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Financial Agreement Entered Before Marriage
Section 90B of the Family Law Act sets out the circumstances in which a written agreement made by parties contemplating marriage is a binding financial agreement. In the recent case of Graham v Squibb, the Family Court considered the situation where parties had purported to make such an agreement but had not complied with the formal requirements set out in Section 90B.
Graham v Squibb 2019
In Graham v Squibb, the husband and wife had signed an agreement entitled ‘Pre-nuptial agreement’ the day before they married. The agreement was that each party would retain the assets that they took into the marriage in the event of separation. The agreement itemised the property owned by each party in separate Schedules. The agreement did not cover property acquired by the parties after marriage.
The parties married in 2008 and separated in 2015.
The agreement made no reference to Section 90B of the Family Law Act nor did it contain any other reference to the act. Instead, the agreement referenced ‘the laws in the state of Victoria.’
The wife sought a declaration that the agreement was binding on the parties. The husband sought an order that it be set aside.
Section 90B of the Family Law Act
Section 90B of the Family Law Act relates to financial agreements entered into before a marriage. The provision states that written agreements that are:
- made by parties contemplating a marriage;
- made by parties who are not parties to any other binding agreement relating to the same matters;
- which are expressed to be made under Section 90B
are financial agreements.
A financial agreement may set out:
- How, in the event of a breakdown of the marriage, all or any of the property or financial resources of either or both parties are to be dealt with;
- The maintenance of either or both parties during the marriage and/or after a divorce;
- Incidental matters or other matters.
The decision at first instance
The trial judge, Judge McNab, found that the parties had a common intention to enter into a binding financial agreement prior to marrying and that they each signed the agreement the day before the marriage, after receiving independent legal advice. His Honour ordered the agreement be rectified to replace the reference to ‘the laws of Victoria’ with a reference to Section 90B of the Family Law Act. The rectification was needed to remedy the ‘legal nonsense’ created by a clause of the agreement that referenced ‘the laws of Victoria’ in what was clearly a matter of federal jurisdiction.
The decision on appeal
The husband appealed against the decision by judge McNab, arguing that the agreement was not intended as a binding financial agreement. In hearing the husband’s appeal, Judges Kent and Austin stated, ‘a party seeking rectification of a contract must advance clear and convincing proof that it does not embody the final intention of the parties …For that purpose, the parties’ mutual intention is the relevant feature of the evidence, as there is no room for rectification of the contract if the contrary intention is not shared.’
Their Honours found that if the husband did not intend the agreement to be a binding financial agreement he must have intended it to be a nullity. Although the husband conceded that he had held an intention to enter a binding financial agreement initially, he claimed the wife had failed to prove this intention continued up until the document was executed. However, the husband did not give evidence that he had recanted from this intention prior to signing the agreement and his lawyer was unable to point to any evidence that suggested that Judge McNab’s finding that there was a common intention to enter a binding financial agreement was wrong.
The court held that in order for an agreement to be binding, the parties need not have a common intention about the exact words in which the agreement should be expressed but only as to its effect. As the agreement could not be a binding financial agreement without a reference to section 90B of the Act, Judge McNab’s rectification of the agreement to include such a reference was a valid order. The parties must have intended the agreement to be a binding financial agreement as no other device could have carried their intention into effect. The husband’s appeal was dismissed and he was ordered to pay the wife’s costs.
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