Binding Financial Agreements – Fewster v Drake
Binding financial agreements, commonly known as ‘pre-nups’ in popular culture, are a way to protect assets when entering into marriage or de facto relationship. They are dealt with under the Family Law Act 1975 (Cth) which provides requirements for financial agreements and circumstances in which financial agreements may cease to be valid.
This was the issue in the recent case of Fewster v Drake. Fewster (the Husband) and Drake (the Wife) entered into a binding financial agreement in 2006. At first instance, the agreement was set aside due to hardship and the Husband was ordered to pay spousal maintenance of $1500 per week. The Husband appealed this decision and sought to have the financial agreement upheld.
On appeal, the Husband submitted that the decision should not have been set aside under s 90K(1)(d). This provision allows for the Court to set aside a financial agreement where there has been a significant change of circumstances that causes hardship. The primary judge’s reasoning for setting aside the financial agreement was that the agreement ‘inevitably causes hardship for the wife’. This, the Husband argued was not the correct test.
The Full Court of the Family Court of Appeal agreed with the Husband. They noted that the change in circumstances must cause the hardship and not be caused by the agreement itself in order to be set aside under this provision. They also note that there is no statutory provision allowing financial agreements to be set aside merely because they are unfair, affirming Hoult & Hoult (2013).
This approach was taken given the free nature of entering financial agreements. Similar to other contractual documents, if not entered into freely, for example by fraud (s 90K(1)(a)) the agreement is void. In the event that the agreement is entered into freely, as it was in this case, the agreement between the parties should be upheld.
This case is an example of how the Court seeks to maintain the integrity of agreements. The bar to have a binding financial agreement set aside is quite high and will not be, simply because the agreement may be seen as ‘unfair’.
Fewster v Drake (2016) 56 Fam LR 38.
Hoult & Hoult (2013) FLC 93-546.
The information posted on this blog represents our opinion and should not be taken as legal advice.