Binding Financial Agreements are Bad News
A financial agreement can be entered into by a couple prior to marriage, during marriage or after divorce. Many Australians like to have their financial affairs made certain and thus these agreements, superficially, appear attractive.
For a financial agreement, however, to exclude the power of the Family Court or Federal Circuit Court, it is necessary for the agreement to meet the conditions set out in section 90G(1)(a) – (d) inclusive of the Family Law Act. One of the conditions is in the following terms:
- 90G(1)(b) before signing the agreement, each spouse party was provided with independent legal advice from a legal practitioner about the effect of the agreement on the rights of that party and about the advantages and disadvantages, at the time that the advice was provided, to that party of making the agreement.
In the case of Hoult v Hoult, Justice Murphy considered this provision. The Husband, who was a wealthy businessman, had lived with and then married a woman whose second language was English. She had little business knowledge or understanding and she came to the relationship with no assets and a dependent child. A document, which the Husband alleged was a Binding Financial Agreement, had been signed in Australia by the parties and in particular by the Wife, nine days prior to their overseas marriage in December 2004.
When the parties separated in March 2011, the Wife sought a property settlement via the Court. The Husband argued that the Court had no jurisdiction because of the prior agreement. The Wife contested the agreement on a number of bases. One of those related to the validity of the Certificate of Independent Advice. It was the evidence of the Solicitor who had signed the Certificate on behalf of the Wife that while the 50 minute appointment had occurred seven years prior, and she had no notes of the meeting, she would not have signed the Certificate unless she gave the appropriate advice. His Honour stated, “I do not regard Ms K’s evidence as untruthful. I consider she was doing her best to give evidence which was as accurate as possible. But, her evidence reveals a recall that is significantly impaired in respect of important aspects of the matter".
His Honour was not clear as to what advice is actually required pursuant to section 90G(1)(b). He indicated it clearly required that the evidence be independent. He also considered it necessary to make it clear that pursuant to section 71A of the Family Law Act, if you enter into a Binding Financial Agreement, then the Court will not have jurisdiction to deal with the financial matters covered by the Agreement. His Honour also agreed that advices in respect to the advantages or disadvantages would depend on a myriad of circumstances which may or may not exist during a person’s married life, e.g. how long the marriage lasted, the health of each of the parties, how many children they had and what degree of dependency they had, if the parties’ marriage broke down.
His Honour stated, “I consider that the Certificate is, without more, insufficient to satisfy the onus of establishing that the relevant section 90G requirements have been met”. In the circumstances of this case, His Honour found there was insufficient evidence for him to make a finding that advice was given about the advantages and disadvantages of the Agreement for the Wife at the time that the Agreement was made.
It is, therefore, impossible to state that any Binding Financial Agreement is binding. It is not usually possible to find out what advice the other party was given, as this is privileged. It is only years after the event, when the Agreement is being disputed, that the issue of whether the relevant Independent Legal Advice covering the issues set out in the section will be considered. In these circumstances, we would caution people about considering documenting a Family Law property settlement at any stage of their relationship in a Binding Financial Agreement. The safer course would be to use a Consent Order lodged with the Court. We accept that this will not be possible in the pre-nuptial circumstances. There is some capacity for the Court to overlook strict compliance with the requirements of section 90G(1). One should not, however, feel confident that this will overcome all defects.
For more information
Family Law Act 1975 (Cth)