WELCOME to Divorce Café, the podcast where we demystify, detangle and (hopefully) detox the legal processes that follow a separation, with the EXPERTS in the relationship property world.  TODAY we are talking about pre-nups, or contracting out agreements!  Those least romantic of proposals.

On the home team: 

I’m Shelley Funnell

And I’m Taina Henderson.

We are partners in law and friends in life.  We work with people going through a separation to navigate what is usually a complex and bewildering process.

Shelley is a numbers whiz, who worked in relationship property law until she went through her OWN separation and experienced it all from the other side of the desk.

I love working in this area of law because it feels like important work – and I want to be involved in making it better, and this podcast and the conversations we are going to be having with people is part of that!

Today’s episode is all about prenups or as we call them in New Zealand contracting out agreements or section 21 agreements.

The agreements fit into the Divorce café conversation because while they are generally put in place during a relationship to avoid disputes after a separation, the reality is that they can be the cause of huge conflict and cost.

Today’s guest is a specialist in relationship property with a particular focus on trusts and the Property (Relationships) Act – she has a Masters degree in the subject.  She has made a specialty of complex contracting out agreements and in particular agreements between couples entering into second or subsequent relationships, with sometimes significant assets, and adult children of their own.

Amanda Morgan is a fellow director at Henderson Reeves she started out at Henderson Reeves in litigation in 2009 and now focuses on non-contentious relationship property matters and trust and commercial work.  

She’s here to discuss what it takes to make an agreement that will do what you need, when you need it to – and importantly, how to ask for a prenup without losing the “nup”.

Amanda Morgan, welcome to Divorce Café!

Thanks for having me.

Before we get into the juicy bits, in our first segment we like to have our distinguished guests pick a random question from the distinguished bucket.  Amanda, I apologise in advance but half of these questions are insightful interrogations on life in the law, and the other half were made up by Shelley. 

If you were having a dinner party and could invite 3 guests from the living or dead who would you invite?

Oh that’s quite a safe one. 

That is a safe one, hard but safe. I would probably invite Nelson Mandela, Helen Clarke and I would probably invite Ritchie McCaw. 

You possibly stand a chance of getting Helen Clarke but I don’t know about Ritchie McCaw his wife might get in the way.

This next section is called ‘The basics’ so we’re going to jump in and put you right on the spot Amanda by asking you if you can summarise what is a contracting out agreement, and why do we have them?

Certainly, so essentially contracting out is in the name so what you are wanting to do is reach your own rules or contract out of the default rules about how your assets or liabilities get classified divided in the event that you relationship ends, whether that be that you separate, or one of you dies during the relationship – so that’s sort of it in a nut-shell. 

Basically you are wanting to reach your own rules of engagement into this marriage or relationship. 

How does it differ from a contract like a lease? 

So the contract itself is governed by the Property Relationships Act of 1976 so it’s quite an old piece of law but it had some reforms in 2002 to include De-facto Relationships as well.  With that specific legislation come specific rules such as each party having to get independent legal advice, the fact that it has to be in writing and signed by both parties and the lawyer that has given you the advice has to witness it. So there are more stringent formalities around the actual nuts and bolts of how the agreement is done.   

 Hence why when you do a contracting out agreement each party takes the agreement to a different lawyer for independent advice. 

And it’s a bit more than just witnessing it right? 

Absolutely, it is a bit of a misconception – well I know in my practice anyway I’ve had agreements arrive on my desk and people ring and say hey I just need a half hour appointment, if that, for you to witness my signature and then you say well what sort of agreement is it, they say well it’s just a contracting out agreement or a prenup and its actually not a quick or easy witness. 

So as a lawyer when I am signing off on an agreement I am actually signing a certificate to say that I have explained the effects and implication of the agreement to the client and when I am explaining it what I am comparing it to is what would you get if you separated or died under the law compared to what you are going to get under this agreement.  

So that then entails another investigation into what assets and liabilities you have currently, where they have come from - the source of those - how long your relationship has been, is it a first relationship and neither of you have kids, is it a second relationship and you’ve both got kids from previous relationships or do you plan to have kids together or are you later in life and you’ve got adult children and there is no prospect of you having children together. 

So it’s actually more than a one appointment process and I think that’s where people feel clients anyway feel a little but frustrated with the process at times because they don’t think that’s explained to them, like the education is lacking to say that this is not a $500.00 job. 

In the movies they sign it right before they walk down the aisle don’t they. 

I’ve heard you saying it’s a forever document. 

Yes, but that not entirely correct as these agreements can be overturned but the reason they get overturned is generally they are really unfair or the advice hasn’t been sufficient or the process hasn’t been followed adequately.  

So yes the reason I say they are “forever” is that you need to channel time and energy and thought into it at the outset so that you’re happy with arrangements now while your signing or, in 10 years when your circumstances change but also in 30 years because potentially unless you both agree to get rid of this (which hardly ever happens) you are going to be stuck with it. 

