This document creates a Binding Financial Agreement (BFA) for parties who are contemplating entering into a de facto relationship.
Note: This document assumes that both parties are ordinarily resident outside of WA.
The agreement will be created under the provisions of the Family Law Act 1975.
Section 90UA specifies that two de facto parties can make a Part VIIIAB financial agreement under section 90UB of the Family Law Act 1975 only if the parties are ordinarily resident in a participating jurisdiction (which does not include WA) when they make the agreement.
A Part VIIIAB financial agreement pursuant to section 90UB of the Family Law Act 1975 is a Binding Financial Agreement:
1️⃣ By two parties who are contemplating entering into a de facto relationship; and
2️⃣ Providing how, in the event of the breakdown of the de facto relationship, all or any of the property or financial resources of either or both parties at the time when the agreement is made, or at a later time …
Important: Independent Legal Advice for both parties from their own lawyer [before they sign] is required for the prenup to be valid!
It's a critical element for the validity of a binding financial agreement that both parties are provided with independent legal advice from their own respective Australian legal practitioners.
This must happen before the parties sign the binding financial agreement.
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The circumstances governing whether a "de facto” relationship will be imposed by Australian law for the purposes of making an application to the Family Court for a financial property settlement generally can only arise when one of the following legally prescribed circumstances is present [1]:
1️⃣ Two adult persons who are not married or related by family live together as a couple in a "genuine and permanent domestic relationship” for at least two years (this can include more than one period providing it totals at least 2 years);
2️⃣ There is a child of the relationship;
3️⃣ There have been significant contributions made and a serious injustice would result if the court did not make an order or declaration; or
4️⃣ The de facto relationship has been registered in a State or Territory under laws for the registration of relationships.
In the recent case of Radecki & Fairbairn [2020] FamCAFC 307 the Full Court of the Family Court of Australia at Sydney in their judgment dated 11 December 2020, confirmed the relevant law to determine the existence of a de facto relationship from para. 26 as follows:
A de facto relationship exists where a Court finds that the parties were “a couple living together on a genuine domestic basis” (s 4AA(1)(c) of the Act), which is to be decided by reference to the matters set out in s 4AA(2) of the Act, which are as follows:
(a) the duration of the relationship;
(b) the nature and extent of their common residence;
(c) whether a sexual relationship exists;
(d) the degree of financial dependence or interdependence, and any arrangements for financial support, between them;
(e) the ownership, use and acquisition of their property;
(f) the degree of mutual commitment to a shared life;
(g) whether the relationship is or was registered under a prescribed law of a State or Territory as a prescribed kind of relationship;
(h) the care and support of children;
(i) the reputation and public aspects of the relationship.
In addition, the Court “is entitled to have regard to such matters… as may seem appropriate to the court in the circumstances of case” (s 4AA(4) of the Act).
In a passage which has been frequently quoted and applied when determining the existence of a de facto relationship (see, for example, Sinclair & Whittaker (2013) FLC 93-551 (“Sinclair & Whittaker”) at [55] and Cadman & Hallett (2014) FLC 93-603 (“Cadman”) at [48]), albeit in a different legislative context, Fitzgerald J said in Lynam v Director-General of Social Security(1984) FLC 91‑577 at 79,663:
Financial arrangements cannot be taken in isolation and considered of particular importance in determining the nature of relationship.
Their materiality, like each of the other elements of the relationship, stems from the impact which they have as part of an overall situation.
Each element of a relationship draws its colour and its significance from the other elements, some of which may point in one direction and some in the other.
What must be looked at is the composite picture.
Any attempt to isolate individual factors and to attribute to them relative degrees of materiality or importance involves a denial of common experience and will almost inevitably be productive of error.
The endless scope for differences in human attitudes and activities means that there will be an almost infinite variety of combinations of circumstances which may fall for consideration.
In any particular case, it will be a question of fact and degree, a jury question, whether a relationship between two unrelated persons of the opposite sex meets the statutory test.
