Pre-Nuptial Agreements in Australia – Insist at your Peril

Pre-Nuptial Agreements in Australia – Insist at your Peril

The portrayal in some U.S. based legal television series, of a pre-nuptial agreement protecting the family fortune of the wealthy intended-spouse from the clutches of the poor one, is simplistic at best.

In Australia there are many reasons why a pre-nuptial agreement (known in Australia as a financial agreement) made prior to marriage or even during a relationship might not stand up to later scrutiny. Chief among these is the idea that an agreement entered into under duress or coercion (e.g. the day before the wedding) has the same effect as a confession extracted under torture. It simply lacks efficacy.

Australian family law operates on surprisingly similar principles to normal commercial principles. Misrepresenting relevant material facts, undue influence, unconscionable conduct, fraud and duress can all lead to the downfall of a family law financial agreement, just as they would in the commercial world.

This was dramatically illustrated by Australia’s High Court in November 2017. The wife was an Eastern European woman who met the husband on the internet. She left everything behind to move to Australia and marry the husband. She had no material assets, limited English and no family in her new country of residence. The husband was wealthy, worth $18m-$24m. The wedding arrangements were made including guests flying in from overseas. 

Shortly before the wedding the husband insisted that his future wife sign a (pre-nuptial) Binding Financial Agreement and she did, against the strong advice of the lawyer she consulted. Shortly after the wedding the husband insisted that the wife sign a replacement (post-nuptial) agreement on the basis that if she did not, there would be no further relationship. If that occurred, she would be an illegal foreign resident with no job, no home, no community and no family.

The High Court found that in both cases there was undue influence which eroded the basis of consensus to the point of both agreements being unenforceable. Just like in the commercial context, if there is really no consensus, there is no enforceable agreement. This meant the matter would have to be resolved just like any other settlement following their separation which inevitably happened 4 years later.

It is understandable to want to preserve a family fortune and it is possible to enter into binding financial agreements for this reason, but great care must be taken to avoid a signature under torture… in Australia.

For more information, contact Murray Crawford at CLO Lawyers on (07) 4631 9000.