We wanted to do an episode on contracting out agreements because knocking down contracting out agreements has become such a big issue.  And when you look at the huge variation in the agreements and the variations in the advice and the time and care taken to give the advice it feels like overturning agreements is going to be an even bigger industry and god forbid lawyers are going to be up on the stand. It is an area that can be pretty morally fraught too... 

Absolutely, I think what I find in my practice is when relationship property specialists are dealing with these types of agreements, and really it should be a specialist in this area of the law because it is complex they generally are schooling their clients up as to what they can expect. I find when lawyers who don’t usually practice in this area prepare seemingly simple agreements and then refer the other side onto a lawyer and say it should be done in about half an hour, there is a lack of understanding and education I think, as – no - the lawyer you see is going to have to ask questions it won’t be done in one appointment you will have to expect at least several appointments. 

We are going to talk a bit later about a big case from Australia which must have cost the parties hundred and thousands of dollars between the 3 different levels of court case because it wasn’t done thoughtfully and it was rushed through – yes, and there was pressure in that case as well like a time pressure. 

So who comes to you for a Contracting out agreement – as a generality? 

Generally I find that it is young couples starting out and one of them is coming into the relationship with a significant house deposit for example or they have received a significant financial injection from family, whether that be an inheritance or a gift from mum and dad or mum and dad’s trust and they are wanting to ring-fence a certain aspect of it as they are buying their first home.

The second and most common is second relationships and as we all know blended families are completely sort of the norm now and are only going to be more normal well not normal but more common as time goes on, so second relationships where people have got kids from their earlier marriages or relationships, and also a lot of older people coming together later in life where one person has built up a substantial or just more wealth than the other party which they want to protect for their own bloodline. 

Not only that, they just each have different assets they want to specifically leave... 

Yea exactly which would otherwise become relationship property under the law once their marriage or relationship was 3 years or more. 

With the increasing value of property in New Zealand and Auckland and everywhere just means that people coming into relationships with really significant amounts of assets that they want to protect and so when you are talking about millions of dollars in assets to spend a couple of thousand on that Contracting out agreement.

As a percentage of your assets it’s so small – the other point with the later in life couples I will call them is that if they were to lose well not lose but have to part with half of their assets on a separation death they don’t actually have, they may have been retired so they don’t have the time or working life to recoup what they have actually had to divide so it is quite appropriate in those, and again it has been built up pre relationship so no joint efforts of the party themselves it’s all pre relationship. 

That’s a really important distinction isn’t it in terms of agreements. 

And I think that you can compare that to the younger starting out couples where actually the likelihood apart from a big gift or an inheritance they are coming into the Relationship with nothing or a student loan often they haven’t had kids they are likely to have kids together and get married

They are starting out in their careers.

Yeah, so it is quite a different proposition to be dealing with as a legal advisor. 

That core principal from the Act is the one about equity of contribution so everybody’s contribution to the relationship is equal and they should be sharing equally the fruits of their labours. 

So do you think in terms of contracting out agreement is there a spectrum of “entry level” up into “you eat what you kill” so you get to keep what is yours? 

Yes definitely, I always say to clients there are no rights or wrongs with how you arrange these things it’s actually what is specific and relevant for you in particular so it’s not a cookie cutter get a precedent kind of approach but they do vary.  Generally with younger people starting out its generally quite simple there are not generally companies or trusts involved at that time, we are simply ring fencing a capital contribution to the relationship as one person’s separate property and actually when you talk it through with them the balance of things they are happy for the law to dictate what happens because that’s really what’s fair, the law is relatively fair.

Then you contrast that to later in life where there might be two family Trusts involved on each side there might be businesses involved so company structures that are financially separate from one another and they want to remain that way and keep everything separate. 

And often they have been burned in the past and they have already divided their assets.

Yes, or they have been widowed and there is an emotional attachment to what the deceased and one partner has built up together and protecting for that for their own kids.  

It is a really specialist area because although with those sorts of couples you can say to them yes your agreement is going to be more easily enforceable because those moral reasons to not depart from equal sharing are kind of gone when you have built up equal assets but then you start verging into the Family Protection act type thing. 

The Family Protection Act is where you have a moral obligation to adequately provide for someone you had a close relationship with in your life namely your partner and kids who are dependent on you, now you can’t contract out of that from what I understand. 

No you can’t so there is several pieces of law all operating in tandem which you have to have in mind so you are absolutely right the COA is done under the Property (Relationships) Act and just deals with assets that would be applied to those and then you have the Family Protection Act 1955 so an old piece of law that is there for good reason-  to protect people that are left essentially destitute on death - you can’t contract out of that so then you have got to think about legal structures we’ve  got the contracting out agreement does the client then need to think about a Trust to transfer safely once they have done the Contracting out agreement 

Or make adequate provision.                                     

Or make adequate provision. 

Work out what adequate means to them. 

