A recent High Court case of Thorne v Kennedy has again brought the profile of family law financial agreements into light and not necessarily for the better.
This was a case about a couple who entered into two financial agreements, intending to set out what would happen if the marriage broke down.
The Court determined the financial agreements could not be relied upon due to “undue influence”, that is, there was no free choice to make the decision to enter into the financial agreement. Furthermore on the grounds of “unconscionable conduct”, that is, one party suffered from a special disadvantage that stopped them from making a decision in their best interests and additionally, the other party took advantage of that.
This case is a warning to parties when contemplating entering into a financial agreement that unequal bargaining power must be considered and overcome.
There may be circumstances when a financial agreement entered into prior to a relationship or marriage is appropriate. However, the enforceability of them has again been questioned by the High Court and they should not be entered into without significant thought and advice about the viability of the agreement in the long term. The certainty which is sought by entering into a pre relationship or marriage financial agreement is questionable and potentially fraught with difficulties.
Post separation financial agreements do not have the same difficulties associated with them. However, post separation financial agreement for formalising agreements for the division of relationship property should still give consideration to the following factors which were raised in the case of Thorne v Kennedy:
1. whether there was any avenue to negotiate the terms of the agreement;
2. the emotional circumstances in which the agreement is entered;
3. whether there was any time for careful reflection;
4. the nature of the parties’ relationship;
5. the relative financial positions of the parties; and
6. the independent advice that was received and whether there was time to reflect on that advice.
A post separation financial agreement is one avenue to formalise an agreement reached between parties for the division of relationship property. They are appropriate in some family circumstances. A Consent Order which must be ratified by a Court as being fair and equitable in the particular circumstances of the parties is the best and most secure method to formalise an agreement after a relationship breakdown to ensure it is binding on both parties, severs a financial relationship and avoids further court proceedings in the future. If you would like further information, our experienced Family Law Team including our Accredited Family Law Specialist are able to assist with all your family law needs.
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