Are the spousal maintenance provisions in your financial agreement up to scratch?

Overview

In the case of Guild v Stasiuk, the Court was required to determine whether a prenuptial agreement was effective in ousting or excluding the Court’s jurisdiction to consider a wife’s claim for spousal maintenance after the couple had separated.

The prenuptial agreement included an express provision that it was a financial agreement under section 90B of the Family Law Act, which allows engaged parties to reach an agreement about how their property will be divided if their relationship fails and also, if they choose, about whether spousal maintenance will be paid.

If parties decide to deal with the issue of spousal maintenance in their agreement, section 90E applies.

Section 90E (and section 90UH for de facto couples) states that a provision for spousal maintenance in a financial agreement is void if it fails to specify who is to receive the maintenance and how much the maintenance is.

Void in this context means of no legal effect.

The facts

Before the wedding in 2008, a prenuptial agreement was signed in anticipation of marriage.

The husband operated a business and received income from trusts that owned properties. The wife worked three days per week and was the main carer for the children. The parties had two children, who were the subject of a parenting dispute. The wife argued the husband had financially supported the family until 2018 and that they had enjoyed an affluent lifestyle.

The wife sought an order that the husband pay spousal maintenance of $1,000 per week, family health insurance cover, and various expenses incurred in the running of the house where she lived with the couple’s two children. The husband argued the prenuptial agreement removed the power of the Court to make these orders.

The prenuptial agreement

The agreement included a provision entitled ’No Claim for Maintenance’, which provided:

(The wife) agrees that in the event of the event occurring (and relevantly, the event is the permanent separation), that she will make no claim for maintenance for herself and will accept the provisions of this Agreement in full and final settlement of any claim for maintenance that she might otherwise have had.

The wife argued the absence of a specific amount in the agreement made that provision void.

Judgment

The Court agreed with the wife’s contention, meaning the judge could then hear and decide the spousal maintenance claim and was not precluded from doing so by the agreement because it was of no legal effect about the issue.

The purpose of that part of the Act that contains section 90E is to promote certainty by holding parties to their informed decisions to enter financial agreements. It allows parties to oust the Court’s jurisdiction.

However, section 90E is drafted in precise terms.

It requires an agreement to specify either:

1. the actual amount provided for the maintenance of the named party; or
2. ‘the value of the portion of the relevant property attributable’ to maintenance.

As an example of the second type of section 90E provision, an agreement might state that, of the $1M received by a party in a settlement in the event of separation, $200,000 of that was attributable to maintenance.

The Family Law Act requires the Court to determine questions about the effectiveness of a financial agreement according to the principles of law and equity that apply in determining the validity and enforceability of contracts.

This involves interpreting the agreement in light of the surrounding circumstances and how a reasonable person would have understood the terms. The Court considered a reasonable person would know legal advice had been given, and that the requirements of section 90E were known to the parties.

Although the provision as to spousal maintenance contained the wife’s promise not to make an application for maintenance, it did not indicate she was barred from doing so. The intention of the parties when agreeing that the wife would make no claim was uncertain.

In light of the Court’s narrow interpretation of section 90E, the provision was void and the Court heard the wife’s spousal maintenance claim – no doubt a very unwelcome outcome for the husband and the lawyer who drafted the agreement.

The lesson

This decision shows the importance of scrupulously adhering to the strict requirements of the Family Law Act when entering into a financial agreement designed to protect your wealth and, in the right case, your future income.

The agreement needs to be well drafted by experts who understand your circumstances and the law.

I often say to clients (not the electricians) that doing your own family law work is like doing your own electrical work – you can do it, but it won’t go well for you.

This case also makes me think of Benjamin Franklin, the polymath who first developed the theory of electricity as just one of his many achievements, when he wrote: ’The bitterness of poor quality remains long after the sweetness of low prices are forgotten’.

If you would like to discuss a financial agreement or any other family law matter, please do not hesitate to contact our family law team.