The case of Nyles & Nyles highlights the importance of giving full and frank financial disclosure at the time that terms of settlement are being entered into of any circumstance which may impact the future value of an asset even if that event has not yet occurred and its future worth is unknown.  

In this case the parties entered into consent orders and a Binding Financial Agreement  (“BFA”) dealing with the adjustment of property interests in 2004.

According to the terms of settlement the husband was to receive 60% of the net assets which were set out and annexed to Binding Financial Agreement. At the time the parties entered into the BFA and consent orders the wife was a director of a public company and the shareholding in that company was disclosed to the husband in the asset schedule attached to the BFA.

Floating of Company on Stock Market

At the time the parties signed the terms of consent and the Binding Financial Agreement however, the wife’s company was in the process of converting from a private company to a public company. The company floated on the stock market less than 2 months after the Agreement was signed, the wife sold her shares and made a large profit.
The Husband then sought to set aside the Binding Financial Agreement by making an Application to the Court under s79A of the Family Law Act for reason of non-disclosure of relevant information and the fact that he relied on the wife’s assertion as to the value of the assets in making the Agreement.

Full and Frank Financial Disclosure

Full and Frank financial disclosure is a fundamental element of justice and applies as much to out of court settlements as it does to contested proceedings.

The complicating factor in this case was that the wife’s shares were subject to strict confidentiality obligations. The wife was not able to provide the husband with any documents with respect to the pending commercial transactions due to confidentiality issues. The Husband’s evidence was that the Wife disclosed the floating of the shares at the time it was occurring but alleged the wife said that the float would not happen for a number of years and that the value of the shares would be minimal. The wife’s evidence was that she directly discussed with the husband the possibility of the shares being floated and made an offer of settlement during mediation in which her proposal involved the transfer of some of those shares to the husband which he failed to take up.

The husband was advised by his solicitors that it was not in his best interest to enter into the Binding Financial Agreement until further disclosure was to hand. The husband therefore failed in his Application to set aside the consent orders and the BFA as it could not be said that he was induced to enter into the BFA by the misconduct of the wife and he had made an informed decision.  This was despite the fact that the Court actually found that the wife had failed to make full and frank financial disclosure and to some degree acted fraudulently.

Prenuptial agreements have become more common and accepted in our society. yet many couples intending to marry feel they don't need a prenup. This post covers some of the Who, When and Why of arranging a Prenuptial Agreement.

Yes a prenup is not for everyone, but they are appropriate for a wide variety of people and you may find it applies to your personal situation. Importantly a pre-nuptial agreement is a legally enforceable contract. It does require each party to receive independent legal advice. It is not a quick list of who owns what.

Who should have a prenuptial agreement?

A prenuptial agreement is not necessary for everybody, however there are some personal and family situations where it is a very wise decision. In fact for many couple it can raise and deal with important concerns. it can also put into perspective or reduce anxiety related to "what if" situations and the unknown. 

Common reasons for considering a prenuptial agreement include:
 
Owning a successful business
You are wealthy
You have children from a previous marriage
If you have elderly parents
If you anticipate a sizeable inheritance
If you are in a professional school
If one has sizeable debt
If you are pursuing a lucrative career
If you own stock, a home or retirement fund
Or if you want to avoid a costly divorce.

When should you consider a prenuptial agreement?

A marriage ceremony can be viewed as a contract where promises are made.  In the same way, a prenuptial agreement is a contract where promises are made in the event of a marriage breakdown.  The prenuptial agreement is best developed before the marriage, and is a legal process where both parties need time to join in discussion and come to agreement.  It is best for both parties to have legal representation as the contract is drawn up, to ensure that the prenuptial agreement is enforceable.

It is a contract based on trust, where there is full disclosure and a clear understanding by both parties of the way things will be if the marriage does breakdown.  The process does not need to involve conflict, but can provide a platform for open communication.

Why consider a prenuptial agreement?

Elderly parents, children from a previous marriage, assets and possessions can all be protected.

Fears of the unknown can be put to rest.  Vulnerabilities and strengths are understood.  A prenuptial agreement solves many serious problems before problems arise. A prenuptial is not an admission this relationship is likely to fail. Rather the discussion it generates can help unite a couple as they plan the future together.

See other Prenuptial Blogposts and Information:

Understand what makes a Prenuptial Agreement legal in Australia
Independent legal advice required for Prenuptial Agreements
Case - Court protects Russian Bride
Six types of Prenuptial Agreements

Marriage is a contractual arrangement and your rights and responsibilities do change after you walk down the aisle. From taxes to property ownership, from insurances to income, from inheritance to social security, marriage changes a lot.  

