Is your binding financial agreement really binding? A review of the decision in Sullivan & Sullivan

The case of Sullivan & Sullivan [2011] FamCA 752 highlights some of the perils parties may encounter when entering into a Binding Financial Agreement in respect of property settlement matters.

In summary, the case involved a separated husband and wife who, before getting married, intended to enter into a section 90B Agreement. The wife received legal advice in relation to the Agreement and her solicitor signed the appropriate certificate of advice on 11 April 2003. They were married on 13 April 2003.

The husband received legal advice and certification from his solicitor on 16 April 2003 – three days after they were married.

In accordance with the Family Law Act, parties may enter into a section 90B Agreement before they marry. Once they are married, they can enter into a section 90C Agreement during marriage or a section 90D Agreement after they are divorced.

The husband applied to the Family Court for a number of orders, including that the Agreement be declared a binding financial agreement and that the references to ‘section 90B’ in the Agreement be rectified to ‘section 90C’.

The husband made the following arguments in support of his application:

• The certificates signed by the parties’ solicitors made no reference to section 90B of the Family Law Act and otherwise complied with the requirements of section 90G(1).
• The advice provided to the parties would not differ if the Agreement was made before or after marriage.
• It was irrelevant that the wife signed the Agreement before marriage, as the Agreement was finally executed on 16 April 2003, when the husband signed. Therefore, the references to section 90B in the Agreement were erroneous and could be rectified and declared valid.
• In the alternative, sections 90B and 90C were not mutually exclusive and the Agreement could therefore be made under both sections concurrently.

The wife’s position was that there was no Agreement at all and, if the court found there was an Agreement, that it was not binding. The wife made the following submissions:

• According to contractual principles, the Agreement signed by the wife and provided to the husband constituted an offer, but the husband’s failure to sign before they married meant he did not accept the offer.
• There was no common intention for both parties to enter into a section 90C Agreement and therefore, unlike the case of Senior & Anderson (2011) FamCAFA 129, rectification was not available to the husband.
• The wife did not receive advice in respect of a section 90C Agreement and, although that advice may have been the same as the advice she did receive, by marrying the husband she acquired rights under the Family Law Act that she otherwise would not have had.
• In response to the husband’s alternate argument, the recitals stated clearly that no other Agreement was in force (except the section 90B Agreement) and it is only an Agreement if expressed to made under the appropriate section of the Family Law Act.

The decision

Justice Young found that there was no Agreement between the parties as the husband did not accept the wife’s offer before the parties married.

His Honour rejected the husband’s argument that the Agreement could be made pursuant to two different sections concurrently, as the requirements of neither section were met by the Agreement signed by the parties. That is, one party signed the Agreement pursuant to a particular section before they were married, while the other party signed pursuant to a different section after they were married.

The flow-on effect of this is that section 90G of the Family Law Act can have no operation where there is no Agreement pursuant to section 90B or section 90C.

His Honour also found that there was no common mistake between the parties that would allow him to rectify the reference from ‘section 90B’ to ‘section 90C’. Accordingly, there was no common intention to give rise to a remedy for rectification.

The husband’s application was therefore dismissed.

Was the decision too strict?

It is curious to note that had the husband signed the agreement only four days earlier, none of the above issues would have been necessary to determine.

Should such an error by the husband result in there being, according to Justice Young, no agreement between the parties? The reality is that the advice given to the parties would have been no different whether it was done immediately before or immediately after their marriage. It is also clear that both parties intended to be bound by the terms of the agreement, otherwise they would never have signed it.

The intention of the Federal Justice System Amendment (Efficiency Measures) Act (No.1) 2009 was to:

…limit the technical requirements that people need to meet to enter into prenuptial agreements, while still providing necessary protections to parties, such as the requirement to obtain legal advice. It will restore confidence in the binding nature and enforceability of financial and termination agreements under the Family Law Act. [Second reading speech]

With cases such as this, is it likely that the technical requirements have been relaxed enough to restore confidence about such Agreements?

There are a number of recent cases that highlight how anything short of strict compliance with the requirements for Agreements pursuant to the Family Law Act will result in existing agreements either being set aside or declared non-binding. This case is, obviously, no exception.

What could it mean for you?

The Federal Justice System Amendment (Efficiency Measures) Act (No.1) 2009 has not been the ‘get out of jail free’ card many practitioners thought it might be for mistakes made when drafting or signing an Agreement.

Accordingly, it is critical for parties who wish to enter into an Agreement pursuant to the Family Law Act to obtain advice from a solicitor well versed with the technical requirements.

Cooper Grace Ward’s family lawyers have considerable experience in preparing and providing advice to clients in relation to Agreements.

If you are considering entering into an Agreement with a current or potential partner or spouse, we would be pleased to assist you.

Additionally, in light of Sullivan & Sullivan, if you have previously entered into an Agreement in similar circumstances, we recommend you contact an experienced family lawyer immediately.

For further information please contact Craig Turvey of Cooper Grace Ward’s family law team via +61 7 3231 2569 or craig.turvey@cgw.com.au.

We’ve developed a series of short videos about binding financial agreements that look at what makes an agreement binding as well as some of the advantages and disadvantages.