And that’s a really good point that you make as when people come to you they say they want X Y and Z and then you pose the question what would you want if you died during the relationship, so you’re tracking along happily and you get hit by a bus - its often quite a different scenario.

Yes, I do think that people need to be educated on that as I think there is an aspect of every person wants to look out for their children because you are obviously responsible for them as a parent and you’re focused on that looking out for your kids that you’ve got a contracting out agreement that you’re not sharing anything and that you’re not making provision in the Will.  And then you are thinking you actually had a relationship with this person like a primary relationship and while you do want to protect your kids you actually want to look after that person! 

And those are legal obligations.

And the law says you have to. 

Nobody wants their will over-turned - except lawyers right – we make money. 

People generally do want to look after their spouse or partner on death to at least have them in the same standard of living standard as they have enjoyed during the relationship and so there are lots of ways you can achieve that.  For example, I’ll just say the husband dies and [the house]’s owned by his trust or him it might be that husband wants to leave the wife the right to occupy it either for her life or a certain period of time or upon a certain event happening like a re parenting for example. 

We are going to do a podcast on relationships and death. 

Do you think it is fair to say that, we’ve kind of covered this anyway, but is it fair to say that contracting out agreements can get quite expensive, why can’t you just take their instructions and put it in an agreement and let them sign it, why do you need to be involved? 

Well legally you do but also I think it’s risky if you’re not actively involved in providing advice and robust advice a lot of the time because it means that you’re really leaving the agreement to be challenged down the track.  So these agreements are done because one party does want to protect assets so there is a disparity and the person who is disadvantaged by the agreement if there hasn’t been adequate advice, investigation into what there is, there has been pressure or a time pressure or pressure to sign “because I’m not going to marry you if you don’t sign it” – then I kind of think there is no point doing it because 10 years down the track that person will say “I felt pressured, I was pressured, I didn’t get adequate advice I had no idea what I would be entitled to under the law I’m going to seek to overturn it”.  Now it is a pretty high threshold to overturn it but they do get over turned and so the whole point of doing it in the first place is just undermined (which for certainty is what happens on separation or death). 

It’s like having an insurance policy that you’re not paying the premiums on. 

And this is another reason why – the reason why lawyers have to be involved because this is social legislation – it’s put in place to protect usually the person who has less assets and for the benefit of the children of the relationship so what a COA is its somebody who wants to protect themselves or their own assets against some of those safe guards.  So you a lawyer involved and they can kind of counsel you through the ways that can be done - through that are going to be supported at the end of the day by the law.

Do you find, well I often found that when people came they don’t want to disclose all their assets so especially if you are two years into the relationship and you’ve got a complex kind of property structure and you’ve got companies and trusts and they don’t want to disclose the values of the property or the values of the company –anyone can look on Homes.co.nz

It’s even about knowing what’s even in existence so if I sit down with a client and I say OK … 

Well that feeds into the next question, sorry to interrupt, 

What’s your process when someone comes to you wanting to do a COA? 

So If I’m getting instructed to draft an agreement or advise on it basically I set up a first initial meeting and I explain to the client via email or the phone that this is a first meeting we won’t be signing the agreement at this meeting so just to give you the heads up I want to be in line with your expectations that it’s not going to be signed and sealed today which sometimes they are surprised about.  And they say “oh I thought it was just a simple contract”. 

Then I met with them and it’s generally depending on the complexity an hour appointment and I start with getting the details of the relationship so when it started, their ages, what they do for their jobs relative income earning capacity for each currently, whether they have children together or from previous relationships, whether it’s possible that they will have children together and then I get into detail about the assets and liabilities that each have, I’m asking what do you have currently, where did it come from (as in did you acquire it pre relationship starting or during), how was it funded, ‘did you get an inheritance?’, the house or acquire a company or build up a company and then I ask about their partner’s or spouse’s assets and liabilities so same details. 

And values.

Yes and rough values, I would have done a title and company search pre the meeting so I would have done under both names and then a conflict check to make sure that we haven’t acted for the other side.  Then I discuss how the law is structured and then I go through their assets and liabilities and then give them advice about how if you don’t do an agreement this is essentially how your assets will be divided up.

Because some people they might be like ‘so my inheritance is going to stay separate maybe I don’t need this agreement’?

Exactly, or ‘I didn’t know my income from my job, well it gets paid into my separate account, it’s my separate property’, well actually no it’s not. 

Kiwisaver 

Kiwisaver whatever you are contributing during the relationship so there are often people who are surprised about how things will be classified and then I ask them what you want to do. Like how do you intend this to pan out if you separate or if you die and as I say those answers can be different, generally are different, and should before each scenario and then I go away and draft the agreement if I have been instructed to.  Or I will if I’ve got an agreement that I have been asked to look at there are generally some tweaks to it from minor to major depending in how it’s structured and what my instructions are then there can sometimes be toing and froing with the other lawyer and then we can get another meeting lined up and  sometimes you can sign at that but if its complex you actually can have several meetings or if they are not actually agreed after having the advice from you how they want to structure things.

