Causal link between chanqes in circumstances and hardship required to set aside a Bindinq Financial Aqreement

Home News Causal link between chanqes in circumstances and hardship required to set aside a Bindinq Financial Aqreement

ln another recent, important decision by the Full Court in the case of Fewstar v Drake, the Full Court affirmed a number of important principles relating to the validity of prenuptial or as we call them Binding Financial Agreements entered into by parties either before or during the relationship.

The Full Court reaffirmed earlier decisions that the fact that an agreement may be unfair (i.e, produce a different result by way of property settlement had the agreement not been in existence) is not a ground to set aside the agreement. ln this recent case, the Trial Judge set aside a Binding Financial Agreement because of another ground under the Family Law Act that allows the Court to set aside agreements if there has been a material change in circumstances that has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and as a result of that change, the child, or if the Applicant has care and responsibility for the child, a party to the agreement will suffer hardship if the Court does not set the agreement aside.

The Trial Judge placed a lot of emphasis in this case on the fact that the agreement did not provide recognition of the Wife’s contributions as a Homemaker and a parent The Wife was pregnant with the parties’first child at the time the Agreement was entered into and by the time of separation, ten years later, and at the Hearing of the Application was the primary carer for two children and a third child was on its way.

The Full Court correctly held that the actual birth of the child can be a change in circumstance relating to the care, welfare and development of the child. ïhe Trial Judge placed a considerable importance on the so-called unfairness of the Agreement and the fact that the Wife would not receive an adjustment for factors relating to the care and upbringing of the children which she might normally expect to receive in a property settlement at law had the agreement not been made.

The Full Court correctly reversed that decision and pointed out that the unfairness otherwise embodied in the Agreement was irrelevant to the determination. What was relevant here was that the actual material change in circumstances relating to the care, welfare and development of the child must cause the hardship, ln other words, there must be a direct causal link between the change in circumstances and the hardship.

ln other words, it cannot be that Agreement itself that cause hardship or the lack of a property settlement or otherwise to a party that causes hardship.

One must ask the question as to whether the changes in circumstances for the Wife in being the primary carer of three children now instead of one (as anticipated in the Agreement)would in itself cause hardship to her. ln order to answer that question, the Full Court said that one had to look at the Wife’s current circumstances. ln this matter, the Wife did have reasonably sufficient assets and also was allowed to bring a spousal maintenance claim against the Husband, ln other words, spousal maintenance that had not been dealt with in the Agreement and that was yet to be determined.

Finally, the Court said that one also had to look at the result if the Agreement was set aside compared to what the Wife would get via property settlement if the Agreement wasn’t set aside and what she would get in the event it would be set aside, However, just because the Wife would get a greater amount of property settlement if the Agreement was set aside is not grounds to set it aside nor does that mean hardship. Hardship must mean something more than just being ‘unfair’ .lt must effectively be a substantial detriment. lt is suggested, that there clearly can be cases where an Agreement could be set aside because the change in circumstances for children does cause hardship. However, what must be kept in mind is that each case will be individually judged having regard to the nature of the change in circumstances and as to whether that has caused the hardship that may exist for the relevant party under the agreement.

It is not the terms of the agreement or what they do or do not provide for in itself that is the test of hardship. Parties are free to enter into an Agreement and if drafted properly under the Act then even if those terms may produce what many may call an ‘unfair’result for one party then that is irrelevant and the Agreement will in most cases stand affirmed.

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