Pre-nups or pre-nuptial agreements are becoming increasingly popular and are far more socially and legally acceptable in 2025 than in 2000 when they were first introduced.
The High Court of Australia in R Lawyers & Daily and Another (2025) FLC 94-276 considered financial agreements for the first time since Thorne v Kennedy (2017) FLC 93-807. In Thorne v Kennedy, the High Court upheld the setting aside of a financial agreement for undue influence and unconscionable conduct, and set guidelines as to when agreements may be at risk of being set aside for undue pressure. Following Thorne v Kennedy, many legal practitioners became more cautious about advising clients subject to undue pressure who were entering into “bad bargains”.
In R Lawyers & Daily, a financial agreement was set aside for uncertainty under s 90K(1)(b) Family Law Act 1975 (Cth) FLA) and hardship relating to children under s 90K(1)(d).
The issues before the High Court were:
- The time at which a party’s loss arises in relation to the negligence of their lawyer in the drafting of and advising on a financial agreements. This impacts whether a claim against a lawyer is statute-barred;
- How damages are calculated when a client has a claim against a lawyer because a financial agreement is set aside.
The procedural history was described by Chief Justice Gageler and Justices Jagot and Beech-Jones of the High Court (at [8]) as “unduly complicated” and by Justices Gordon and Edelman (at [85]) as “long tortured and complex. It is hoped it is never repeated.”
Background facts
The parties met in 1986 and began cohabiting in 1987. The parties entered into the financial agreement in mid-2005, prior to being married later that year. They separated in September 2018, after having been in a relationship for over 21 years. At the time of the original trial, the parties’ two children were aged about 11 and 14, but by the time of the 2023 trial which was appealed to the High Court, they were aged 15 and 18. The primary judge found that the wife left the paid full time workforce when the parties had children and became the homemaker and primary caregiver of the children, enabling the husband to remain in full time employment.
The financial agreement was amended and re-executed 5 times. In substance, the agreement was intended to ensure that if the marriage broke down, each party kept their separate property and that any joint property was divided equally.
In December 2019, the wife applied to have the financial agreement set aside, and sought property settlement orders pursuant to s 79 of the FLA.
The first trial
In June 2020, Justice Berman delivered judgment in Daily & Daily [2020] FamCA 486. He ordered that the financial agreement be set aside for hardship pursuant to s 90K(1)(d). The wife also argued that the agreement was not binding as she was not given advice from her lawyer in accordance with s 90G(1) as to the effect of the agreement on her rights, and the advantages and disadvantages of entering into the agreement. Handwritten amendments were made to the agreement and the advice was not updated following the amendments. The agreement was therefore held to be not binding, but the agreement was “saved” under s 90G(1A). Justice Berman held that it would be unjust and inequitable if the agreement was not binding, as the handwritten amendments would not have been a surprise to the wife.
The first appeal
The husband successfully appealed against the setting aside of the agreement, and the Full Court of the Family Court in Daily & Daily [2020] FamCAFC 304; (2020) FLC 93-999 (per Strickland, Aldridge & Kent JJ) remitted the matter of whether the financial agreement should have been set aside back to the primary judge.
The second trial
In 2023, the agreement was set aside by Justice Berman again in Daily & Daily [2023] FedCFamC1F 222, but this time on two grounds:
- Uncertainty within s 90K(1)(b) making it “void, voidable or unenforceable”. The uncertainty arose from the drafting of the agreement, including:
- “Net matrimonial assets” was defined to include “financial resources of the parties at separation” but the term “financial resources” was not defined and it was unclear as to whether it was intended to extend to income.
- The wife was to receive a payment pursuant to clause 12(a) but there was no such clause.
- Recital K, which was an operative clause by virtue of clause 2 of the financial agreement, was open to different interpretations. It read:
“Entitlements to assets and gifts or inheritances under this Deed extends to any appreciation in value attributable thereto and whether or not the asset has been sold or dealt with such that it has changed character provided the asset held at separation is clearly traceable to the original asset, gift or inheritance.”