Or if there are things they can go and talk about.              

Or not talk about it.

Yeah exactly.

And then if there is a trust involved - and trustees can’t technically be a party to a Property Relationship agreement - some practitioners do include them but technically it’s not possible

How do you bring them in? 

So I bring them in, I refer to the trust, when the trust was set up, who the trustees are, who the beneficiaries are, who holds the powers of appointment and things like that in the agreement and then I will say that the parties agree that this agreement is conditional on the trustees consenting to the terms of the agreement as it relates to them and then it’s a matter of doing the trust documentation depending on what they are agreeing to.  But it could be agreeing to a Right of Occupation in the trust home for the survivor etc.

And making it conditional sometimes on that.

Yes, because for the disadvantaged party you want to make sure that the trustees are not going to say “well actually, no”.

And for the advantaged party because the agreement will become seriously unjust if the trustees don’t perform.

Yes, so that’s when they can get more complex and therefore more cost is involved with those sorts of agreements.  And then obviously the trust will have its own costs as well for preparing documentation and ratifying for what they have agreed to. 

So basically the more trusts the more entities you have the more it’s going to cost I think that applies to every area over the law.

Exactly but there is a good reason to have a trust and if there’s not a good reason you shouldn’t, you know if you’ve got a trust in place there’s generally one good reason for it. 

My initial question was going to be are there any circumstances where you would say don’t do a contracting out agreement just rely on the law that is already in place? 

Quite often, so there are a couple of scenarios - so particularly for younger couples who are starting out and they really don’t have, one of them doesn’t have anything major to protect but they are just wanting to move forward and keep everything separate for eternity, I’ll often say that the likelihood is that you will have kids, get married, one of you will take time off to look after and raise kids maybe lose a bit of earning capacity, this has the potential to become so unfair that its likely to be over-turned.

In a few years you are going to end up throwing it out is there a point.

Yes exactly, and the other scenario is the example of a capital contribution from a parent or a trust and actually you can structure that.

There are some alternatives. 

Yes so tell us about that.

So rather than distributing or gifting it to their child they can structure it as a loan and it can be a loan to one or both of them, if it’s a relationship debt it doesn’t matter whose name it is under but ideally maybe both of them.  

Ideally both so there is no misunderstanding. 

So that actually if they separate the Trust or mum and dad can re call that loan back and say we need that to be repaid.   

The caveat to that is you’ve always got to get that approved by the bank but we are quite successful as long as you propose it in a way that it’s not going to be detrimental to the bank’s interest and they are not going to compete. 

Yes, so they rank second to the bank – and you should record it, it should be in writing in a Deed of Acknowledgement of Debt. 

And you make sure it get signed and if it’s not signed you ask why haven’t you signed what needs to be changed, because yeah there are cases about that aren’t there? 

Yes and we don’t like to lose business because obviously that [Deed] is a lot cheaper but in terms of the relationship I think it’s much easier to sign an acknowledgement of debt than it is to argue a Contracting out agreement.

Cheaper and easier. 

I think what you’ve got to keep in mind in a prenup is the relationship‘s continuing so you don’t want to completely blow it out of the water with your legal advice, they can become crunchy and the issues - they are sometimes awkward to talk about. 

They are really awkward. 

So I think that’s always a back of mind is you want to be able to leave this meeting go home and have dinner across the table of each other – sorry I am jumping ahead! 

No, it’s perfect because we have got a question on that topic. 

Which question is that Taina?

Question 8

Do you have any advice on how you can have that conversation in a constructive way that doesn’t undermine this important relationship? 

I have some thoughts on it as obviously I have been through it from the client point of view as well as the lawyer point of view because it is awkward conversation and one party is getting advice by one lawyer and one is getting advice by the other lawyer and often they are both saying the other is getting the best deal because it’s kind of part of what you have to do as a lawyer because to say “this is what this actually says this is what this means” and then you are both coming home... 

And it also starts reducing your contribution to your financial contributions because that’s what the lawyers are often focusing on. 

That’s the tangible thing you’ve got to put think about and play with.

Like why would you give away this and then you’re like “hmmmm”.

And then you get very defensive I think you’re entrenched in your position, these are fundamental conversations.

Well I guess you feel cornered generally one person is pushing it or raising it and for the other person it’s like what is the way through this if our relationship going to continue then and “I don’t want to sign it in this form”... like how do we get through this? 

Maybe that’s the secret it’s just not in that form. 

And it is, what am I worth to you? 

Do you trust me, do you not trust me that I’m not going to take you to the cleaners? 

You’re at the beginning of a relationship or very early days and you’re talking about what’s going to happen when the relationship ends, it’s really hard-  you cannot do that in a way that it doesn’t become personal. 

