Financial Agreements can be set aside

Gregory & Gregory is a case decided in January this year in Brisbane.  The lesson to be learned from the case is that where parties enter into a financial agreement under the Family Law Act which determines how their property should be dealt with in the future in the event of the end of the relationship, its existence and terms need to be carefully considered during the relationship and after it ends.

In essence the agreement was set aside on the basis that the agreement could not be carried out because it was “impracticable” to do so (Section 90K(1)(c) Family Law Act).  This arose because the wife had dealt with the “separate property” of the husband (i.e. property which was defined in the agreement to remain his in the event of separation) and that her "separate property" was to remain hers.  The wife’s use of money which was from the separate property of the husband (a significant superannuation payment she intercepted and put to her own use) meant that the husband (or his estate as he died after proceedings were commenced) could not be repaid unless the agreement was set aside as the wife was entitled to retain her real estate as it was “separate property” under the financial agreement.  The Judge also commented that the agreement could also have been set aside given the unconscionable actions of the wife in taking the husband's superannuation monies.

Financial agreements (including prenuptial agreements) are valuable tools in protecting property from claims following the breakdown of relationships, particularly in second relationships.  Significant care needs to be taken when drafting the documents but this case also shows how important it is not to forget that the agreement exists and that the parties to the agreement need to understand their own actions may lead the to the agreement being set aside upon grounds found in Section 90K of the Family Law Act.

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