- The agreement was silent as to the effect or consequence of income earned by the parties and whether any “appreciation in value” of purportedly quarantined assets, liabilities and entitlements such as bank accounts and most entitlements were also quarantined.
- Hardship within s 90K(1)(d) as:
“since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside.”
This was because the agreement did not contemplate what would occur if the parties had children, as they had in fact done.
By this time, the husband had joined his former solicitors, R Lawyers, to the proceedings, relying upon the accrued jurisdiction of the Court.
It was found by Berman J that the husband’s former solicitors had been negligent in advising the husband, but Berman J deferred the assessment of damages to be heard with the determination of the s 79 proceedings.
The third trial
After a further hearing and in a separate judgment, Daily & Daily (No 3) [2024] FedCFam1F 47 delivered on February 2024, Justice Berman made final property settlement orders pursuant to s 79 of the FLA which gave the wife $741,634 from a joint account. These orders were made by consent, the husband conceding the wife’s entitlement to 60% of the property.
His Honour ordered that the husband’s former solicitors pay the husband $38,000 in damages for negligence. This was for his litigation costs for the uncertainty claim, but the husband received nothing for his costs for the hardship claim or for the s 79 order for alteration of property interests. His contractual claim against his former lawyers was dismissed.
The second appeal
Daily & Daily (No 2) (2023) FLC 94-151; was the hearing of the appeal by the husband in relation to both the property settlement order against the wife and the assessment of damages payable by his former solicitors to him.
The husband’s former solicitors cross-appealed against the award of damages, arguing that the husband’s claim was statute barred and that the trial judge had erred in finding that the solicitors were negligent. The High Court plurality summarised the reasons for the finding of the primary judge (at [20]):
“The Division 1 Court also found that, by the provision of “cursory, nonspecific” advice that, inter alia, failed to advise Mr Daily as to the two bases that might warrant the BFA being set aside, R Lawyers breached the duty of care it owed to take reasonable care in advising Mr Daily. In particular, the Division 1 Court found that the duty was breached by R Lawyers’ failure to provide “specific advice” to Mr Daily as to “what would happen upon the birth of a child and whether that might represent a material change in circumstances” and to advise Mr Daily as to the risks “to the integrity of the [BFA] namely, whether there was a risk that it could be considered as void for uncertainty”
The primary judge had found that the damage arose either at the time the parties separated in 2018 or at the time when the wife initiated proceedings in 2020. In either case, this was within the relevant statutory time period under South Australian law, the Limitations of Actions Act 1936 (SA). The husband’s former solicitors argued that the damage had actually been sustained by the time of the marriage and the claim was therefore statute-barred.
The Full Court of the Federal Circuit and Family Court of Australia (per Justices Austin, Tree and Christie JJ) noted that in Australia there are two competing characterisations of when damage first arises from a negligently drawn contract:
- The contract is analogous to a defective asset (Orwin v Rickards [2020] VSCA 225; Davys Burton v Thom [2008] NZSC 65; [2009] 1 NZLR 437). This was the approach taken by the husband’s former solicitors.
- Any loss is merely contingent until events precipitate it (Wardley Australia Ltd v Western Australia [1992] HCA 55; (1992) 175 CLR 514)). This was the approach taken by the trial judge.
The Full Court ultimately concluded that the primary judge’s approach was the correct approach to be applied to financial agreements in the family law context. Their Honours said (at [76]):
“A convenient starting point is to recognise that there is no authority which binds this Court to hold in favour of the “defective asset” characterisation of the negligently drawn BFA.”
The matter of re-assessment of damages was remitted to be determined by a judge other than the primary judge.
The third appeal
In Daily & Daily (No 4) [2024] FedCFamC1A 185 Justices Aldridge, Tree and Campton JJ considered a further appeal by the husband (being his third appeal to the Full Court overall). The husband sought a remedial order to confirm the financial agreement was set aside, but by deleting the reference to s 90K(1)(d) within the order, leaving only s 90K(1)(b). The appeal was dismissed.