Although not expressly mentioned in s 4AA(2) of the Act, an intention to enter into a de facto relationship or to end one is powerful evidence to be taken into account under s 4AA(4) of Act, in determining whether such a relationship exists or has ended.
Whilst evidence of such intention is not required and, in many cases, is not present, where such an intention can be identified, it can be telling.
Footnotes:
[1] s. 90SB of the Family Law Act 1975 (Cth.).
[2] Joint judgment of May, Strickland & Ainslie-Wallace JJ reported at 86,682.
[3] Paragraph 94 of the joint judgment of Bryant CJ, Thackray & Aldridge JJ reported at 87,398.
Credits:
This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.
Important Notice:
This FAQ is intended for general interest + information only.
It is not legal advice, nor should it be relied upon or used as such.
We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.
A legally valid* Binding Financial Agreement (BFA) will operate to prevent the Court from being able to make property adjustment orders under the Family Law Act 1975.
A Binding Financial Agreement (BFA) can also deal with spousal maintenance and prevent your former partner from filing an application for spousal maintenance.
Important Note:
* In order to be legally valid and actually in fact “legally binding”, a Binding Financial Agreement (BFA) must not be susceptible to being set aside by the Court for any reason.
For a detailed discussion of when a Binding Financial Agreement (BFA) can be set aside, please refer to the separate FAQ on this topic.
Credits:
This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.
Important Notice:
This FAQ is intended for general interest + information only.
It is not legal advice, nor should it be relied upon or used as such.
We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.
In the case of Hoult & Hoult [2013] FamCAFC 109 Strickland and Ainslie-Wallace JJ opined at para. [310]:
“ … The point of the legislation is to allow the parties to decide what bargain they will strike, and provided the agreement complies with the requirements of section 90G(1) they are bound by what they agree upon.
Significantly, in reaching agreement, there is no requirement that they meet any of the considerations contained in section 79 of the Act, and they can literally make the worst bargain possible, but still be bound to it."
If any of the following apply the Binding Financial Agreement (BFA) can be set aside by the courts:
Make sure there is plenty of time.
Watch out for the looming wedding date which could provide a basis for a claim of undue influence or duress.
If a party does not have a good command of English, DO NOT allow the intended partner or a relative to act as an interpreter.
This may lead to allegations of undue influence or duress or that the party did not understand the BFA.
If a party to a Binding Financial Agreement (BFA) is aware of relevant information and does not disclose it to the other party, whether intentionally or non-intentionally, the Court may set the agreement aside at a later date, under section 90K of the Family Law Act:
"A court may make an order setting aside a financial agreement if and only if, the court is satisfied that: the agreement was obtained by fraud (including non-disclosure of a material matter)…"
❌ If a party fails to disclose the true extent or value of his or her assets.
This might occur, by way of example, if a party:
➲ Hides assets;
➲ Mistakenly assumes the assets don't need to be disclosed, such as property held in the name of a Trust which they directly control, or property held overseas which the other party knows nothing about, or cryptocurrency they have forgotten they own but could become worth a material sum;
❌ Not disclosing the true value of assets, or material information which could assist to determine the true value of assets;
❌ Failure to disclose other material information which would impact on a person's decision to enter into the Binding Financial Agreement; or
❌ Deceiving the other party in some way, in order to induce them to sign the Binding Financial Agreement.
In such a case, he or she would create an inherent weakness in the Binding Financial Agreement, leaving the possibility open for it to be challenged at a later date by the disgruntled ex-partner.
Family Law Act 1975 (Cth.)
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:
…
(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
…
These avoidable mistakes made by one or both of the parties lawyers were incapable of rectification by the Court.
This meant that the Court had no choice but to invalidate and set aside the BFA in the following situations:
➲ The wrong type of Binding Financial Agreement was entered;
➲ There were mistakes in one or both of the Lawyer's Certificates;
➲ The BFA was executed by a party before receipt of legal advice;
➲ Out-dated Lawyer Certificates were used;
➲ The lawyer failed to record the advice provided and have the party sign an acknowledgement of having received the advice;
➲ There were other legally technical matters wrong regarding the BFA such as it being signed in counterparts or a translator was delegated to provide the legal advice.
