Donate Child Support Calculator
Skip navigation

Technical hitch puts pre-nups in doubt

one party's solicitor forgot to prepare a fresh certificate when, two days after the pre-nup was signed, the parties made a small amendment to one of the agreement's clauses.

Technical hitch puts pre-nups in doubt
By Matthew Drummond


Australian Financial Review
18 April 2008

The validity of pre-nuptial agree­ments has been thrown into doubt by a court ruling that could thwart attempts by men and women to ring ­fence their assets from their spouses.

Family lawyers are so concerned about the ruling by the full Family Court that they are preparing to lobby the federal government to have it overturned.

Ian Kennedy, head of the Law Council of Australia's Family Law section, said the ruling had given people a way to have their pre-nuptial agreements cancelled by a court.

"This ruling has the capacity to invalidate many agreements that people have entered into. Many people will look at their agreements and say: 'Is there some way I can get out of it?'"

Pre-nups, known more accurately as "financial agreements", can be entered into before, during or after a marriage and are an increasingly common way of avoiding a relation­ship breakdown ending up in court.

Once signed, the terms of a pre-­nup are binding and courts are barred from interfering in a divorce settlement. But judges have long been suspicious of pre-nups, which can leave some parties substantially worse off. When courts split up assets, they look at what is "just and equitable". After weighing up factors such as a party's limited career prospects after taking time out to raise children, "equitable" can be a far cry from "equal" and even further away from what parties agreed to when they got married.

The ruling made earlier this year that has alarmed family lawyers was in a case called Black and Black. Three Family Court judges declared that an entire pre-nup could be cancelled if it was found to contain any errors in its drafting, even if that error appeared to be technical or immaterial.

The Law Council's family law section resolved last week to take the ruling up with government on grounds that it undermined policy objectives of getting people to settle their own affairs out of court. A submission to federal Attorney-­General Robert McClelland is being prepared. In the meantime, family lawyers are urging worried clients to get their pre-nups double-checked.

To be effective, a pre-nup must satisfy certain criteria. Each party must obtain independent legal advice on whether the agreement is prudent, fair and reasonable. Each side's solicitor must affix a certificate confirming that such advice has been given.

In the case of Mr and Mrs Black, the advice was given and the certificates were affixed. But one party's solicitor forgot to prepare a fresh certificate when, two days after the pre-nup was signed, the parties made a small amendment to one of the agreement's clauses.

The Blacks had been married for just 13 months. Their pre-nup specified that they would buy a house in Tasmania with the proceeds of the sale of Mr Black's South Australian home and Mrs Black's compensation payout from a personal injury claim.

In the event of divorce, the house would be split equally.

The sale of Mr Black's home netted $180,000. But Ms Black's compensation claim was less valuable than she had thought. Instead of the $200,000 she had expected, she received only $41,000.

The house in Tasmania was worth $278,000. When they divorced, Mr Black sought to have the agreement terminated and the house split 80/20 in his favour, reflecting his higher contribution. He argued that his lawyer's failure to affix a fresh certificate following the amendment rendered the entire agreement invalid.

The argument was rejected by  judge Robert Benjamin, who warned that if courts began striking down pre-nups simply because of technical errors they would cost more to prepare and would become outside the financial means of the general community.

"Courts should not make the legal practitioners and the parties cross all of the t's and dot all of the i's to enter into and give effect to financial agreements," Justice Benjamin said. "The form should not defeat the substance."

But on appeal, the Deputy Chief Justice, John Faulks, and judges Joseph Kay and Julienne Penny disagreed. If parties were able to prevent a court from intervening to decide how to split assets, "strict compliance" with all the statutory requirements was needed.

The entire pre-nup was deemed ineffective and the matter has been returned to the original judge for a retrial. Ms Black's lawyers have decided not to appeal to the High Court.

Many family lawyers are now concerned that they will be sued by their clients should a small defect render pre-nups they penned ineffective.

"It does not seem reasonable that parliament should place the onus on the legal profession to carry the insurance for technical defects in drafting," Mr Kennedy said.

But not all family lawyers agree. Charles Cooper, a family lawyer based in Queensland's Southport, said a big "hoo-ha" had been made of the Black decision at a conference of family lawyers held last week. But the case should not be overturned, he said. Complying with the strict terms of pre-nup laws was simply a "tick-a-box exercise".

"Why should we not be accountable for our mistakes? We should be responsible for them," he said. "If we stuff it up, we get sued. We're lawyers. We're supposed to be smart."

While no data is available, Mr Kennedy said pre-nups had become increasingly popular. They are mostly used by people going into second marriages with separate asset bases or people who are marrying for the first time but with inheritance prospects they want to protect.

Mr Cooper said many people who soughtadvice on a pre-nup were turned off once they heard what was involved. A dampener was the requirement to make full disclosure of all one's assets to the spouse.

[It is interesting to note how quickly the Law Council are to react, or is it defend, their clients.

Concerns about laywers being sued by their clients are alive.

Now, what is it again that laywers do with their mistakes?]

What is done for you, let it be done, what you must do, be sure you do it, as the wise person does today that what the fool will do in three days - Buddha

Wasn't that Doctors

Verdad said
It is interesting to note how quickly the Law Council are to react, or is it defend, their clients.

Concerns about laywers being sued by their clients are alive.

Now, what is it again that laywers do with their mistakes?
Wasn't that in relation to Doctors = something about burying their mistakes. The only lawyers who do that are Criminal Lawyers in Death Penalty jurisdictions.

For me - Shared Parenting is a Reality - Maybe it can be for you too!
1 guest and 0 members have just viewed this.

Recent Tweets