The High Court appeal
The husband’s former solicitors, R Lawyers, appealed to the High Court of Australia. The High Court granted leave to appeal on 6 March 2025, and the matter was heard before Chief Justice Gageler and Justices Gordon, Edelman, Jagot and Beech-Jones. On 6 November 2025, their Honours handed down their decision in R Lawyers v Mr Daily & Anor (2025) FLC 94-276. In two separate judgments the appeal was allowed against the Full Court’s remitter of the matter for further hearing on the question of damages. Whilst R Lawyers was successful in arguing that the husband had not substantiated his case for damages beyond the costs of litigation arising from the uncertainty claim, they were unsuccessful in arguing that his claim was statute barred.
Determination of damages
There were two questions:
- Were the husband’s damages limited to his wasted legal costs in litigating the financial agreement, or could he claim further damages representing the difference between his current situation and his situation if non-negligent advice had been provided?
- Could the husband claim his legal costs for the litigation with respect to the s 90K(1)(d) hardship aspect, or only with respect to uncertainty under s 90K(1)(b)?
In relation to the first question, the husband’s loss was potentially the difference between the outcome for him of an amended (and binding) financial agreement and the s 79 orders ultimately made. However, this required the court to progress through multiple hypothetical steps: Could a different financial agreement have survived legal challenge? What would this financial agreement look like? Would the wife have agreed to it? And, crucially, would the husband not have entered the marriage if the wife did not agree to the financial agreement?
Before the High Court, the husband’s case was characterised as a loss of outcome, not as the loss of a chance to negotiate a binding financial agreement as the Full Court understood the argument. Instead, in the High Court, the plurality Gageler CJ, Jagot and Beech-Jones JJ said (at [34]):
“Mr Daily contended that his case was that he suffered a loss in the form of a diminution of his interest in securing a binding financial agreement that was not liable to be set aside under the FLA and that was effective upon his separating from Ms Daily, and that the diminution or infringement of that interest was purely contingent until at least when he and Ms Daily separated …”
The husband argued before the primary judge and the Full Court that, if the wife had refused to sign an amended financial agreement, then he would not have married her or had children with her. This argument was rejected by both courts and was ultimately conceded by the husband before the High Court.
The plurality discussed the difficulties with the remaining argument in the husband’s case (at [45-47]:
“… Until the hearing before the Appellate Court, Mr Daily’s claim was not framed as a loss of chance case. Nor is it apparent that Mr Daily could have proved the loss of a chance of any value given that, irrespective of the invalidity of the BFA for uncertainty as found below, the BFA was always vulnerable to be set aside on any of the other grounds in s 90K(1) of the FLA which include contingencies (such as s 90K(1)(c) and (d)) that could not be known or assessed at the time the BFA was executed. …
… However, as also noted, the Division 1 Court found that Mr Daily did not instruct R Lawyers to the effect that he wanted a financial agreement that “was effectively bullet proof against the application of s 90K(1)(d)” of the FLA and otherwise noted the absence of any evidence of the terms of a financial agreement that even amounted to a “reasonable attempt to avoid a potential application of s 90K(1)(d)”. Those findings were fatal to the second component of Mr Daily’s case.”