Sometimes the way I tackle it is you are paying me a very hefty hourly rate and you need to blame me - that this - no but seriously - this is the advice that I am giving you and I am kind of forcing you to take it. 

You go home and say well my lawyer won’t let me do this.

And that can sometimes be a really good way of deflecting off the person and blaming the lawyer. 

And you’re right because you’re saying if you don’t get some protection this is really unfair and the agreement can be over-turned.

Absolutely, and the other thing I say to people is try and talk about it, don’t make it the elephant in the room try to talk about it and the best way that you guys communicate best and don’t leave it kind of festering. 

Try to lay it all out, I often ask just think about what would be fair if you separated in 3 years, what about in 5 years, or in 10 years and when you start to think like that it becomes more real and they can see that maybe after 10 years I shouldn’t be keeping all of the house, I should be sharing some of those increases.

And I think the other point you made about the non-financial contributions particularly for the party that might stay home and look after the kid’s well that is just as valuable as the party continuing to work and earn an income and is it really fair that they get to keep that as separate property and give you an allowance whilst you’re at home with the kids, like that’s the extreme but that is what could happen. 

And there is some evidence to suggest, there is actual empirical evidence that when a working person has a husband or wife at home they do better in their job and they make more money. 

Married men are supposed to live longer right and married woman live less long and single men don’t live as long as married men. 

Do you think - Shelley I know you have made some submissions on this - but do you think it gets better under the Law Commission’s recommendations?

Well definitely the law commission recommendation in 2019 -  unfortunately it was a pretty comprehensive report, I can’t remember it was hundreds of pages and I didn’t read all of it - but the government said we are just not looking into that at the moment as they are wanting to do trusts and then they are doing estates and then I think they will be coming back to this.  But one of the recommendations was that when people came to a relationship with a significant asset, the family home they get to keep the value of it at the beginning of a relationship and you are just sharing 50/50 of the increase of it while you are in relationship and I think that is really fair. We get a lot of people that come in wanting exactly that scenario because it is fair if you’ve come and you’ve built up assets and it doesn’t seem that fair to say well it is my house and it will be my house forever, I think it does sound fair to say we are going to share in the value increase while we are in a relationship together. 

The other part of those recommendations was the FISA, Family Income Sharing Arrangement and so that...we have had a podcast on Spousal Maintenance but that was another way that takes the conflict out.  I think that’s another area that’s got its problems but yes. 

Yes it’s another way to provide maintenance or alimony or whatever you want to call it in a similar fashion to the child support agreement where you have a calculator and it’s easy.

And it deals with that section 15 argument which is also a bit fraught about the person who stays home and comes out not earning as much so it equalises that. 

And it provides an easy way for the spouse or the partner who doesn’t have income to get income without having to go to Court and I think just that simplicity if might not be fair in every single case but the simplicity and the ease of gaining immediate maintenance. 

Yes and if it’s like the Child Support arrangement IRD child support you put it into the calculator IRD collects it, there’s a review provision so that if you fall out of the standard you can make use of that or misuse that to beat your partner up a little longer. 

So when can things go wrong do you think? When do these agreements fail? 

I’ve had a couple of examples where there has been a really complete imbalance of power, so one example was I acted for a person who had come from overseas and married a Kiwi person and English was their second language so they were not fluent at all and it was a completely unfair agreement so it just never would have stuck long term.  In that case I did have to get an interpreter as I just didn’t feel comfortable that my advice was being understood so I did get an interpreter.  That goes the same for the young couples starting out and really keeping everything separate and not forward thinking to how fair or unfair that is going to be 5, 10 or 20 years down the track. 

And in what way it might detract from the relationship to not be building up something up together. 

And with questions: “how do you intend to build up any sort of joint wealth?” and they say “I hadn’t really thought of that I don’t know”. 

Obviously the provisions of the act can become unstuck if they haven’t had independent legal advice - and that’s independent firms not different lawyers within the same firm - if there has been inadequate advice so really where you know that a person has been to a lawyer who has spent half an hour and it’s quite a significant agreement in terms of what it seeks to do and it’s just been signed off.

Yes there was the case where they ended up looking at the lawyers time records and saw that the lawyer spent 2 units meeting with the client

Which Is 12 minutes isn’t it

Yes sorry 2 units in people-speak

12 Minutes. 

And that agreement got thrown out and there would have been some justifiable actions against the lawyer. 

Yes because the other parties can.  So when there is a client on the other side they can sue the other side’s lawyer. 

What’s become more common since Covid too, also with people cohabiting with people across the ditch in other countries, is how you get these signed.  So generally they are “in person” with a lawyer and we haven’t had any specific legislation to allow us to witness those remotely via Zoom or other video means, but during Covid obviously things had to keep moving and so I think it’s really important to include provision in the agreement if you are going to sign remotely and then I do a pretty extensive File Note about where the meeting for my client took place in terms of were they at home, were they at work, who else was present.  Ideally you would have a witness to confirm at least that the other side is not near or in the room and they have witnessed that person sign the agreement as you have via Zoom, so that’s become a lot more common since Covid

And your client isn’t going to be thanking you 15 years down the track if you’re not able to give evidence that supports an agreement they have been relying on and if you haven’t gone through all of those details. 

