“The pen is mightier than the sword,” but in the case of financial and termination agreements, the pen and the signature can save you a lot of time, money, and heartache.
That’s because financial agreements (prenuptial agreements or postnuptial agreements), are legally binding contracts that set out how your finances will be divided in the event of a separation or divorce.
While signing a prenuptial agreement may seem like something that only applies to the rich and famous, the truth is that financial and termination agreements can be a valuable tool for any couple, regardless of their income or assets.
Read our article about financial agreements to understand the concept and other relevant information.
Section 90K: Circumstances in Which Court May Set Aside Financial and Termination Agreements
There are circumstances when the court must set aside financial and termination agreements. According to section 90K, the court has the power to make an order setting aside these agreements if the court believes that:
- There is fraud when one party obtained the agreement from another. This could include non-disclosure of a material matter.
- A party enters the agreement with the intention to defraud a creditor or creditors of the party or another person who is a party to a de facto relationship with a spouse party.
- A party enters the agreement with reckless disregard of the interests of a creditor or creditors of the party or of such other person.
- A party enters the agreement to defeat the interests of that other person in relation to any possible or pending application for:
- The agreement is void, voidable or unenforceable.
- When it is impractical to carry out the agreement, in whole or in part, given new circumstances that emerge since the formation of the agreement.
- Since the making of the agreement, a material change in circumstances has occurred and, as a result of the change, the child or, if the applicant has caring responsibility for the child, a party to the agreement will suffer hardship if the court does not set the agreement aside.
- A party to the agreement engaged in unconscionable conduct, in respect of making the financial agreement.
- The agreement covers at least one superannuation interest which is an unsplittable interest.
However, there is one prohibition as to the making of an order under this provision. The court must not make an order under this section if the order would:
- result in the acquisition of property from a person otherwise than on just terms
- be invalid because of paragraph 51(xxxi) of the Constitution.
Section 51 (xxxi) of the Constitution provides that “The Parliament shall, subject to this Constitution, have the power to make laws for the peace, order, and good government of the Commonwealth with respect to acquisition of property on just terms from any State or person for any purpose.”
When Does a Person Have a Caring Responsibility?
According to the same provision, a person has caring responsibility for a child if:
- the person is a parent of the child with whom the child lives
- there is a parenting order which provides that:
- the child is to live with the person
- the person has parental responsibility for the child.
A court may make such orders, including an order for the transfer of property, as it considers just and equitable to preserve or adjust the rights of persons who were parties to that financial agreement and any other interested persons.
Moreover, the court may only do so if the following persons apply for such orders:
- A person who was a party to the financial agreement that the court has set aside; or
- By any other interested person.
Furthermore, a court may enforce an order on behalf of, or against, the deceased party’s estate after the death of a party to the proceedings in which the order was made.
What if a Party Dies Before the Completion of the Proceedings?
If a party to proceedings under this section dies before the completion of proceedings, these circumstances can take place:
- The proceedings may be continued by or against the legal personal representative of the deceased party, and the applicable Rules of Court may make provision in relation to the substitution of the legal personal representative as a party to the proceedings.
- The court may make any order that it could have made if it is of the opinion:
- that it would have exercised its powers under this section if the deceased party had not died
- that it is still appropriate to exercise those powers.
and such order may be enforced on behalf of or against the estate of the deceased party.
Section 90KA: Validity, Enforceability, and Effect of Financial and Termination Agreements
Section 90KA establishes that the court will decide the financial and termination agreements’ legality, enforceability, and effectiveness. This choice will be made in accordance with the legal and equitable standards that govern how contracts are valid, enforceable, and effective.
Additionally, the court has the following powers:
- In processes relating to contracts or alleged contracts, which are proceedings in which the High Court has original jurisdiction, the court may grant the same remedies and must have the same consideration for the rights of third parties as the High Court has.
- The power to order that a party to the agreement pay another party interest on an amount due under the agreement, starting when the amount became or became due and payable, at a rate not higher than the rate set by the Rules of Court.
- The court may order that the agreement, or a specific portion of the agreement, be enforced as if it were an order of the court in addition to or instead of making such orders.
Section 90L: Financial and Termination Agreements Etc. Not Liable to Duty
Section 90L provides that these agreements are not subject to any duty or charge under any law of a State or Territory or of the Commonwealth:
- a financial agreement;
- a termination agreement; and
- a deed or other instrument executed by a person for the purposes of, or in accordance with, an order or financial agreement under these provisions.
Talk to a Family Lawyer About Financial and Termination Agreements
- Understand the law and their rights and obligations.
- Negotiate terms that are fair and reasonable to both parties.
- Draft a legally binding agreement.
- Provide independent legal advice to each party.
- Enforce the agreement if necessary.
In addition to our legal expertise, we can provide couples valuable counselling and support. We can also help couples:
- communicate effectively
- reach a mutually agreeable outcome
- make informed decisions about their future, with respect to their financial agreements.
Contact us today.