Understanding at the start is a vital key to a successful union.  Not understanding money and property can be at the core of what goes wrong in a marriage.  Early discussion of these issues, even before the marriage, can help start couples off on the right foot and a prenuptial agreement is the ideal basis for this discussion.  Creating a prenuptial agreement can be a very positive process to go through.

Strong marriages are built on trust. A prenuptial agreement helps brings things out into the open and can lay a healthier platform for your relationship. The process can help generate discussions and concerns about ageing parents, children from a previous marriage, owned businesses, inheritance expectations, acquired debt, retirement plans and even general  lifestyle.  

A prenuptial agreement clarifies the future and is an legally binding agreement reached when the couple are at their most amiable.  Before considering credit cards, budgets, joint accounts, groundwork can be laid before the marriage to chart the course for the future and protect what is presently in our lives as individuals.  Individual wealth and property are tender subjects, and it is far easier to talk about these issues BEFORE you are married, rather than when you are married or in the event you are contemplating a divorce.

There’s nothing romantic about money and property, but they are two very key issues in every relationship, and there is nothing wrong with being clear about these issues before beginning married life.  Creating a prenuptial agreement is like buying car insurance.  Hopefully you will never need it, but if you do, you will be very grateful that you had it.

For advice on a prenuptial agreement contact Streeterlaw Sydney Lawyers.

See other Prenuptial Blogposts and Information:

Understand what makes a Prenuptial Agreement legal in Australia
Independent legal advice required for Prenuptial Agreements
Case - Court protects Russian Bride
Six types of Prenuptial Agreements
Prenuptial agreements Who, When and Why

The Situation - Prenup found not to be binding

A financial, or prenuptial agreement, had been entered into by a couple. The agreement did not expressly state that both parties had received independent legal advice. As it is a requirement of Financial Agreements that independent legal and financial advice been received the agreement was found to be not binding.

The changes to protect Prenuptial Agreements

Effective 4 January 2010, the Federal Justice System Amendment (Efficiency Measures) Act (No. 1) 2009 (No. 122, 2009) - Schedule 5 amended the Family Law Act 1975 (Cth) and significantly modified section 90G.  Section 90G(1)(b) and (c) were repealed and new sections inserted.  The effect of the change is to overcome the strict interpretation of the previous version of the legislation as interpreted by the Full Court of the Family Court in the above case of Black v Black [2008] FamCAFC 7.

These recent changes are designed to overcome this decision. 

Comment from Mark Streeter - Sydney Family Law Lawyer

The amended legislation will enable legal practitioners to provide signed statements that they gave independent legal advice either before or after the spouse party signed the financial agreement, and provide copies of the statements to be provided either to the other party or to the legal practitioner of the other party.  

The changes also provides the Court with the discretion to declare a Financial and Termination agreement to be binding, notwithstanding that it fails to meet the procedural requirements in relation to the making of the agreement providing the Court is satisfied that it would be unjust in all the circumstances if the agreement did not bind the parties.

The impact of the legislation is retrospective and covers all Financial Agreements entered into from 27 January 2000.

Other Prenuptial Agreement blogposts

Prenuptial Agreements change for Defacto Relationships
Prenuptial Agreements for Property and Maintenance

Six types of Prenuptial Agreements

On 1 March 2009 the previously state based de facto laws in New South Wales were transferred to the Federal jurisdiction. This has brought changes to defacto agreements (often referred to cohabitation agreements). Changes have been made to the Family Law Act 1975 (CTH) in respect of de facto property and financial matters in the Family Court of Australia and the Federal Magistrates Court.  These changes included expanded definitions of “matrimonial causes”.

There are now six types of “financial agreements” also called “binding financial agreements” that can be drafted.  The most commonly known is a prenuptial agreement or prenup.
1.    Financial agreement in anticipation of marriage (ie prenuptial agreement).
2.    Financial agreement made during a marriage – this may be during a marriage and before or after separation.
3.    Financial agreement made after an order for divorce.

In respect of de facto relationships:
4.    Financial agreement in anticipation of entering into a de facto relationship.
5.    Financial agreement made during a de facto relationship.
6.    Financial agreement made after the de facto relationship has ended.

Comment from Mark Streeter - Sydney Family law Lawyer

There are slightly different requirements of the legislation for each type of financial agreement.  As part of the “family law legislation” the requirements for de facto financial agreements must also comply with the obligation that each party provide full and frank disclosure to one another in respect of their financial interests and resources.

Call me for an appointment to create a prenuptial agreement that suits your situation.

Other Prenuptial Agreement Blogposts

Independent legal advice required for prenuptial agreements
Prenuptial Agreements
Case - Court protects Russian Bride
Case - Husband's fraud undermines Binding Financial Agreement


Common miss-spellings or other terms:
Pre nup, prenuptual agreement, prenups, Binding Financial Agreements, Cohabitation agreement, prenuptial contract