In any event, the second component of Mr Daily’s claim was bound to fail by reason of Mr Daily’s failure to adduce evidence establishing the fact of loss wasted in unsuccessfully defending the validity of the BFA as not void for uncertainty. At trial Mr Daily did not adduce any evidence as to a form of financial agreement that a lawyer in 2005, exercising reasonable care and skill, would (or might) have drafted to avoid that financial agreement being set aside and to have that financial agreement be effective upon separation, including a financial agreement that addressed the potential that Mr Daily and Ms Daily might have had children. Nor did Mr Daily adduce any evidence from which it could have been inferred that Ms Daily would (or might) have agreed to such a financial agreement around that time…”
The plurality further explained what the husband needed to have done to succeed in his case for damages in relation to the failure to have an effective financial agreement (at [50]):
“It may be that a finding that Mr Daily suffered loss as a consequence of R Lawyers’ failure to exercise reasonable care and skill would not have required the precise terms of the counterfactual financial agreement to have been identified, but Mr Daily would have had to identify at least the scope, nature and likely monetary amount or range of monetary amounts that any provision for children would have entailed. Unless that was done there could not be any assessment of whether Ms Daily would (or may) have agreed to such a financial agreement, whether it would or may have survived a challenge on hardship grounds many years later and, if so, whether it would have secured a better outcome for Mr Daily compared to the orders the Division 1 Court made under s 79 of the FLA”
Justices Gordon and Edelman held that the approach taken by the Full Court was in error, saying (at [132]):
“First, the Full Court addressed the issues in the wrong order and, as a result, failed to consider the issues correctly. The Full Court incorrectly addressed whether Mr Daily’s claim was statute barred before addressing the question of loss. That was wrong. The proper order for the Full Court was to first identify what the claimed loss was and when that claimed loss was first incurred by Mr Daily, and then to address the question of causation – whether, but for the negligence of R Lawyers, Mr Daily would have achieved a particular outcome or, but for the negligence of R Lawyers, Mr Daily lost the chance of obtaining a different financial agreement and thereby securing a particular better outcome.”
Justices Gordon and Edelman, like the plurality, also discussed the ways in which a client may suffer and then prove loss or damage as a result of the negligent conduct of a solicitor (at [147]):
“In the case of a client’s claim for loss of a particular outcome caused by negligent drafting of a financial agreement, the client would need to prove, on the balance of probabilities, that (a) the financial agreement, including the substance of the terms of that agreement, would have been agreed; (b) that agreement would not have been set aside; and (c) that agreement would have secured for the client a better outcome than that which they in fact achieved. It would be necessary for the client to prove the amount of the loss, but they would be entitled to recover the loss in full.”
Justices Gordon and Edelman were, like the plurality, critical of how the husband put his case at trial and later courts, saying (at [166]):
“Mr Daily’s central premise was that he would have secured a financial agreement that reflected his instructions in certain terms and he was entitled to damages for the difference between that financial agreement and the position he now finds himself in… At no point in the proceedings did Mr Daily demonstrate that a different financial agreement would or might have been agreed with Ms Daily. He did not prove: the substance of the terms of that agreement; that that agreement would or might not have been set aside; and that it would or might have secured a better outcome than the position he found himself in after the Court made orders under s 79 of the FLA.”
Their Honours’ discussion at [167]-[170] sets out clearly how the husband should have presented his case to be successful, and they concluded that his claim for damages was limited, saying (at [171]):
“It follows that the primary judge was correct to confine the assessment of damages in respect of Mr Daily’s legal fees to the amount conceded by R Lawyers – that is, the costs of Mr Daily’s proceeding against Ms Daily in so far as they related to the uncertainty claim. As Mr Daily failed to prove that he and Ms Daily would or might have entered into an alternative financial agreement that would or might not have been set aside on hardship grounds, he was not entitled to damages referable to his legal costs in litigating the hardship issue against Ms Daily. The Full Court was therefore wrong to remit the assessment of damages as they pertained to Mr Daily’s legal fees.”
Was the negligence claim barred by statute?
In relation to the husband’s former solicitors’ contention that the husband’s claim was barred by statute – namely, the operation of the Limitation of Actions Act 1936 (SA) – the crucial question was when the loss or damage occurred. The plurality of Gageler CJ, Jagot and Beech-Jones JJ refused to apply the concept of a flawed contract or “damaged asset” as submitted by the husband’s former solicitors in pursuit of their argument that the loss or damage arose around the time the agreement was entered. The husband’s former solicitors argued (at [63]):
“…as a result of its negligence and the consequential invalidity of the BFA, Mr Daily “did not get what he should have got” from the performance of R Lawyers’ duty and thus it can be readily inferred that he suffered loss when the BFA was executed or no later than the time at which he married Ms Daily with an inadequate financial agreement in place.”
