If you think that the law relating to financial agreements changes faster than Australia changes Prime Ministers, you’re right. The High Court in Thorne v Kennedy (2017) FLC 93-807 added to the complexity. Here are the five top tips for preparing financial agreements in the wake of Thorne v Kennedy:
1. Be Willing to Negotiate Terms
The stronger party should be prepared to negotiate the terms. A “take it or the relationship ends” approach means that the agreement is more likely to be set aside.
2. Allow Time for Reflection
There should be time for careful reflection about the terms of the agreement, but the High Court did not say how long this should be. It is likely to vary according to the weaker party’s level of education and literacy, the terms of the agreement, and other factors.
3. Avoid Unfair or Unreasonable Terms
The terms of an agreement that is “a bad bargain” for one of the parties may be relied on to establish that there was undue influence or unconscionable conduct. Why else would they have entered into it? An agreement that provides an outcome within the broad discretion given under s 79 and s 90SM of the Family Law Act 1975 to make a property settlement order is more likely to withstand scrutiny than one that is “unfair and unreasonable.”
4. Address Issues from Previous Agreements
If an agreement entered into before the commencement of a relationship or marriage was affected by undue influence or unconscionable conduct, an agreement entered into after the relationship or marriage commences is likely to be affected by the same vitiating factor.
5. Beware of False Declarations
Be wary of false declarations in recitals, such as:
- A party claiming to be able to support themselves without an income-tested pension or benefit when they clearly cannot.
- Stating that mutual disclosure has occurred when it has not.
- A mutual waiver of the right to disclosure, particularly when the parties have unequal bargaining power.
Conclusion
There is no easy substitute for reading the cases and checking the legislation. However, if you follow the above guidelines and check the terms of s 90G(1) of the Family Law Act 1975 (or s 90UJ(1) for de facto couples) as well as the section that the agreement is made under (e.g., s 90B for pre-nuptial agreements), you will be on the right track.