Protection of Assets Obtained after a Relationship Breakdown

Clients often enter into a financial agreement to protect their assets in the event of the breakdown of the relationship. This may include inheritances that they anticipate receiving post separation. The Supreme Court of Victoria – Court of Appeal recently handed down a judgment in the case of Orwin v Rickards [2020] VSCA 225. This concerned a professional negligence claim brought in the Supreme Court of Victoria. The underlying issue of the case involves a binding financial agreement between Ms Orwin (the appellant) and her former de facto partner, Mr Sarah.

Facts:

In 2009, Ms. Orwin hired Mr. Rickards as her solicitor to create a binding financial agreement with Mr. Sarah. The agreement under s90UC of the Family Law Act 1975 was signed by both parties in 2010. Ms Orwin and Mr Sarah separated on a final basis in 2011. Ms Orwin received a considerable amount of inheritance from her mother after separation. In 2015, Mr. Sarah applied to the Federal Circuit Court (“FCC”) to overturn the financial agreement. He alleged non-disclosure, duress, undue influence, and unconscionable conduct, seeking a fair adjustment of property interests.

At the time of the FCC trial, Ms. Orwin’s property, including her inheritance, was valued at over $11 million. After the family law proceedings, she had to pay $572,470 to Mr. Sarah. Consequently, she sued her lawyer in the Supreme Court of Victoria, seeking compensation for the fees paid to Mr. Rickards for the financial agreement and the amount she paid to Mr. Sarah in the family law settlement.

The trial judge’s decision, upheld on appeal, dismissed the application due to the parties not being in a de facto relationship when they made the agreement. The significance lies in the trial judge’s comments on Binding Financial Agreements, backed by the Full Court.

Those comments made by the trial judge were that even if the s 90UC financial agreement was upheld it still would not have provided Ms Orwin full protection for her assets, particularly, the inheritance that she received from her mother after separation [at 229-230]. After all, the Family Court and Federal Circuit Court treat property acquired post separation at their discretion (Calvin & McTier [2017] FamCAFC 125 at [51]). The judge also referred to the judgment in Bonnici & Bonnici (1991) 105 FLR 102; 15 Fam LR 138; (1992) FLC 92-272 at [43].

Quote:

“A property does not fall into a protected category merely because it is inherited. On the other hand if there are ample funds from which an appropriate property settlement can be made and a just result arrived at, then the fact of a recently acquired inheritance would normally be treated as the entitlement of the party in question.

The other party cannot be regarded as contributing significantly to an inheritance received very late in the relationship and certainly not after it has terminated, except in very unusual circumstances. Such circumstances might include the care of the testator prior to death by the husband or wife as the case may be or other particular services to protect a property.”

Moreover, the trial judge’s comments prompt the inquiry of how to ensure complete protection for assets obtained afterward when an active s90UC financial agreement is in place. Furthermore, does a s90UC financial agreement on its own provide enough security, or does it necessitate additional documentation?

Contact our trusted family law team at De Saxe O’Neill Family Lawyers for further information on this topic. Our Northern Beaches Lawyers are here to assist you, call 02 9948 3820