Prenup: You may already be aware that for a Binding Financial Agreement, aka a “prenup”, to be valid, you and your spouse need to have followed certain rules when entering into the agreement. One such rule is that each party needs to have obtained independent legal advice before signing on the dotted line. As proof, the parties then receive a certificate from the solicitor who gave them the advice. But what does the “independent legal advice” actually have to consist of to be valid? That’s the critical question that came up for debate in a recent case in the courts which had to determine whether or not a prenup was binding. Let’s take a look.
The case, given the pseudonym Kaimal & Kaimal in the courts, concerned a former couple’s dispute over whether their Binding Financial Agreement (BFA) was valid. The wife wanted the BFA deemed invalid due to the fact she claimed she had not received genuine independent legal advice. She also argued that even if the court ruled she had received legal advice and the BFA was binding, it should be set aside on the basis of other issues namely fraud, unconscionable conduct and uncertainty.
The court ruled that the wife had not received the necessary legal advice and the BFA was therefore deemed legally invalid. It was found that although the wife did attend a solicitor independently to the husband in relation to the BFA, the advice she received amounted to the solicitor reading her the agreement’s terms and asking if she agreed with them. Damningly, the wife’s solicitor gave evidence that the wife only came to him to witness her signature and admitted he didn’t have any expertise regarding her entitlements under family law.The court found that the legal advice given relating to the prenup had been cursory and inadequate.
The legislative requirements for a Binding Financial Agreement to be binding are set out in the Family Law Act. It requires the parties to each have obtained legal advice “about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement”.
In the past however, some court decisions regarding BFAs have turned on the idea that the legislation doesn’t actually specify what the content of the legal advice must be or how adequate it should be.
In this case then, the judge spent time outlining why it was deemed that the wife had not received legal advice, despite attending a solicitor. In essence, the legal advice has to be clear, real and meaningful. And, in order to fulfil the need to advise a party of the advantages or disadvantages of terms, it’s logically necessary to identify such advantages or disadvantages.
It was also pointed out that just because you got the certificate saying you received legal advice from a lawyer in itself isn’t evidence that you got the required legal advice.
Why else could the prenup be tossed out?
For completeness, the court also considered the other aspects of the wife’s argument. Even if the BFA had been found valid, would the court have set it aside for the reasons the wife advanced? In the end, the court found that while fraud and unconscionable conduct were not factors, uncertainty was. The BFA would therefore have been set aside on that ground in any case.
In attempting to argue there had been unconscionable conduct at play, the wife discussed the couple’s power dynamics, raised family violence allegations and said she signed the BFA out of fear of her controlling husband. The court found that while it was likely the husband exercised financial control and that the disempowered wife was in an inferior bargaining position, a “key link of coercion” was missing and there had been “no ultimatum with severe consequences if the Financial Agreement was not signed”.
As to fraud, there is a very high threshold to legally prove someone committed fraud and the wife was unable to establish that the husband deliberately engaged in fraud to get her to sign the BFA.
The wife did however succeed in her argument for voiding the BFA on the ground of uncertainty. The document contained material errors, contradictions and inconsistencies that infected the whole agreement, so it would have had to be set aside on this basis regardless.
Be very careful to assess the quality of the legal advice you obtain in relation to a Binding Financial Agreement. If the “advice” amounts to the solicitor merely reading through the agreement and asking if you agree to the terms, be aware that in future, this could render your BFA invalid. Ensure your solicitor explains the effect of terms and outcomes of the agreement, and of course that you don’t sign anything containing material errors.
You can read this case here.
If you need assistance with drafting a Binding Financial Agreement (prenup) or would like legal advice in relation to one, please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.
Please note our blogs are not legal advice. For information on how to obtain the correct legal advice, please contact Alliance Family Law.