BINDING FINANCIAL AGREEMENTS

Web Hosting by Netfirms | Free Domain Names by Netfirms

BINDING FINANCIAL AGREEMENTS

[Talk given to Family Law Reform Association on 7 May 2001 by Andrew Corish.]

There is now a new way of concluding financial agreements. The Family Law Act was amended on 27 December 2000 to insert Part VIIIA, sections 90A to 90L to create new types of agreements, known as Binding Financial Agreements (BFAs).

There are three types:

Firstly, Pre-Nuptial Agreements made in contemplation of marriage (Section 90B).

Secondly, Mid-Nuptial Agreements made during marriage and prior to separation (Section 90C).

Thirdly, Post-Nuptial Agreements made after separation* or divorce (Section 90D).

[*Question: Is this true for "separation"? Section 90D is headed "Financial agreements after dissolution of marriage" with Section 90D(1)(a) stating "after a decree nisi dissolving a marriage is made…"]

All three agreements can deal with property settlement and spousal maintenance following a separation. They can also deal with "incidental and ancillary matters". They can't deal to any great degree with child support or children's matters.

To be binding, BFAs must be signed by both parties. They must attach certificates by independent lawyers for each party confirming that the party has received advice by the lawyer prior to the party signing the agreement.

BFAs continue to be enforceable after the death of a party, unless otherwise specified (which is important if there is a provision for ongoing spousal maintenance).

It is not possible to vary an existing BFA. You must make a new one and obtain new certificates of advice from solicitors.

However, once an agreement is properly entered into, it is binding and enforceable upon the parties and the Family Court has no jurisdiction to interfere unless a court finds [Section 90K(1)]:

a. the agreement was obtained by fraud, including the non-disclosure of a material matter;

b. the agreement is void, voidable or unenforceable;

c. circumstances have arisen since the agreement that make it impracticable (example, it deals with a house which has now burnt down);

d. since the making of an agreement, a material change in circumstances has occurred relating to a party or child and the party or child will suffer hardship unless the Court sets aside the agreement; and/or

e. the party to the agreement is engaged in conduct that was "unconscionable".

The matters contained in BFAs are to be interpreted according to the law of contract.

What are the main changes brought about by the amendments to the law and by BFA'S?

Firstly, you can now enter into binding Pre-Nuptial Agreements and Mid-Nuptial Agreements. Formerly, such agreements were of persuasive value only. Now they can be binding upon the Court.

BFAs don't need to be filed. There may be less paperwork required than for Consent Orders. However, a certificate of advice by a solicitor is now required, whilst with Consent Orders, one solicitor could do the documents, or the parties could do the documents themselves and swear them before JP's.

In respect of spousal maintenance, you can now enter into a BFA, which eliminates the possibility of future spousal maintenance or fixes the amount. This formerly could only be done by having a judge approve a detailed section 87 Deed. Such deeds have now been abolished. A BFA eliminating spousal maintenance following separation is binding notwithstanding the circumstances following separation are that one party is reliant upon social security. However this only applies to BFAs made prior to separation.

You can't bind the Child Support Agency in respect of child support by a BFA. You can only do so by a Child Support Agreement and this is only binding if there is no reliance on social security.

Will BFAs be useful and popular? It remains to be seen. They are apparently a way of life in places such as California, where courting couples insert life-style clauses dealing with who is to take out the garbage and how the toothpaste tube is to be squeezed.

Pre and Mid-Nuptial Agreements will certainly be a useful option, now that they are enforceable. This will particularly be the case where the parties have both been previously bitten by a Family Law dispute, and don't want another biting. It will be useful where one party is bringing a great deal more property into the relationship than another. They will be particularly useful option when there is a desire to preserve a family farm or family business in the event of the breakdown of a marriage. It will also be useful where a party has received or is due to receive a large inheritance, gift, redundancy or compensation. It will be a helpful means of limiting claims for spousal maintenance or excessive claims.

However, Pre-Nuptial Agreements have never been popular with courting couples in Australia; even for those who should know better and their remarriage is a triumph of hope over experience, there is an unwillingness to consider the details of what is going to happen if the marriage fails. They often think of them of being a self-fulfilling prophecy of doom and they are often right. They won't necessarily avoid litigation, particularly if they are unfair.

For those who are separated, BFAs may be a useful alternative to Consent Orders in some instances. They may require less paper work and avoid the obligation of filing documents at the court and having them scrutinised by a Registrar.

However, they will not necessarily require less paper work and will not necessarily be cheaper. Both parties have to see independent solicitors and obtain a certificate of advice.