Generally the times they come unstuck in most cases is the complete unfairness. 

How about overturning? So the sections are:

S21F – agreement void if it doesn’t comply with the formalities.

S21H – court may still give effect to it if failure to follow rules has not “materially prejudiced the interests of a party” I think this comes into the Zoom signing ones.

S21J – court may set aside if giving effect to the agreement would cause serious injustice.

Ok, which is a very high threshold but it does happen 

Until 2001 it was just that ‘giving effect to the agreement would be unjust’ - since 2001 / those reforms it’s ‘seriously unjust’.

So I personally thankfully haven’t had any cases that I have directly (touch wood) involved this, but the kind of quintessential case is where there is very long relationship so there is a very familiar case Clayton v Clayton[1] and essentially the contracting out was done at the start of the marriage and it was about a 30 year marriage off the top of my head – kept everything separate, fast forward 30 years and it’s become seriously unfair so you know that is a clear cut case of injustice.

So there are two ways right - if the agreement was at the time of signing seriously unjust so if it was just a shitty agreement or unfair - or if due to circumstances, a chance in circumstances it becomes seriously unjust. 

I know you have a good case, tell us, I like juicy... 

So we always like a good case, so I thought it would be good to talk about - there was an Australian fairly high profile case a couple of years ago  Called Thorne v Kennedy[2] so this was an; 

Australian property developer who was 67. He had assets of between 18 and 24 million [aussie] dollars, 

He met an Eastern European wife on the internet, it wasn’t quite as sordid as that as they both spoke Greek they both shared the same religion, he met her family you know it was - I hate to throw shade on some of these poor old characters in our cases - so anyway they met over the internet and after a few holidays together she moved to she moved to Australia.  She was 36 and had no substantial assets of her own.  She had no right to stay in Australia if the relationship ended and that was fairly important to the outcome at the end.  They became engaged.  There was a bit of a media flurry and publicity around their wedding.  Her family came over from Europe, her dress was made and then just over a week before the wedding, Mr Kennedy said to her: jump in the car we are going to see your lawyer and you’re going to sign this agreement 

True Romantic. 

True Romantic, I know what a catch. It’s a shame he died.

At least order a Limo, 

Yes he died half way through the litigation, it’s a shame. 

So he drove her to her lawyer who thankfully was a bit of a specialist well not thank fully because it didn’t make any difference in the end...on the 20th of September this was ...he took her to the lawyer’s office, that was the first time she was made aware of the contents of the agreement he wanted her to sign, I think he said “If we marry you sign agreement” was what they quoted (that’s not me being anti Greek).  Mr Kennedy’s lawyers were insistent that Mr Kennedy wanted the agreement signed the following day, on the 21st of September.  

Her lawyer gave some speedy advice not to sign she said it was “entirely inappropriate”, it only protected Mr Kennedy’s interests and in no way considered her client’s interests.  

Just so that we know what the agreement actually said it gave her a monthly allowance during the marriage of $4,000 a week, which may seem a lot but that’s very little in the scheme of things for his assets.

Was it $4000 a week or a month? 

A month, while they were living together so she could live rent free in a penthouse he planned to build, during the relationship, so not after and her family was going to live in another unit. 

But if they separated within 3 years she would get nothing and that’s with or without kids.  If they separated after the three year mark, with no children she would get $50,000.

So she has relocated to Australia to set up a life, she loves this man, she wants to have children - was the evidence.  If he died while they were still together - which was the only risk she thought she would face - she would get the penthouse apartment ($1.5M) and $5,000 per month so that’s if he died while they were together.

She signed the agreement 4 days before the wedding and she actually signed another one 4 months later.  After 4 years they separated and MS Thorne went to the family court and the judge threw out the prenup and the postnup on the grounds of undue influence.  The judge pointed to the financial inequality, the lack of Thorne’s permanent status in Australia, her reliance on Kennedy for all things, the fact she was in love with him and was desperate to have a child with him, the public nature of the upcoming marriage and the time pressure on her so that’s another important part. 

He appealed and the Full Court of the Family Court which I guess is like our High Court they said no that prenup is fine that was duress.

She knew what she was signing. 

She knew what she was signing, that pressure is not enough, and luckily someone supported Ms Thorne to go to the High Court of Australia, where a panel of 6 judges said the trial judge was right to say Thorne had had no options available to her that were fair and reasonable.

It was open to the judge to conclude in light of the combination of factors that Thorne had no choice or was powerless other than to enter into the agreement and the important the kind of crux of that undue influence was they said the wife was subject to a special disadvantage when she entered into the agreement which was all of those factors but particularly that she would have to leave the country if she didn’t marry.  He was aware of the disadvantage and he took advantage of it to get her to enter into an agreement that was entirely inappropriate and fully inadequate so it was that combination of factors. 

