- Agree that one or more of the circumstances listed in s 90K(1)/90UM(1) exists, and subsequently set the agreement aside; or
- Decline to find that the circumstances in ss 90K(1) and 90UM(1) were made out, and refuse to set the agreement aside.
However, a third, albeit less common, option exists. As confirmed by the Full Court of the Family Court of Australia the use of the word “may” in ss 90K(1) and 90UM(1) means that these sections are discretionary in nature (see Kostres & Kostres (2009) FLC 93-420 at [156]). Accordingly, it is open to the court to find that one (or more) of the circumstances in s 90K(1) have been satisfied, but nonetheless decline to set the agreement aside. For example, the court may accept that one party acted unconscionably during the negotiation of the agreement, but determine the agreement should still be binding.
When will the court decline to set aside an agreement under s 90K(1) or s 90UM(1)?
Whilst the court does have the discretion to refuse to set aside an agreement when one or more of the ss 90K(1) and UM(1) circumstances has been made out, the case law suggests that the court will rarely exercise this discretion. As a result, there is limited guidance on when the court will decline to exercise its discretion.
Kostres & Kostres
As mentioned briefly above, in Kostres & Kostres (2009) FLC 93-420, the Full Court of the Family Court of Australia confirmed that s 90K(1) was discretionary in nature (at [156]). However, the Full Court set the agreement aside. Amongst other things, the Full Court had found that the agreement contained an ambiguous clause, and was therefore void for uncertainty and liable to be set aside under s 90K(1)(b)). Whilst the Full Court briefly considered the possibility of severing the ambiguous clause, they ultimately declined to do so on the basis that the ambiguities were significant enough to render the whole agreement uncertain. Kostres was cited with approval by Thackary J in Weldon and Asher [2014] FWCA 11 at [69] and recently by McGuire J in Goffe & Ottoson [2025] FedCFamC1F 632 at [87].
Manner & Manner
Manner & Manner [2015] FCCA 3304 is one of the few examples of the court declining to exercise its discretion under s 90K(1). The agreement was allowed to stand despite a ground under s 90K(1) having been established. The parties entered into a financial agreement shortly prior to marrying in late 2007. Less than 12 months later, the parties separated on a final basis. Initially, the wife sought performance of the financial agreement. Amongst other things, she engaged lawyers for the purpose of enforcing the agreement, and signed acknowledgments stating that monies paid to her by the husband were, in effect, part-payment of the amount the husband was to pay to her under the agreement.
However, over 2 ½ after the parties separated, the wife commenced proceedings, seeking that the agreement be either declared non-binding or set aside. Whilst Judge Jarrett accepted that the husband had not received independent legal advice in accordance with the requirements of the FLA, his Honour “saved” the agreement under s 90G(1A). His Honour suggested that it would not be unjust and inequitable in circumstances where it was the party seeking to rely on the agreement that received deficient advice.
With respect to s 90K(1), Judge Jarrett found that the husband had acted unconscionably towards the wife during the negotiation of the financial agreement. It was therefore open to his Honour to set aside the agreement under s 90K(1)(e) (and possibly s 90K(1)(b), although this was not raised in the judgment). However, his Honour declined to exercise his discretion to do so. Judge Jarrett was not persuaded that the agreement should be set aside in circumstances where the wife had previously sought performance of it.
Interestingly, although both parties approached unconscionability as an equitable principle, Jarrett J did not refer to the equitable requirement for “clean hands” as a reason for declining to set aside the agreement. That being said, his Honour’s failure to do does not appear to amount to saying that it is impermissible for a party to rely on the doctrine of “clean hands” or other equitable principles as a reason for why the court should not set an agreement aside. It is not uncommon for the court to rely on equitable principles, including one party’s failure to have “clean hands” when determining whether or not to save an agreement under ss 90G(1A) and 90UJ(1A). Section 90G(1A) and s 90K(1) have some key differences, including that s 90G(1A) requires the court to determine whether it would be “unjust and inequitable” (emphasis added). However, it may be that the court is also prepared to use equitable principles to decline setting an agreement aside if the ground for setting the agreement aside is grounded in equity.
Goffe & Ottoson
Recently, Justice McGuire briefly discussed the court’s discretion under s 90K(1) in Goffe & Ottoson [2025] FedCFamC1F 632. Whilst McGuire J was ultimately not required to exercise his discretion under s 90K(1) as the husband (the party seeking to set aside the agreement) had not satisfactorily established any of the grounds in s 90K(1), his Honour did cite, with approval, Kostres (at [87]). Similarly, his Honour referred to Manner, citing it as authority for the proposition that the court’s (at [88]):
“[d]iscretion [under s 90K(1)] is unfettered but must be exercised judicially and circumstantial to the case.”
In other words, s 90K(1) does not limit or restrain the court’s ability to determine whether or not the agreement should be set aside, save that the circumstances of the matter warrant such a decision.
Ultimately, while the court’s discretion to refuse to set aside an agreement under ss 90K(1) and 90UM(1) is rarely exercised, the potential for the court to do so is worth remembering for both those seeking to set aside an agreement and those seeking to enforce one.
© Copyright – Wolters Kluwer/CCH. This paper uses some material written for publication in Wolters Kluwer/CCH Australian Family Law and Practice. The material is used with the kind permission of Wolters Kluwer/CCH.