Binding Financial Agreements

Binding Financial Agreements:

Where parties have been able to reach agreement on the distribution of property from their marriage or de facto relationship, they have the option of formalising that agreement by recording it in a Binding Financial Agreement or BFA.

A BFA is, in essence, a contract between the parties which sets out the terms of their agreement. As it has the effect of excluding the jurisdiction of the Family Court to deal with the parties’ financial matters, the Family Law Act 1975 stipulates that for a BFA to actually be binding on the parties, it must comply with a number of requirements.

Those requirements include that all parties to the agreement must sign the BFA. However, before signing the BFA, each of the parties to it have to have received independent legal advice about the effect of the agreement on their rights and about the advantages and disadvantages to that party of entering into the agreement. After a party has received their independent legal advice, their lawyer will provide a certificate confirming this advice was given. A copy of that certificate must be provided to the other party.

A BFA may deal with a wide variety of financial matters, including:

• The division of the parties’ joint and individual assets, liabilities, and financial resources (including superannuation)
• The payment of spousal maintenance.

There is no requirement for a Court to review and approve the BFA. Accordingly, where parties comply with the formal requirements under the Family Law Act 1975 , they can agree to enter into an agreement that a Court may not consider to be ‘just and equitable’ or ‘fair’ in all of the circumstances. This is one factor of a BFA that differs from a Consent Order, as a Court will not make a Consent Order in relation to the division of property from a relationship unless it is satisfied by the parties that the proposed Consent Order is ‘just and equitable’. This enables the parties to a BFA to have a lot more flexibility and control over how their property is distributed between them.

Another benefit of entering into a BFA is that it can provide parties with certainty as to how their property is to be divided, or how they will be provided for financially into the future, without having to incur the significant legal costs associated with a Court hearing or having to endure the delays that often arise when seeking a Court hearing date.

Where a BFA has been properly prepared and executed in accordance with the requirements under the Family Law Act 1975, it can be very difficult to have it set aside. Circumstances where a Court will set aside a BFA include:

1. Where the agreement set out in the BFA was obtained by fraud, where the term fraud can include the non-disclosure of relevant financial information.
2. A party to the BFA entered into the agreement:
3. For the purpose, or for purposes that included the purpose, of defrauding or defeating a creditor or creditors of the party; or
4. With reckless disregard of the interests of a creditor or creditors of the party; or
5. A party to the BFA entered into the agreement:
6. For the purpose, or for purposes that included the purpose, of defrauding another person who is a party to a de-facto relationship with a spouse party; or
7. For the purpose or for purposes that included the purpose of defeating the interest of that other person in relation to any possible or pending application for an Order to alter the persons property interests; or
8. With reckless disregard of those interests of that other person; or
9. The agreement is void, voidable or unenforceable due to, for example, non compliance with the requirements of the Family Law Act 1975 , or a party being subjected to duress and force to sign the BFA;or
10. Where circumstances have arisen since the agreement was made, whereby it is impracticable for the agreement or a part of the agreement to be carried out; or
11. Since making the agreement there has been a material change in circumstances relating to the care, welfare and development of a child of the relationship and, as a result of the change, the child, or a person who entered the agreement with the care of that chid, will suffer hardship if the Court does not set the agreement aside; or
12. One of the parties entering into the agreement engaged in unconscionable conduct.

Whilst this article is intended to provide a general overview of the requirements necessary to ensure an agreement reached by parties to a relationship is binding on them, each case turns on its own facts, and there are a number of factors that can significantly impact on the validity and enforceability of a BFA. At Frigo james Legal Group we can provide you with expert family law advice that is tailored for your circumstances. Contact our office to arrange your initial consultation on 07 5621 3799 or info@fjlegal.com.au.