A Prenuptial Financial Agreement, Formally Compliant but Concealing the True Finances — the Court Sets the Agreement Aside

This case concerned a Binding Financial Agreement (BFA) entered into prior to the parties’ marriage. At the insistence of the husband’s family, the parties executed the agreement with the intention of pre-determining the division of property in the event of a relationship breakdown.

On its face, the agreement satisfied the formal requirements under the Family Law Act 1975. Both parties had signed the agreement and obtained independent legal advice, with the relevant legal certificates duly executed. Accordingly, the agreement appeared to be a valid and binding BFA.

However, following the breakdown of the marriage, our client (the wife) challenged the enforceability of the agreement. She asserted that she had entered into the agreement without knowledge of the husband’s true financial position, and that her consent had been formed on the basis of a fundamental misunderstanding.

The critical issue in this case did not lie in the wording of the agreement itself, but in whether the financial foundation upon which the agreement was entered into was accurate and complete.

Through a detailed forensic review of the husband’s disclosed financial position, our team uncovered a series of material misrepresentations across multiple key asset categories, each of which contributed to a distorted picture of his true wealth.

First, in relation to real property, the husband disclosed that a property under his name was valued at approximately $365,000, with an outstanding mortgage of only $30,000, thereby suggesting an equity position exceeding $300,000. However, upon further investigation, it became clear that the property had been recently purchased, with the husband contributing only a $50,000 deposit and financing the remainder through borrowings. The actual mortgage was approximately $315,000, meaning his true equity was significantly lower. This was not a mere valuation discrepancy, but a fundamental misrepresentation of the asset structure.

Secondly, in relation to company and investment assets, the husband listed a company and associated investments as separate asset categories, inflating his overall asset position. Evidence at trial revealed that these investments (including precious metal bonds) were already incorporated within the company’s value. More importantly, the husband admitted under cross-examination that the company and its assets were not beneficially owned by him, but were held on behalf of a family member. He neither derived income from nor exercised control over these assets. This crucial information was not disclosed to our client or to either party’s legal representatives at the time of entering into the agreement.

In addition, the husband listed a purported liability of approximately $200,000 owed to a family member. However, no documentary evidence or satisfactory explanation was provided to substantiate the existence of this debt. The Court ultimately found that this liability lacked any factual basis and further contributed to the misleading presentation of his financial position.

The primary challenge in this case was to set aside an agreement that was, on its face, fully compliant with the formal requirements of a BFA. In particular:

This required a shift away from form-based arguments and towards a substantive analysis of the integrity of the agreement’s underlying financial foundation.

Our approach focused on reframing the case from one concerning the fairness of the agreement to one concerning the validity of the consent upon which it was based.

We undertook a detailed reconstruction of the husband’s financial position, systematically testing each disclosed asset and liability. This included:

Crucially, we elevated the issue beyond mere non-disclosure and established that the husband had made material misrepresentations, presenting a significantly inflated financial position that directly influenced our client’s decision to enter into the agreement.

The Court accepted our submissions and found that, notwithstanding its formal compliance, the agreement was vitiated by material misrepresentations as to the husband’s financial position.

Accordingly, the agreement was set aside pursuant to s 90K(1)(b) of the Family Law Act 1975. This outcome restored our client’s entitlement to have her contributions assessed under the statutory property settlement framework, rather than being constrained by the terms of the agreement.

In this matter, our team identified at an early stage that the real issue did not lie in the terms of the agreement, but in the financial foundation upon which it was built. By systematically reconstructing the husband’s actual financial position and testing each disclosed asset and liability, we uncovered a pattern of material misrepresentations that fundamentally undermined the agreement. We then strategically reframed the case from one of contractual fairness to one of defective consent, enabling the Court to focus on whether the agreement was entered into on a genuine and informed basis. Through this approach, we were able to successfully set aside an agreement that was otherwise formally compliant, and restore our client’s right to pursue a fair property outcome.