Setting aside a financial agreement...

Family Law

because of changed circumstances relating to children- can it happen??

In a recent decision handed down by the Full Court of the Family Court of Australia on 4 November 2016 the Court had cause to consider whether a Judge was correct in setting aside a Binding Financial Agreement under Section 90K(1)(d) of the Family Law Act. That subsection states, relevantly, that a Court may make an Order setting aside a Financial Agreement if, and only if, the Court is satisfied that since the making of the Agreement a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has care and responsibility for the child, a party to the Agreement will suffer hardship if the Court does not set the Agreement aside. 

Somewhat surprisingly, there have been very few cases that have examined this particular subsection of the Family Law Act. It is a potentially fertile ground for argument when one party seeks to set aside a Financial Agreement which could have been entered into a number of years earlier.

You will see that there are a number of critical elements that must be satisfied before a Court may make an Order setting aside a Financial Agreement under this particular subsection. In particular:

  1. There must be circumstances that have arisen since the making of the Agreement, being circumstances of a material nature relating to the care, welfare and development of a child of the marriage;
  2. It must be demonstrated that the child or the particular parent will suffer hardship if the Court does not satisfy the Agreement;
  3. The hardship must result from the material change in circumstances and not from some other case; and
  4. The Court may then set aside the Agreement if it appropriate and make any other Order it deems appropriate.

The Full Court picked up an error made by the Judge who first heard the case. That Judge did not link the hardship with the material change in circumstances. That particular Judge made an error in concluding that the Financial Agreement itself inevitably created hardship when in fact the Judge should have, if available to him, linked the hardship with the change in circumstances. 

It is the changed circumstances which must give rise to the hardship and not the Agreement itself. 

The Court quite rightly pointed out that there is no statutory provision which enables a Financial Agreement to be set aside merely because it is unfair. People are free to enter such Binding Financial Agreements as they see fit subject to compliance with the statutory requirements. 

I have no doubt this ground for setting aside these agreements will be tested again, soon.

Ben Farmer