The courts have reaffirmed the importance of seeking independent legal advice and assistance regarding the execution of Binding Financial Agreements (BFA) or other property arrangements when planning for you and your family. The Family Law Act 1975 (Cth) sets out very strict requirements for a BFA to be valid and enforceable, and it is often the case that informal agreements and one’s executed overseas will not be recognised by Australian courts.
A BFA when executed correctly, can allow for certainty, trust, and peace of mind in a relationship. If you are wanting to enter into a financial agreement with your partner, or to understand if your current agreement is valid, it is crucial that you take appropriate caution and seek suitable legal advice.
What is a Binding Financial Agreement (BFA)?
A BFA is a legally binding document which sets out what would happen to the couple’s finances and property, should the marriage or de facto relationship break down resulting in separation or divorce. It allows a couple to plan their future rights and responsibilities, before entering a marriage or even after, in the event of a substantial financial change. A BFA is not lodged with a court, but rather acts as a private contract between the parties.
Importantly, a BFA can protect assets including cash, property, superannuation or inheritances and are predominantly used for setting out the financial arrangements of the couple. However, a BFA does not cover child custody arrangements, nor child support payments. A more extensive discussion of which matters can be dealt with in a BFA can be found in our previous blog article about constructing, obtaining and setting aside Prenuptial Agreements.
BFAs can be set aside where:
- There have been instances of non-disclosure of assets or financial resources.
- The BFA does not make any provision for children or if there was an adverse change in the welfare of the children so the agreement would cause hardship.
- The contents of the agreement were not just and equitable.
- Additionally, as discussed in a previous blog article, the High Court will not enforce any BFAs which have been entered into arising from unconscionable conduct, especially where this conduct is a consequence of a significant power imbalance between the parties.
The Family Law Act 1975 (Cth)
The Family Law Act is the legislation which governs BFAs. It allows parties to enter into these agreements before or during a marriage, or after a divorce. Under this Act, a BFA must be in writing, have been signed by both parties, and make specific reference to the section of the Act it is made under.
Recent case: Akhtar & Gaber (No. 2)  FamCAFC 28
An important recent case demonstrated that marriage agreements which do not comply with the Family Law Act’s requirements for a financial agreement are not binding. In the case of Akhtar & Gaber (No. 2), the Appeal Division of the Family Court of Australia dismissed the appeal which aimed to oust the jurisdiction of the court to make orders relating to property interests and to uphold the terms of the marriage agreement between the parties made in another country (or jurisdiction).
The marriage agreement between Akhtar and Gaber was not a recognised BFA as it did not comply with the strict requirements of the Act. It was therefore not enforceable and did not oust the jurisdiction of the court for determining proprietary interests. This means that, even if the marriage agreement was binding in another country, it does not effectively operate as a BFA in Australia. The division of property between the parties was therefore to be determined in accordance with s 79 of the Family Law Act.
Why obtain our legal assistance regarding your Binding Financial Agreement?
As demonstrated in Akhtar & Gaber (No. 2), it is very important that your BFA meets the requirements set out in the Family Law Act. BFAs which are incorrectly drafted may be deemed invalid or set aside, but engaging an experienced solicitor will assist in this process.
Additionally, for a financial agreement to be binding, before it can be signed by both parties:
- Each party must have received independent legal advice regarding the effect of the agreement on the rights of that party and the advantages and disadvantages of the agreement, at the time that the advice was provided to the party,
- Each party must have received a signed statement from a legal practitioner as authority that this advice has been provided, and
- Each party must have received a copy of the equivalent signed statement of their spouse or intended spouse.
If you need further advice or assistance regarding BFAs or other family law matters, please contact one of our experienced solicitors on (02) 9963 9800 or via our contact page.