43.21

Because the Courts...there is always going to be an element of influence and pressure because of the very nature of them... it’s just where that becomes seriously unjust.

And I think like the point there - she knew what she was entering into I don’t think that dilutes the fact that it was a seriously unjust agreement. 

And like they say it wasn’t just that it was seriously unjust it was that there was an influence she was powerless against it. 

I think that was more the pressure on that case, it was the pressure of it.

Which he was taking advantage of it and pushing it that the case does talk about amendments they weren’t prepared to make substantial amendments to it now that is something that is a big part of our work isn’t it, how you make it fairer for people.

If the agreement had been more balanced, would there have been the same outcome?

If she got $10,000 or $20,000 

I think it has to be relative to the pool - like what the otherwise asset or relationship property pool would be so um 

$50,000 after 3 years 

$50,000 as a percentage of, I mean I guess we don’t know the ins and out, I guess a lot of that was going to be relationship property any way, but yeah I think if it had of been more forward thinking, if we are together 2 or 3 years this is the outcome, if we have kids together, I’ve done an agreement where a young couple was entering into it, I was acting for the female and what I suggested to her which ultimately happened was in the event they got married or had a child together they agreement became null and void essentially.  So that was a good way of protecting it in its infancy,   the pool from a relationship that might have terminated early but actually was more appropriate if they continued on with the relationship. 

There are a few different future proofing things like that that you can use, you can stage it so that once they have kids maybe they share Kiwisaver and incomes and  increases in the home. 

The other thing to watch out for is review clauses, most people think ‘ah that’s alright we have got a review clause in there’ but the way that I see most review clauses that I see drafted it’s actually only if both parties agree to make changes it will be changed otherwise it continues on in his current form which is essentially useless.

Well it almost makes it worse because you can say we pulled it out we discussed it. 

I wanted to make changes but she didn’t so we are just trucking along and it’s pointless really. 

Because have you ever actually changed an agreement with a review clause? 

And do they ever remember to review it in the 5 years.

I’ve had a few reviews but it’s usually when there changing, they are buying a house. 

I’ve had addendums, for different scenarios and that is a balance process because I do think you have to be careful of setting up milestones in a way that actually affects them hitting the milestones, such as saying you get another million dollars or whatever when you have kids. 

Or when you’ve been together 10 years. 

Pumps the breaks.

Yeah, or well I’m not going to have kids, so it is really nuance and it’s so fact/person specific.

Like all these agreements, they are bespoke they are not cookie cutter.

And they take time to get right, time to discuss at home, time to talk to your lawyer.

The other style I have adopted is in my back ground I have a really detailed narrative, a snapshot of their relationship and their financial status and their jobs and their income earnings, you see a lot of agreements that say they living together on this date and that’s it and they just want to contract out of the act and that’s it, well I’m not picking it up in 10 years but another lawyer is that’s kind of useless. 

Or a judge

Or if it’s being challenged, it’s hard to... yes.

And they are both agreeing these are the facts here and now and they are both signing it so there is less room for wriggling out of that down the track. 

It also makes the other lawyer’s job easier as there are a whole lot of facts so they can just say ‘Is that right, is that right?’ 

Have you ever found yourself not wanting to sign off an agreement or actually not signing off an agreement because it was so unfair or you could see the person was being pressured? 

Absolutely, and I genuinely felt that the person was not, you know I couldn’t sign the certificate because they did not understand my advice, because of pressure in one case and another one was the language barrier.

They wouldn’t have been making that decision if they had of... 

Yeah they wouldn’t have been making an educated decision about the terms of the agreement. 

So what about if it’s really really unfair but they totally understand the affects and implications can you sign off on that? 

I think you can, I explain to clients it’s not my job to tell you what’s the right or wrong thing to do based on morally what I think is going to be good for you long term, my job is to explain the law, explain what the agreement providing for you and for me feeling confident that you are understanding my advice. 

And the implications of what you are signing longer term. 

Longer term, then I will sign off on it, but I will generally get the client ... I will summarise that advice in a letter to acknowledge that despite my advice not to sign they wish to sign regardless and they know that there is a risk involved with this moving forward that the agreement could be over-turned so yeah I mean there have been occasions where I have simply said I refuse to sign off because I don’t think you understand, and I say to them you might find a lawyer that will sign this off...

I don’t want to be that lawyer.

Or unless until this agreement is changed in some way I just don’t think you are understanding the ramifications. 

And sometimes that can tip the balance to, often there is a bit of a power imbalance.

Always, generally. 

It’s quite powerful to have a partner come back and say my lawyer says she is not going to sign it because it is so unfair. 

“What are we going to do?” 

Maybe that will change something, exactly, what we are going to do, and then he or she can go back to their lawyer and say “Ok how can we make this... what are the things... is that true that this might get thrown out?” 

