Private Law, Uncategorised

Prenuptial Agreements Now More Important Than Ever

Prenuptial Agreements
Now More Important Than Ever

In a landmark ruling in June 2023, the Supreme Court delivered a decision regarding section 44 of the Property (Relationships) Act (PRA) 1976 that substantially changes the way that key legal provisions governing relationship property rights will be interpreted.

The case, Sutton v Bell, allows for the recognition of relationship property rights that arise prior to the qualifying relationship commencing, making the use of contracting out agreements to protect individual interests an even more essential component of modern relationships.

The parties, Mr Sutton and Ms Bell, met in July 2003. Ms Bell moved into Mr Sutton’s Pt Chevalier property in February or March 2004. In November 2004, Mr Sutton transferred the property to the Sutton Family Trust. The couple lived in the property until their separation in 2012.

Section 44 of the PRA states that the court may set aside a disposition of property if it was made in order to defeat any person’s rights under the PRA. The High Court found that the couple commenced their de facto relationship between December 2004 and January 2005, after Mr Sutton had transferred the Pt Chevalier property to his family trust. The primary issue was whether section 44 could apply to a disposition made prior to the commencement of a qualifying relationship.

Prior to Sutton v Bell section 44 had been interpreted as applying only to dispositions which occurred after a de facto relationship, marriage or civil union had commenced. However, the High Court found that as Mr Sutton and Ms Bell were “on the cusp of a de facto relationship” at the time Mr Sutton transferred to his family trust, and that Mr Sutton knew the effect of the disposition of Ms Bell, the disposition was “made in anticipation of their deepening commitment to one another”.

The Court of Appeal upheld the High Court’s judgement, and on appeal the Supreme Court found that there was “nothing in section 44 that requires an interpretation that only dispositions made after a marriage, civil union or de facto relationship commencing are subject to the section.” The Court was satisfied that Mr Sutton and Ms Bell had “a clear and present intention” to commence a de facto relationship when the disposition occurred, and that the disposition was therefore an attempt to defeat Ms Bell’s rights under the PRA even though the de facto relationship had yet to commence.

This ruling marks a profound shift in the way that relationship property law will be interpreted and disputes decided. It reaffirms that contracting out agreements are the best way to protect individual interests in a relationship. If you would like any assistance or advice with managing your property within a relationship, please contact us.