A recent Full Court decision (Fewster and Drake  FAM CAFC 214) has reaffirmed the previous position of the Full Court of the Family Court that just because an agreement is unfair, doesn’t mean that it should be set aside. Even if, a party is receiving substantially less than they would have if they had not executed the agreement (pursuant to the Terms of S79 of the Family Law Act), then that by itself is not a sufficient ground to set aside an agreement.
Also, the decision reaffirmed that it is difficult to set aside an agreement just because children are born after the agreement is executed.
In this case, the wife was pregnant at the time of signing the agreement and a second child was also born during the relationship. The Trial Judge set aside the agreement on the basis that circumstances had arisen since the time of the agreement that would cause hardship to the wife, if the agreement was not set aside.
The Trial Judge effectively based his position on the fact that the agreement, itself, did not provide recognition for the wife’s contribution as a parent and the neglect of these important contributions by the wife in the agreement meant that the agreement should be set aside.
The Full Court reiterated that there must be a material change in circumstances that has arisen since the signing of the Financial Agreement.
Importantly, the Full Court pointed out that it is the changed circumstances which themselves must give rise to any hardship and not the actual agreement itself.
They stated that people were free to enter into such Binding Financial Agreements as they see fit and there is no statutory provision which enables an agreement to be set aside merely because it is “unfair”.
The Trial Judge’s conclusion that because the agreement failed to provide any provision for the increased responsibility for the child, and that therefore this inevitably creates “hardship” for the wife, was incorrect.
Finally, if there has been a material change that itself had given rise to the hardship, then before setting aside the agreement the Court must undertake some comparison between the parties’ positions if the agreement remains in place (and that of the child) and the position, if the agreement is set aside – it is only be doing so that the Court can then place itself in the position to determine whether there would be hardship if the agreement was not set aside. The Trial Judge did not embark on such a comparison.
Hardship has to be something more than just unfairness – it must be a substantial detriment and more burdensome than any appreciable detriment.
The above decision is a stark reminder to those contemplating on entering into a Binding Financial Agreement (especially those who may find their circumstances changing through the birth of children), that they should not lightly enter into such agreements.
These Agreements are becoming more difficult to set aside, if drafted correctly. The financially weaker party and the party who may, in the future, be the primary carer of children, needs to give considerable thought into entering in to such agreements in the first place and/or ensuring that the Agreement provide an adequate outcome to them in the event of some separation in the future.