

So, which case won?
Cast your judgment below to find out

Vote case A – The case for the husband
Vote case B – The case for the wife

Anneka Frayne
Family law
Stacks Law Firm

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.