BFAs will apparently be less binding than Consent Orders. They will apparently be harder to vary and easier to set aside.

Andrew Corish

Accredited Specialist Family Law

FAMILY LAW ACT 1975

Part VIIIA -Financial Agreements

SECTION 90A Definitions

In this Part:

_dealt with_ includes the meaning given by subsection 90F(2).

_marriage_ includes a void marriage.

SECTION 90B Financial agreements before marriage

(1) If:

(a) people who are contemplating entering into a marriage with each other make a written agreement with respect to any of the matters mentioned in subsection (2); and

(aa) at the time of the making of the agreement, no other agreement (whether made under this section or section 90C or 90D) is in force between the parties with respect to any of those matters; and

(b) the agreement is expressed to be made under this section;

the agreement is a _financial agreement_.

(2) The matters referred to in paragraph (1)(a) are the following:

(a) how, in the event of the breakdown of the marriage, all or any of the property or financial resources of either or both of them at the time when the agreement is made, or at a later time and before the dissolution of the marriage, is to be dealt with;

(b) the maintenance of either of them:

(i) during the marriage; or

(ii) after the dissolution of the marriage; or

(iii) both during, and after the dissolution of, the marriage.

(3) A financial agreement made as mentioned in subsection (1) may contain matters incidental or ancillary to those mentioned in subsection (2).

(4) A financial agreement made as mentioned in subsection (1) may terminate a previous financial agreement made as mentioned in that subsection between the same parties.

SECTION 90C Financial agreements during marriage

(1) If:

(a) the parties to a marriage make a written agreement with respect to any of the matters mentioned in subsection (2); and

(aa) at the time of the making of the agreement, no other agreement (whether made under this section or section 90B or 90D) is in force between the parties with respect to any of those matters; and

(b) the agreement is expressed to be made under this section;

the agreement is a _financial agreement_.

(2) The matters referred to in paragraph (1)(a) are the following:

(b) the maintenance of either of them:

(i) during the marriage; or

(ii) after the dissolution of the marriage; or

(iii) both during, and after the dissolution of, the marriage.

(3) A financial agreement made as mentioned in subsection (1) may contain matters incidental or ancillary to those mentioned in subsection (2).

(4) A financial agreement made as mentioned in subsection (1) may terminate a previous financial agreement made as mentioned in that subsection, or a financial agreement made as mentioned in subsection 90B(1), between the same parties.

SECTION 90D Financial agreements after dissolution of marriage

(1) If:

(a) after a decree nisi dissolving a marriage is made, the parties to the former marriage make a written agreement with respect to any of the matters mentioned in subsection (2); and

(aa) at the time of the making of the agreement, no other agreement (whether made under this section or section 90B or 90C) is in force between the parties with respect to any of those matters; and

(b) the agreement is expressed to be made under this section;

the agreement is a _financial agreement_.

(2) The matters referred to in paragraph (1)(a) are the following:

(a) how all or any of the property or financial resources that either or both of them had or acquired during the former marriage is to be dealt with;

(b) the maintenance of either of them.

(3) A financial agreement made as mentioned in subsection (1) may contain matters incidental or ancillary to those mentioned in subsection (2).

SECTION 90E Requirements with respect to provisions in financial agreements relating to the maintenance of a party or a child or children

A provision of a financial agreement that relates to the maintenance of a party to the agreement or a child or children is void unless the provision specifies:

(a) the party, or the child or children, for whose maintenance provision is made; and

(b) the amount provided for, or the value of the portion of the relevant property attributable to, the maintenance of the party, or of the child or each child, as the case may be.

SECTION 90F Certain provisions in agreements

(1) No provision of a financial agreement (other than a financial agreement made under section 90B or a financial agreement made under section 90C in the event of the breakdown of a marriage) excludes or limits the power of a court having jurisdiction under this Act to make an order in relation to the maintenance of a party to a marriage if the court is satisfied that, when the agreement was made, the circumstances of the party were such that, taking into account the terms and effect of the agreement, the party would have been unable to support himself or herself without an income tested pension, allowance or benefit.

(2) To avoid doubt, a provision in an agreement made as mentioned in subsection 90C(1) or 90D(1) that provides for property or financial resources owned by a party to the agreement to continue in the ownership of that party is taken, for the purposes of that section, to be a provision with respect to how the property or financial resources are to be dealt with.

