This interesting question was analysed in the case of Squibb & Graham.
The wife wanted to preserve the BFA, which was supposed to be a prenuptial agreement, and for the court to rectify its badly drafted parts.
The judge noted that both barristers agreed that the financial agreement was “not a model of clarity”. Further, he said, “The document bears all the hallmarks of having been the subject of an internet search and….completed under the misapprehension that it complied with all the (necessary) legal requirements.”
After separation, the husband decided to challenge the agreement.
The problems in the agreement included:
- Omission of the compulsory requirement in the Family Law Act that, to be a “financial agreement”, it had to stipulate that it was made under s90B, 90C or 90D (relating to marriages).
- A nonsense paragraph saying that it was governed by the laws of the State of Victoria. Unfortunately the lawyers had not understood that the Family Law Act is a Commonwealth Act and is not a law of Victoria.
- And, finally, the husband argued that the agreement was not a just and equitable settlement between the parties and didn’t take into account all their respective contributions to the relationship and to their family.
The judge noted that the agreement referred to their marriage and “their respective rights” to property and spousal maintenance, and it was clear that the agreement was intended to cover their marriage and any future separation.
He then considered the law about rectifying contracts or agreements.They stated that the Court will construe an agreement to give effect to the intention of the parties, even if that intention has been obscurely expressed.Further, there was to be no “limit to the amount of red ink or verbal rearrangement or correction which the Court” allows, as long as it is clear enough that a reasonable person would have understood what the parties intended.
So, the Court decided it was clearly the parties’ intention (if they had understood the law properly) that the agreement was to be a prenuptial agreement and they rectified it to specify that it was made under s90B.
Secondly, it was clear that the statement about the agreement being governed by the laws of the State of Victoria should be replaced with a new clause stating that the agreement was governed by the Family Law Act.
Finally, the argument that the agreement was not a “just and equitable settlement” was rejected because “it is not for the Court to make good a bad bargain”.An identical statement was made in the High Court case of Thorne v Kennedy.
Accordingly, the rectified agreement was found to be legally binding.
Although the wife escaped with a valid agreement, it is dangerous to have binding financial agreements prepared by inexpert lawyers.
How we can help
To avoid needless litigation we are very happy to help with any queries you have in relation to BFA’s. Please do not hesitate to contact us.