Beware of the Pole Dancer Case; Legal Challenges to the Validity of Financial Agreements

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Financial Agreements, or what also are commonly referred to as BFA’s (Binding Financial Agreements), Pre-Nuptial Agreements, Separation Agreements, Cohabitation Agreements or Termination Agreements, are agreements which have been given legal standing under the Family Law Act in dealing with how the assets and property of the parties is to be divided in the event of separation.  Under this legislation, a properly constructed Financial Agreement will constitute a legally binding and enforceable agreement entered between a married couple or de-facto spouses.  These agreements can be entered upon the commencement of a marriage or de-facto relationship or following separation. 

Financial Agreements were given legal validity under the Family Law Act following reforms introduced in 2000.  At the time of introducing this legislation, Parliament intended for these agreements to give greater ability to people in being able to reach agreement between themselves as to how their property should be divided, which would not only offer protection and cost savings to these individuals but it would also reduce the number of matters coming before the Courts.

In the time that has passed since these reforms, Financial Agreements are most commonly used in cases where parties are about to enter into a de-facto relationship or marriage and usually when one or both parties already has property and accumulated wealth.  Financial Agreements are drawn up in these cases to protect the assets and property which each of the parties already has at the commencement of such relationships so that the other party has no claim on the assets and property of that party.

To ensure the legal validity of Financial Agreements, thus to make them Binding Financial Agreements, each agreement must comply with certain criteria which is spelt out in the Family Law Act.  One such requirement is that the parties must each receive independent legal advice.  There are also a number of other essential matters that must be covered in the agreement.

Despite the intentions of Parliament to free up the Courts, there have been an increasing number of new applications being filed in either the Family Court of Australia or Federal Circuit Court of Australia seeking to challenge the legal validity of individual Financial Agreements.  This involves a challenge by one of the parties to the Agreement that the Financial Agreement previously entered by him/her with the other spouse is not binding on the parties due to the agreement failing to meet the legal requirements under the Family Law Act or that the person was forced or coerced into signing the agreement. 

In many of the cases coming before the Courts, Judges have found inherent defects in certain Financial Agreements, ruling that they do not comply with the legislation and are therefore invalid.  In matters where the Financial Agreement is declared invalid, parties are then left having their dispute determined by the Courts which is what they had originally sought to avoid in the first place when entering the Financial Agreement with their former spouse. 

 A recent high profile case which has been played out in the media concerning the validity and enforceability of Financial Agreements is a case being referred to as the ‘Pole Dancer case’.  See http://www.smh.com.au/national/husband-in-bid-to-stop-32m-prenup-20140104-30arx.html This particular case involved an application being made by the husband who had considerable wealth prior to the commencement of the relationship where he was seeking to have the Financial Agreement which he entered with his former wife (who had previously worked as a pole dancer) set aside.  The husband’s application was initially dismissed and the Financial Agreement which he entered with his then wife was declared legally valid.  However, the husband has since applied for special leave to appeal to the High Court in a final attempt to challenge the validity of the Financial Agreement.  The outcome of this case is yet to be decided.

The emergence of cases coming before Courts in this particular area of law has left individuals questioning whether they can be afforded absolute protection when deciding whether to enter a Financial Agreement.  Parliament has already been forced to introduce further reforms in an attempt to overcome some of the problems identified by Judges with the original legislation introduced.  These cases have also highlighted the importance of ensuring that Financial Agreements are only prepared by lawyers who have a proper understanding of the formal requirements concerning these agreements. 

Cox West Lawyers has an experienced team of lawyers who practice exclusively in the area of Family Law.  Our team is headed by Adam West who is a principal of the firm and an Accredited Specialist in Family Law.  We have the skills and expertise to advise our clients who are contemplating a Financial Agreement, giving these clients peace of mind knowing that their assets and property can be protected by a properly constructed Financial Agreement. 

 

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