Many family lawyers are reluctant to have their clients enter into binding financial agreements and this article looks at some of the reasons for that.
Firstly, for a financial agreement to be binding each party has to receive independent legal advice. The cases show that the court has been prepared to look behind the certificate of independent legal advice if one party says they did not receive the advice. The court has been prepared to enquire whether the solicitor giving the certificate has maintained a file note of the advice given and has been prepare to also enquire about the length of time taken to give the advice. If the court finds that adequate or proper advice has not been given, the court has been prepared to find that the financial agreement is not binding.
Next, there are quite a few grounds contained in the Family Law Act on which the court can set aside a financial agreement. Under Sections 90K and 90UM of the Family Law Act, the court can set aside a binding financial agreement if certain circumstances are proven. The grounds on which a binding financial agreement can be set aside include the following:-
- That the signature of one of the parties to the financial agreement was obtained by fraud (this includes non-disclosure of a material matter);
- That the financial agreement was entered into for the purpose of defrauding or defeating a creditor of one or both of the parties or with reckless disregard for the interests of a creditor;
- That the financial agreement was entered into for the purpose of defrauding another person who is in a de facto relationship with one of the parties to the agreement;
- That the financial agreement was entered into when one of the parties to the agreement was under duress, such that they were not operating of their own free will when entering into the agreement. Examples of this situation include where the BFA is signed under threat of not getting married or not moving in together. Another example is where one party is in a position of special disadvantage – for example where one party is pregnant and feels that they have no choice but to sign the financial agreement in order to receive financial support from the other party;
- If the financial agreement is void or unenforceable (as a matter of contract law) i.e. due to mistake, misrepresentation or when the court finds that in the process of negotiating and preparing the financial agreement, one of the parties engaged in unconscionable conduct;
- That the financial agreement was entered into in circumstances where one party has failed to disclose assets relevant to the agreement or has otherwise failed to give full disclosure of their relevant financial circumstances;
- That the circumstances have changed since the time that the financial agreement was entered into and that change of circumstances make it impractical to implement all or part of the agreement;
- That, since the financial agreement was entered into, there has been a material change in circumstances relating to the care of a child of the marriage or relationship and as a result of the change in circumstances, there would be hardship caused to the child or a party to the agreement, if they are a carer for the child, if the agreement is not set aside.
Some of these grounds will not be discoverable by the ordinary enquiries that a solicitor would make when a client is wishing to enter into a binding financial agreement. Further the provision of proper legal advice requires a careful consideration of the circumstances of the matter and well as a proper exchange of relevant disclosure.
If the financial agreement is set aside, then the parties’ rights in relation to property settlement or spouse maintenance are their rights under the Family Law Act and the court then proceeds to determine the parties’ respective property settlement entitlements on the basis that there is no agreement to have regard to.
Written by
Stephen Rugendyke
Special Counsel
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