Family Law - Binding Financial Agreements Under the Family Law Act 1975 (Cth)

Date: June 15, 2010

Authors: Carol Grimshaw LL.M., B. Legal Studies, Adv. Dip. Bus.

If you’ve recently entered a new relationship, have been in a new relationship for a time, or are considering ending your relationship, you should consult a lawyer to learn your rights and obligations under the Family Law Act 1975 (Cth) (‘the Act’).

While married couples have had access to Binding Financial Agreements under the Act since 27 December 2000, Australian States and Territories implemented legislation that came into effect on 1 March 2009 permitting de facto and same sex couples to organise their familial obligations in writing. This means that all spousal relationships are now subject to the scrutiny of the law and courts, from the date the relationship commenced.

How long does it take to write a Binding Financial Agreement, get it signed and in place?

A client of mine recently attended our offices seeking advice about getting a Binding Financial Agreement for their relationship. The client wanted to ensure that the Binding Financial Agreement was implemented before a significant transaction and relationship transition occurred. That client instructed the document be drafted within one month of their initial attendance at LAC Lawyers. Is this request capable of being fulfilled? 

Like all questions about time and the law, our answer to your individual question will depend on your individual circumstances. As a guide, the process involved in obtaining a legally binding married, de facto or same sex relationship Binding Financial Agreement under the Act is:

  1. initial client meeting to take instructions about your relationship, financial and family circumstances;
  2. your collection of all financial information pertinent to your relationship from the commencement of the relationship to the time of the Binding Financial Agreement including but not limited to:
    1. income tax records;
    2. bank statements;
    3. superannuation account statements;
    4. trust fund statements and all company records relating to those trusts and their assets such as the involvement of all third parties and their relationship to the trust/company, and taxation, profit and loss statements for the trust/company;
    5. real property holdings whether Australian and/or overseas, and valuations for same to be annexed to the resulting Agreement;
    6. personal property holdings of value whether Australian and/or overseas, and valuations to be annexed to the resulting Agreement;
    7. a personal property register for each party and jointly within the relationship or as held with third parties for items exceeding $100 in value; and,
    8. a statement of all of your liabilities including but not limited to Maintenance and Child Support Agreements and Assessments by the Child Support Agency, credit cards, store cards, personal loans, mortgages, personal and/or corporate taxation debts and contingent liabilities under contracts with third parties;
  3. writing a Financial Statement to be annexed to the Binding Financial Agreement;
  4. writing the Binding Financial Agreement which may take several drafts depending on the nature, quantity and timeliness of the information you provide for inclusion in the Binding Financial Agreement;
  5. exchange of the whole of the information with your spouse’s independent lawyer;
  6. receipt of your spouse’s financial information from your spouse’s independent lawyer;
  7. appointing an independent financial advisor to assist you in the transaction and assess your spouse’s financial information, juxtaposed to your financial position;
  8. obtaining from that financial advisor their independent financial advice about the financial advantages and disadvantages of entering into a Binding Financial Agreement with your spouse, given your respective financial positions;
  9. your spouse obtaining similar independent financial advice regarding the Binding Financial Agreement;
  10. receiving, assessing and negotiating any necessary draft amendments to the Binding Financial Agreement from your spouse’s independent lawyer after the financial advice is received; and,
  11. finalising the Binding Financial Agreement by you signing the document at LAC Lawyers who will provide you with final advice regarding the transaction before sending the original document to your spouse’s independent lawyer for their signature on the document and receipt of final advice on the transaction.

Why so involved?

The process in obtaining a Binding Financial Agreement is so involved because it is a contract under law, capable of being the subject of litigation and attenuant costs. While the Act has particular provisions dealing with specific matters that must be included in the final document and particular processes which all lawyers must follow, the final document is also capable of being read by a court under strict rules of interpretation. 

Those rules of interpretation have been developed over centuries to cover commercial practices which will now apply in the family law arena. Aside from general family law principles, the first and most important rule is that when the document was signed by both of the parties, the whole of the agreement was contemplated by the parties individually and that they entered the agreement freely and willingly. 

For you, this means you and your spouse each made full financial disclosure to the other before signing the Binding Financial Agreement. If you have not disclosed every fact, matter or thing regarding your financial affairs to your spouse, the Binding Financial Agreement is capable of being set aside by the courts. If this occurred, it would have the same effect as you not ever having entered an agreement with your spouse. 

The result is that you may be subject to an assessment of rights and obligations under the Act without further pause. For those clients wishing to exclude the spousal maintenance and property distribution provisions of the Act, this is of particular importance because the courts may assess you as being responsible for paying ongoing maintenance to your former spouse for a duration or decide a property distribution which you would not favour.

The second most important rule is that the agreement must be equitable – it must be fair. This is because, in certain circumstances, a court will set aside a contract it considers manifestly or overwhelmingly unfair to one party. Determining what may be unfair depends on your individual circumstances, of the relationship and the transaction and we will advise you of these matters in conference and in writing.

The two rules mentioned here are also important because the Act allows you and/or your spouse to apply to a court to have the Binding Financial Agreement enforced. At such a time, the applicant is asking the court to scrutinise the Binding Financial Agreement and the behaviour of the parties to the agreement, and make an order forcing the recalcitrant party to do as they contracted when they signed the Binding Financial Agreement. Your Binding Financial Agreement must wholly represent your intentions, and demonstrate that you and your partner entered into the transaction voluntarily and equitably after making full disclosure of your individual circumstances.

As you can see, the process for a Binding Financial Agreement is involved and can be time consuming. At LAC Lawyers, before we take instructions from you we will provide you with an estimate of your costs and ask you to pay funds into our trust account to cover those costs. This practice protects you and your best interests and allows us to continue working for you until the job is done. 

We look forward to working with you to achieve the Binding Financial Agreement which suits your circumstances and protects your best interests going forward.

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Phone LAC Lawyers on NSW 1300 799 888 or VIC 1300 734 638 or send us an email 

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