SECTION 90G When financial agreements are binding

(1) A financial agreement is binding on the parties to the agreement if, and only if:

(a) the agreement is signed by both parties; and

(b) the agreement contains, in relation to each party to the agreement, a statement to the effect that the party to whom the statement relates has been provided, before the agreement was signed by him or her, as certified in an annexure to the agreement, with independent legal advice from a legal practitioner as to the following matters:

(i) the effect of the agreement on the rights of that party;

(ii) whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;

(iii) whether or not, at that time, it was prudent for that party to make the agreement;

(iv) whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable; and

(c) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and

(d) the agreement has not been terminated and has not been set aside by a court; and

(e) after the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.

Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the _Evidence Act 1995_.

(2) A court may make such orders for the enforcement of a financial agreement that is binding on the parties to the agreement as it thinks necessary.

SECTION 90H Effect of death of party to financial agreement

A financial agreement that is binding on the parties to the agreement continues to operate despite the death of a party to the agreement and operates in favour of, and is binding on, the legal personal representative of that party.

SECTION 90J Termination of financial agreement

(1) The parties to a financial agreement may terminate the agreement only by:

(a) including a provision to that effect in another financial agreement as mentioned in subsection 90B(4), 90C(4) or 90D(4); or

(b) making a written agreement (a _termination agreement_) to that effect.

(2) A termination agreement is binding on the parties if, and only if:

(a) the agreement is signed by both parties to the agreement; and

(i) the effect of the agreement on the rights of that party;

(ii) whether or not, at the time when the advice was provided, it was to the advantage, financially or otherwise, of that party to make the agreement;

(iii) whether or not, at that time, it was prudent for that party to make the agreement;

(iv) whether or not, at that time and in the light of such circumstances as were, at that time, reasonably foreseeable, the provisions of the agreement were fair and reasonable; and

(c) the annexure to the agreement contains a certificate signed by the person providing the independent legal advice stating that the advice was provided; and

(d) the agreement has not been set aside by a court; and

(e) after the agreement is signed, the original agreement is given to one of the parties and a copy is given to the other.

(3) A court may, on an application by a person who was a party to the financial agreement that has been terminated, or by any other interested person, make such order or orders (including an order for the transfer of property) as it considers just and equitable for the purpose of preserving or adjusting the rights of persons who were parties to that financial agreement and any other interested persons.

Note: For the manner in which the contents of a financial agreement may be proved, see section 48 of the _Evidence Act 1995_.

SECTION 90K Circumstances in which court may set aside a financial agreement or termination agreement

(1) A court may make an order setting aside a financial agreement or a termination agreement if, and only if, the court is satisfied that:

(a) the agreement was obtained by fraud (including non-disclosure of a material matter); or

(b) the agreement is void, voidable or unenforceable; or

(c) in the circumstances that have arisen since the agreement was made it is impracticable for the agreement or a part of the agreement to be carried out; or

(d) since the making of the agreement, a material change in circumstances has occurred (being circumstances relating to the care, welfare and development of a child of the marriage) and, as a result of the change, the child or, if the applicant has caring responsibility for the child (as defined in subsection (2)), a party to the agreement will suffer hardship if the court does not set the agreement aside; or

(e) in respect of the making of a financial agreement - a party to the agreement engaged in conduct that was, in all the circumstances, unconscionable.

(2) For the purposes of paragraph (1)(d), a person has _caring responsibility_ for a child if:

(a) the person is a parent of the child with whom the child lives; or

(b) the person has a residence order in relation to the child; or

(c) the person has a specific issues order in relation to the child under which the person is responsible for the child's long-term or day-to-day care, welfare and development.

SECTION 90KA Validity, enforceability and effect of financial agreements and termination agreements

The question whether a financial agreement or a termination agreement is valid, enforceable or effective is to be determined by the court according to the principles of law and equity that are applicable in determining the validity, enforceability and effect of contracts and purported contracts, and, in proceedings relating to such an agreement, the court:

(a) subject to paragraph (b), has the same powers, may grant the same remedies and must have the same regard to the rights of third parties as the High Court has, may grant and is required to have in proceedings in connection with contracts or purported contracts, being proceedings in which the High Court has original jurisdiction; and

(b) has power to make an order for the payment, by a party to the agreement to another party to the agreement, of interest on an amount payable under the agreement, from the time when the amount became or becomes due and payable, at a rate not exceeding the rate prescribed by the applicable Rules of Court; and

(c) in addition to, or instead of, making an order or orders under paragraph (a) or (b), may order that the agreement, or a specified part of the agreement, be enforced as if it were an order of the court.

SECTION 90L Financial and other agreements etc. not liable to duty

A financial agreement, a termination agreement, or a deed or other instrument executed by a person for the purposes of, or in accordance with, an order made under this Part, is not subject to any duty or charge under any law of a State or Territory or any law of the Commonwealth that applies only in relation to a Territory.