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In January 2011, the Family Court decision of Wallace v Stelzer ¹ brought much needed certainty to the, often convoluted, area of pre-nupital agreements also known as Binding Financial Agreements or ‘BFA’.

Wallace, also known as the ‘Pole Dancing Case’, held that the 2010 amendments to the Family Law Act 1975 concerning pre-nup arrangements were valid, thus, settling a vexed issue of law.

In Wallace, the applicant husband met the respondent wife at a Sydney club where the latter worked as a pole dancer. They were in a de facto relationship for seven years and eventually married in 2005.

Prior to the Wallace marriage parties entered into a binding financial agreement which provided that the husband would pay the wife $3,250,000 if the marriage failed within four years. The husband had a significant employment income and other assets. The marriage broke down within two years.

In mid-2007, the husband sought to set aside the agreement on the grounds that it was fatally flawed as the solicitor’s certificate annexed to the agreement was incorrect and could not be remedied. Alternatively he claimed that the agreement should alternatively be set aside on the basis that the wife fraudulently induced him to execute the financial agreement.

Binding Financial Agreements and the Law in Australia

In 2004, the federal government introduced changes to s 90G of the Family Law Act. The changes required solicitors to certify they had taken certain steps to ensure their clients understood their agreements.

In 2008, the Federal Court in Black v Black held that for an agreement to be binding there needed to be strict compliance with s 90G. This gave way to a rash of litigation with people attempting to avoid their obligations on the basis their lawyers had not followed those steps.

Following Black v Black, the government in 2010 amended the Act to relax the technical requirements for an agreement to be binding. Thus, courts now have discretion to uphold an agreement where certain technical steps were not taken and, furthermore, the list of technical requirements for the agreements has been narrowed ²

The potential effect of these amendments was that the Agreement may be held to be valid despite the fact that the certificate annexed to the Agreement was incorrect.

The husband claimed that the amendments should not apply to his case retrospectively as this was unconstitutional because it interfered with the judicial process.

The Court Ruling on Wallace v Stelzer

The Court upheld the validity of the agreement and it rejected the husband’s contention that the 2010 amendments were unconstitutional as they operated retrospectively, thus, interfered with the judicial process. The Court did not agree that the amendments interfered with the judicial process because of its retrospective application. On the contrary, the Court held that:

The purpose and effect of the 2010 Amendments is to establish a revised general legal regime concerning agreements, binding on all relevant persons including the Applicant (husband), but not directed at him. The Amendments are not the equivalent of a bill of attainder nor a bill of pains and penalties…accordingly, there can be no constitutional objection on Chapter III grounds merely based on the legislature’s retrospective intervention by the 2010 Amendments…³

The Impact of the Pole Dancer Case

Prenuptial agreements have played an increasingly important role in modern marriages. Indeed with almost 50’000 divorces occurring each year ⁴, prenuptial agreements can be an important means through which to settle property division.

However, these prenuptial agreements in Australia, governed by the Family Law Act, have been controversial. Due to the perceived high level of technicality about how they should be agreed and drafted leading some lawyers to argue that they are “not worth the paper in which they were written” ⁵.

Law firms have historically been very selective about doing pre-nups for because of the risk of being sued and because of the time and expense involved in preparing them.

The 2010 amendments sought to reduce the difficulties in preparing pre-nups. The case of Wallace v Stelzer demonstrates that some pre-nups with technical errors can be held valid as a result of these amendments and, furthermore, the effect of these amendments applies to pre-nups prepared before they (the Amendments) were passed.

Hence, the case of Wallace has introduced a level of certainty into this area. As a result of Wallace, pre-nups entered into by couples before 2010 can still be considered valid, even if they do not strictly comply with the legislation.

Consequently, the fact that the solicitor’s certificate annexed to the agreement was incorrect did not invalidate the financial agreement between the husband and the wife because the 2010 Amendments- deemed valid- relaxed the technical rules and gave the courts a broad discretion.

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Prajesh Shrestha

Online Legal Information Author at Family Law Express

'My name is Prajesh Shrestha and I am currently in my 3rd year of the Juris Doctor at the University of Sydney.Upon graduating, I am interested in becoming a legal practitioner. My areas of interest includes family law and conveyancing. I also have a strong and abiding interest in social justice and as such I am undertaking a legal internship at the Public Interest Advocacy Centre performing legal research, client interviews and drafting.

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