The plurality held that as a financial agreement is “a creature of statute” (at [18]) it is not possible to ascertain the loss at the time of entering into the contract. The plurality explained (at [67]):
“The statutory context in which a financial agreement operates involves a limitless variety of individual circumstances not all of which can be known or even anticipated in a meaningful way at the time of entry into the financial agreement, including but not restricted to variations in lengths of relationships, the number and needs of any children of the relationship and the financial, health and other needs of the parties to the relationship. The potential variations in personal circumstances that may occur from the time of a marriage until it ends are so innumerable that it is not “possible to ascertain whether loss or damage has been”…sustained by reason of a person’s entrance into or failure to enter into a binding and effective financial agreement at the time of entry (or marriage).”
The plurality said further (at [75]):
“ …it was not established that any actual loss that Mr Daily suffered as a result of the negligence of R Lawyers arose before a separation declaration was made within the meaning of s 90DA(1) of the FLA.”
The husband’s former solicitors argued that the fact that the husband could have recovered legal costs for remedying the defects in the financial agreement on or after execution of the financial agreement in 2005 demonstrated that the loss or damage was suffered in 2005 rather than after separation. The plurality disagreed with this analysis, saying (at [70)]:
“There is a difference between, on the one hand, identifying when loss or damage first accrues in the events that happened even if that is not the loss that is claimed in the action and, on the other, merely speculating about loss that might have been suffered or recovered.”
The plurality did not appear to absolutely rule out that a finding could not, in certain circumstances be made that the loss or damage occurred when the financial agreement was executed. It is possible, however, that they were discussing contracts more generally (at [69]):
“No doubt in many contexts it will be inferred that a party who retained a solicitor to draft and advise upon an agreement that was found to be void and ineffective suffered loss or damage when that agreement was purported to be executed. However, a finding that a party suffered loss at that time is not inevitable. In this particular statutory and factual context, it is an inference that cannot be drawn.”
Justices Gordon and Edelman ruled out absolutely the prospect of a claim against lawyers in relation to an agreement before the marriage has broken down, saying (at [177]:
“Moreover, until the time of separation, the couple’s circumstances will vary over time. An assessment of whether loss or damage was occasioned to a party by entry into a financial agreement could not be undertaken until separation. Even if one could identify a point in time prior to separation when it was clear that no financial agreement could have been entered into then that would still not mean that loss or damage was suffered then. From that point until separation, the parties’ circumstances could still have changed so that no assessment could have been made as to whether compensable loss or damage was occasioned (for example, children born, financial harm or gain or personal misfortune).”
Accrued jurisdiction
The claims by the husband against his former solicitors in contract and/or negligence were made relying on the accrued jurisdiction of the Division 1 court to hear and determine the claim.
The High Court confirmed that the Limitations of Actions Act 1936 (SA) was “picked up” by s 79 of the Judiciary Act 1903 (Cth) and was applied to the husband’s claim.
The availability and use of accrued jurisdiction in these circumstances was therefore confirmed.
Conclusion
The High Court’s consideration in R Lawyers v Mr Daily & Anor of when liability arises for the giving of negligent advice in relation to financial agreements is both reassuring and disappointing for legal practitioners. Whilst the statute of limitations finding is not helpful for legal practitioners, the husband faced truly difficult hurdles to establish his case for substantial damages against his solicitors because the agreement was set aside for hardship relating to children under s 90K(1)(d). The damages he recovered were limited to the costs of litigating the uncertainty claim under s 90K(1)(b). He was unable to recover his costs for litigation in relation to the hardship claim, or any part of the amount he paid to the wife by way of a property settlement under s 79 FLA.
Daily is a timely reminder of the need for legal practitioners to ensure that the terms of a financial agreement are clear and certain, and that if the parties may have children, that adequate provision is made in the agreement for a party in the weaker financial position particularly if that party may be the primary carer of any children. As parties and their lawyers are predicting the future, the agreement must address possible changes in circumstances which may arise if the parties have children.