I think collaboration with your colleagues on the other side is really important too, so again thinking: we have got a continuing relationship, we want these guys to be together, trying to get on board with each other and understanding the different positions and collaborating. 

I love it when a lawyer picks up the phone, because you can cut through so many things. 

Rather than email wars. 

Yeah, you can say something in jest that jumps to the heart of it rather than a bullet in a letter.

I reckon we jump to the quick fire questions, we have covered some of our other ones. 

So this is quick fire question time. 

Should I be nervous? 

Definitely (Laughter).

You get 10 questions, actually there is 12 so 12 questions of 12 seconds each to answer them. 

And you can pass. 

No you can’t pass. 

You are first I think. 

Oh, I’m first. 

Quick Fire Questions

1.                   Q: Can you DIY a contracting out agreement?

 A: To an extent bit not without advice. 

 2.                   Q: Does a COA take hours, days, weeks or months to get done?

A: All of the above, 

That’s a good one. 

3.                   Q: Is there a generational factor to prenups – or do you see just as many Boomers as Millennials wanting contracting out agreements?

 A: There possibly is a bit more of a trend with the younger generation, its more normal to operate your finance separately. 

 Maybe also people aren’t getting together so early as well, you know

 I think too the concept that you might have multiple relationships in your life is more a millennial thing than a boomer thing which is you were married generally once. 

 Like an Albatross.

 It’s like your jobs, you used to stick at one job forever 

 Ok this is particularly pedantic, I know this is meant to be 10 seconds but

That’s for the answer, were allowed to take as long as we want for the questions. 

 4.                   Q: I do have the name of my ex-husband, Can you make someone give up your name after a divorce?

 A: No, I don’t think you can. 

 That’s good to know 

 Unless you have got a specific order from the court, I think your name can be whatever you like it to be. 

 5.                   Q: What is your top tip to beat imposter syndrome?

Not that you would have ever had experienced in this, 

A: No never. Fake it till you make it. 

6.                   Q: When making work wardrobe decisions, do you find yourself more influenced by Suits or Legally Blonde?

 A: Probably legally blonde.

 7.                   Q: If you were in a Taylor Swift song, would you be the one wearing high heels, or the one wearing sneakers?

 A: High heels 

 Ah, I would go for the other one

 8.                   Q: What beverage would you associate with your husband asking you to sign a prenup? a) a cup of cold sick b) a poisoned chalice c) a tall glass of water d) Whisky sour on “thin ice”?

A: Whiskey Sour on thin Ice 

Or all of the above  

9.                   Q: What would you say has been the classiest celebrity divorce? Apart from mine obviously 

A: I think the classiest would be the ones we don’t know about to be honest. 

Good Call 

It’s funny on the way down we were talking about Sports Café and we were talking about in the media there was the Matthew and Sally Ridge back in the 2000s there was quite a lot of coverage of that, I remember as I think I was a law student at the time. I think the classy ones are anonymous and you don’t hear about, as they should be. 

 10.               Q: Ok, Your best on screen lawyer?

A: Erin Brockovich 

 11.               Q: What is your favourite dance move?

 A: The worm 

 We were going to bring it up if you didn’t. 

 So we have heard.

 I thought it was the caterpillar. 

12.               Q: If you weren’t a lawyer, what would you be?

A: A dentist 

What? 

Or I’d own a lawn mowing business, a Lawn Mower 

Our last section is called: Best Question Ever:

And for you Amanda, that question is: 

What is one professional experience you have had that changed your perspective on life or work forever? That you can talk about. 

Um, Actually I think you know there is that funny saying when one door closes and you feel like it’s the worst possible outcome at the time but it means another door has opened that otherwise would not have opened.

Don’t tell us you applied for a job at Webb Ross? 

Noooo, no no.

I had a knock down from another firm very early on in my career and it really gave me the drive to be like: you know what? I am a good lawyer I can do this and that’s what lead me to do my Masters actually during my working career because I thought I can do this because I am interested and I can do this, so it’s funny how life pans out right, I never would have ended up at Henderson Reeves which I love and I probably never would have been doing Relationship law. 

Sometimes it’s good to remember the criticism then aye? 

It’s like I feel thankful for it now, but like I say at the time I felt broken, so I think you’ve just got to remember that you get knocked down... 

The cracks are where all the light shines in. 

Yes all of that. 

And I think that applies to relationship property as well and there is nothing like someone telling you, you can’t do it to make you want to do it. 

So thanks Amanda, this has been Divorce Café, if you like this episode you can find out more about Contracting out agreements and the law behind them look for the article that with the link to this podcast. You might like to check out the other Podcasts on other issues to do with Relationships and separations. 

Hope you enjoyed it – see you next time! 

[1] [2013] 3 NZLR 236; [2013] NZHC 309 and see related decisions
[2] [2017] HCA 49; (2017) 263 CLR 85