Having financial separation agreement issues with your former partner? Here’s an article that can help. A financial separation agreement or Binding Financial Agreement (BFA) is an important document that brings clarity and security during separation.
The BFA outlines how you and your ex will split assets and liabilities during the property settlement phase. This legal document will reduce future arguments and allow you both to move forward financially independently. The Family Law Act 1975, Australia’s main family law legislation, sets out several requirements for a valid financial separation agreement.
But what happens when you have legal issues with your financial separation agreement? Let’s find out.
Financial Separation Agreement: Legal Requirements
Before we get into the issues with a financial separation agreement, let’s first go over the general legal requirements under Australian family law:
1. Formal requirements
- The agreement must be in writing and signed by both parties.
- Both parties must get independent legal advice. The lawyers must certify they gave advice on the agreement and your rights.
2. Additional requirements
- Both parties must consent. they must enter into the agreement freely and without duress or pressure.
- Both parties must disclose all their financial information and financial resources.
- A BFA can be signed before, during or after a marriage or de facto relationship.
Does this apply to de facto partners? Yes. De facto financial agreements are contracts between de facto partners that outline how they will deal with their financial differences if they split.
De facto couples live together as husband and wife but are not legally bound by marriage. Like married couples they may have kids or family homes. So they can still enter into financial agreements.
CHECKLIST: Financial Agreement Checklist
This is just a general overview. It is always best to speak to an experienced family lawyer to know what to do in your situation.
Financial Separation Agreement
But what if legal issues arise with your financial separation agreement? Possible legal issues may include validity, completeness, and enforceability. Let’s go through these issues and it may answer your questions:
- Lack of Independent Legal Advice. The law requires that both parties must have received independent legal advice before signing the agreement. If one party can prove they weren’t properly advised or couldn’t afford independent advice the court may set aside the BFA.
- Failure of Full Disclosure. Both parties must disclose all their financial information honestly. The legal issue arises when one party hides significant assets or debts. Here the other party can challenge the BFA’s fairness.
- Undue Influence or Duress. As mentioned earlier both parties must agree voluntarily and without pressure. So if one party threatens the other (e.g. withholding children) to get them to sign a BFA it may be invalid.
- Unconscionability of the Agreement. The law requires that the terms must be fair and reasonable in the circumstances at the time of signing. For example if one party was in a significantly disadvantaged position (financially, emotionally etc) when signing the court may find the BFA unconscionable.
- Enforcement Issues. This is the hard part. If one party doesn’t comply with their financial obligations under the BFA the other party may have to enforce the agreement. Remember a BFA is like a court order. It must be enforced as such.
Section 90KA of the Family Law Act
Section 90KA of the Family Law Act says that the principles of law and equity that apply to determining the validity, enforceability or effectiveness of contracts or purported contracts shall apply to the Court in any case where a Financial Agreement or termination agreement is in doubt. The Court can also enforce some parts of the agreement as if they were court orders under Section 90KA.
Note, however, that these are just potential issues and the Court’s decision will depend on the facts of each case. Talking to a family lawyer before signing a BFA is an important step in making sure the agreement is valid, fair and protects you.
Case Law on Financial Separation Agreements: Thorne v Kennedy [2017] HCA 49
In this case, the Court went through the concepts of undue influence, duress and unconscionable conduct in a financial agreement.
Ms Thorne, 36 at the time, was a woman from overseas who married Mr Kennedy, 67, an Australian property developer. What was involved here was a lawsuit that included a pre-nuptial agreement made just before their wedding.
Kennedy who had $18-$24m in assets told Thorne who had no assets that the wedding would not go ahead unless she signed. An independent solicitor advised Thorne that the deal was ‘entirely inappropriate’ but she signed it.
Thorne also entered into another post-marriage financial agreement against legal advice. So there were questions about whether the agreement was made under duress, undue influence or unconscionable conduct.
The High Court found there was duress, actual undue influence and unconscionable conduct. The Court also listed the relevant factors in creating pre and post-nuptial agreements:
- whether the agreement was offered on a take it or leave it basis;
- the emotional circumstances in which the agreement was entered into including any express or implied threat to end a marriage or to end an engagement;
- whether there was time to reflect;
- the nature of the parties’ relationship;
- the relative financial positions of the parties; and
- the independent advice received and whether there was time to think about that advice.
What About Parenting Arrangements?
Parenting arrangements are important in divorce matters. Children need the proper care and attention even after their parents divorce. Hence, consent orders are in place for such arrangements. A consent order is a written agreement that a court formalises parenting agreements. Think of parenting agreements/plans as an informal agreement, which can be formalised.
How Can a Family Lawyer Help?
Going through a major issue with your financial agreement can be daunting. Hence, having a lawyer to advocate for your financial interests, make sure the agreement is fair and takes into account your contributions to the relationship is a bonus.
Our family lawyers at JB Solicitors can help you by:
- explaining the legal requirements,
- advising on disclosure,
- facilitating communication,
- protecting you from unfair pressure,
- interpreting the agreement,
- enforcing the agreement,
- challenging an unfair agreement in the family court.
If you have questions or need clarification in relation to financial separation agreements, please don’t hesitate to contact us. Seek legal advice and schedule a consultation today.
