BY Jen McMillan – Dec 12, 2025 8:35 am AEDT
Snapshot
- Drafting and advising on binding financial agreements is complex, and lawyers can face negligence claims years later if agreements are set aside.
- In R Lawyers, the High Court confirmed that time limits for such claims may not commence until separation and in this case, the solicitors’ advice was too general and failed to address specific risks, including the risk of the agreement being void for uncertainty.
- Practitioners should provide tailored and detailed advice, ensure clarity in terms, document advice thoroughly, and retain files well beyond the usual period to mitigate future liability.
Drafting and advising on a pre-nuptial binding financial agreement (‘BFA’) can be a complex and challenging process. What is more, when the parties separate and one is seeking to set the BFA aside, the solicitors who prepared or advised on the BFA can find themselves caught in the crossfire.
The facts of R Lawyers v Mr Daily & Anor [2025] HCA 41 (‘R Lawyers’) are that, in 2002, Mr Daily instructed R Lawyers to advise on and prepare a BFA before his marriage. As part of their advice to Mr Daily, R Lawyers wrote to him as follows:
‘Under the Family Law Act 1975 (Cth), agreement can be set aside if:
- the agreement was obtained by fraud, including non-disclosure;
- the agreement is void, voidable or unenforceable;
- it is impracticable for all or part of the agreement to be carried out;
- there has been a material change in the care of a child leading to hardship if the agreement remains; or
- the party engaged in unconscionable conduct.
Unconscionable conduct relates to excessive or unreasonable behaviour by one party, especially the party who is in the superior financial position.
As you can see from the above, it is indeed difficult to ensure the document that we prepare for you is effective in the event that you subsequently separate.’
In 2002, a draft agreement was prepared by R Lawyers but was only signed by Mr Daily. In 2005, Mr Daily sought advice from R Lawyers on a different BFA prepared by Ms Daily’s solicitors. This was amended by hand by R Lawyers and signed by both Mr Daily and Ms Daily on 21 July 2005. They married later that year and had two children, born in 2006 and 2009. They separated in September 2018.
The proceedings
Ms Daily filed an application in the Federal Circuit and Family Court of Australia seeking an order to set aside the BFA. In response, in case the BFA was set aside or unenforceable, Mr Daily joined R Lawyers to the proceedings, seeking damages for breach of contract and negligence relating to:
- the drafting of the BFA;
- the provision of advice about the terms of the BFA; and
- the provision of advice about the operation of the Family Law Act.
The primary judge found the BFA was liable to be set aside on hardship grounds under section 90K(i)(d) of the Family Law Act and also found the BFA was void for uncertainty. These findings were not disturbed on appeal, nor was the finding that R Lawyers breached the duty of care it owed to take reasonable care in advising Mr Daily. Specifically, the primary judge found the advice given was general and cursory, was not specific to Mr Daily’s circumstances and did not identify the potential for the agreement or any part of it to be void for uncertainty.
The High Court considered whether Mr Daily’s claim against R Lawyers was statute-barred as the BFA was entered into more than six years before the claim was made, but decided that time did not begin to run until the couple separated.
In this case, Mr Daily’s damages were limited to the legal expenses incurred in contesting the validity of the BFA on grounds of uncertainty. However, the stress and cost associated with the protracted litigation would have significantly exceeded the damages at issue.
Takeaways
In light of R Lawyers, when considering whether to accept instructions to draft or advise on BFAs, lawyers should have in mind these practical pointers:
- While it is useful to provide general pro-forma advice about the numerous ways in which a BFA might be unenforceable or liable to be set aside, it is important to engage with and identify the particular risks associated with the particular BFA, and with the particular circumstances and anticipated future circumstances of the parties.
- Bear in mind the comments of Aldridge J in Abrum v Abrum [2013] FamCA 897 at [39]-[49] concerning the obligation to provide proper legal advice under the Family Law Act: advice must be real and meaningful, directed to the parties’ circumstances and their present rights, and must address the advantages and disadvantages for the party making the agreement.
- Particular attention should be paid to both the formal requirements of a BFA and the clarity of its terms. Consider whether there is any ambiguity in the treatment of potential future assets of the parties.
- Advice should be recorded in a detailed file note and, ideally, confirmed in writing to the client.
- As a claim may be brought against a lawyer many years after a BFA is executed, it is prudent to retain the file well beyond the seven year period specified in rule 14.2 of the Legal Profession Uniform Law Solicitors’ Conduct Rules 2015 (NSW), in order to preserve evidence to defend any potential claim.
This article originally appeared on lsj.com.au