The Interpretation of Financial Agreements

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By Seasonal Law Clerk, Rebecca Brun

A recent case in the Family Court has again highlighted the need for expert care to be taken when drafting Financial Agreements. In a recent decision of Warrick & Mia [2018] FamCA 426, the Court was asked to determine whether a Financial Agreement entered into during the parties’ marriage should be set aside because of the ambiguity of a particular provision within the Agreement.

In that case, the key provision the parties disagreed on provided that in the event of the breakdown of their marriage, jointly owned property acquired by the parties during their marriage should be divided between them on a ‘contribution basis’. No further definition of “contribution basis” was provided for. The husband proposed, ‘contribution basis’ should be given a broad meaning to include non-financial contributions. The wife, on the other hand, argued for a narrow reading, limited to direct financial contributions.

The Court was concerned with finding the clear intention of the parties and the intended meaning of “contribution basis.’ The Court reiterated the High Court’s approach to this task – that there must be an objective rather than subjective assessment of the parties’ intentions. The Court found that it was not possible to envisage that the phrase in question could include non-financial or indirect contributions as contended by the husband. The Court commented that this did not seem to be the general or specific intention of the parties in entering into the Agreement. This was as a result of the Court finding ‘contribution basis’ was an imprecise phrase, incapable of definite or precise meaning. Therefore the Court was unable to attribute to the parties any particular contractual intention in relation to the Agreement. Consequently, the Agreement was unclear and set aside.

The case illustrates the importance of provisions within an agreement accurately and unambiguously reflecting the parties’ intentions at the time of making the agreement. The meaning to be given to the expressions used in the agreement must be clear and their meaning certain. This is necessary to ensure a parties’ agreement is not set aside by the Court if a dispute arises. As the Court commented, if parties intend to include or exclude non-financial contributions, a ‘simple stroke of the pen’ can make that clear to the Court.

Hence, although the parties themselves may be clear as to the intent and meaning of the agreement, great care needs to be taken to ensure that that intent is clearly articulated within the agreement itself failing which it may be susceptible to being set aside by the Family Court.

For further information, please do not hesitate to contact us.

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