– The “Pole Dancer” case is concerned with the quality of advice given by a party’s lawyer prior to signing the pre-marriage binding financial agreement (prenup agreement).
– If your circumstances change materially during a marriage, or other factors occur which may lead to a binding financial agreement being set aside, it is advisable to revisit your agreement in order to ensure fairness to the parties and reflection of your intentions
– Our Panel of Lawyers take all required steps under law to ensure parties receive proper legal advice and certification in relation to their binding financial agreements.
Binding Financial Agreements have been providing certainty for Australian couples in the event of separation for years. However, a court’s decision in the “Pole Dancer” case has raised concerns in relation to the future of such agreements in Australia (Wallace & Stelzer  FamCA 54).
Consequences of the case on Binding Financial Agreements
So, what is all the fuss about and what does it mean for your current or future binding financial agreements?
Firstly, let’s understand the facts for the case. As the case name implies, Mr Wallace fell in love with and married a pole dancer. Prior to the wedding, the couple entered into a prenup agreement (pre-marriage binding financial agreement) where the new wife would receive $3.25 million if the marriage broke down within four years – just under a quarter of Mr Wallace’s $16 million net worth.
Sadly, the couple split after two years. Mr Wallace claimed the prenup agreement invalid on the basis of the wife’s fraudulent behavior (he claimed she lied about being in love with him) and the quality of advice received from his lawyer. He says his original lawyer never gave him proper advice on the pros and cons of entering into a prenup agreement and took just minutes to sign it, commenting only that “it was a lot of money”.
Secondly, let’s understand the concerns under law. For a financial agreement to be legally binding, the Family Law Act (FLA) which governs these agreements, requires that parties receive independent legal and financial advice before signing the agreement. More precisely, each party must receive advice about:
- the effect of the agreement on the rights of that party; and
- the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement.
Furthermore, the FLA sets out circumstances when a financial agreement may be set aside. They are:
- fraud, including material non-disclosure;
- if party to the agreement entered into the agreement for the purpose of defrauding or defeating a creditor(s) of that party;
- if the agreement is void, voidable or unenforceable (i.e. the agreement must be prepared properly and in accordance with the legislation);
- if circumstances have arisen since the agreement was made which make it impossible or impracticable for the agreement (or part of it) to be carried out;
- since making the agreement, something material has changed that was not previously dealt with in the agreement (such as the care of a child) and, as a result, a party to the agreement will suffer hardship if the court does not set the agreement aside;
- a party’s conduct in the making of the agreement was, in all the circumstances, unconscionable;
- a “payment flag” is operating on a superannuation interest covered by the agreement and there is no reasonable likelihood that the operation of the flag will be terminated by a “flag lifting” under that part; or
- the agreement covers at least one superannuation interest that is an “unsplittable interest”.
A closer look at the facts and applicable law in the Pole Dancer case reveal that the outcome is unlikely to be doom and gloom for binding financial agreements. Rather, the Pole Dancer case provides greater certainty for couples entering into binding financial agreements by highlighting the correct steps required to be taken prior to signing the agreement and also the requirement to obtain legal advice and certification.
What’s more, the case serves as a timely reminder for couples to address any changes in circumstances in their binding financial agreements in order to avoid the risk of the agreement being set aside.