❌ If a party enters a BFA for the purpose of defrauding or defeating the interests of creditor/s or another person who might claim rights due to the existence of an additional de facto relationship.
If a Binding Financial Agreement (BFA) is set aside, it means that it is “as if” the original agreement never existed.
Either party is then free to commence proceedings seeking a property settlement and/or spousal maintenance.
If at anytime, for any reason both parties agree, the parties could decide to replace the BFA with an alternative or updated BFA.
Important: All of the above notes regarding setting aside a BFA, apply to any alternative or updated BFA.
The same rigor must be applied. New certificates of independent legal advice must be obtained, etc.
If the parties have separated, it is also possible for the terms of a BFA to be overridden by consent orders filed with the Court (subject to amendment by the Court if they are deemed not to be fair and equitable).
Note:
The legal term “set aside” means to declare a legal agreement, decision or process to be invalid.
Credits:
This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.
Important Notice:
This FAQ is intended for general interest + information only.
It is not legal advice, nor should it be relied upon or used as such.
We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.
The legal term Binding Financial Agreement (BFA) is the correct wording to use in Australia for this kind of agreement.
In order to provide some context, a Binding Financial Agreement (BFA) has in the wider community (including overseas and in the media) commonly and historically been referred to as a Prenuptial agreement or Prenup.
1️⃣ As a Prenup, Postnup, after the parties have separated, or in the case of de facto relationships, at any time in the absence of nuptials altogether; and could alternatively be
2️⃣ Called a Separation Agreement, Cohabitation Agreement or Divorce Agreement.
Whilst the parties may include the word binding in the name or within the body of the agreement, simply using the word binding does not of itself make the agreement legally binding.
Whether a Binding Financial Agreement (BFA) is in fact legally binding* is a determination which can only be made by the Court.
Important Note:
* In order to be legally valid and actually in fact “legally binding”, a Binding Financial Agreement (BFA) must not be susceptible to being set aside by the Court for any reason.
For a detailed discussion of when a Binding Financial Agreement (BFA) can be set aside, please refer to the separate FAQ on this topic.
Credits:
This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.
Important Notice:
This FAQ is intended for general interest + information only.
It is not legal advice, nor should it be relied upon or used as such.
We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.
The parties to any Binding Financial Agreement or Family Law Court Proceedings must make full and frank disclosure of their financial circumstances.
If a party can show that the other party to the Binding Financial Agreement has not provided full and frank disclosure of their true financial position, the Binding Financial Agreement may not be enforceable.
At the very minimum the Binding Financial Agreement would be subject to a valid legal challenge in Court where the non-disclosing party would bear the onus of proof of showing the the non-disclosure was not material.
This is especially the case where the Binding Financial Agreement (in light of the true financial position of the parties) is not "fair + equitable".
If the non-disclosure is clear to the Court, or disclosure is made in a confusing manner with little or no effort made to respond to requests for clarification: the most likely result will be the Court making Property Orders unfavourable to the non-disclosing / non-cooperating party.
If the non-disclosure is discovered after Court proceedings have completed there may be valid grounds for the Court to set aside the original Property Orders and make new orders to replace them based on the true financial position.
The Court may use its discretion to order that all or part of the legal costs incurred by the innocent party in both the original and subsequent Court proceedings are payable by the non-disclosing party, and in some cases the Court may order the non-disclosing party in contempt of Court.
In the marriage of Briese, Smithers J. at para. [2] described the ongoing duty of full and frank disclosure^ [emphasis added] in Family Law Court Proceedings as:
"… A positive obligation to set out at an early stage their financial position in a clear and comprehensive manner. The Regulations, and now the Rules, are not intended as a vehicle to mask the true position, or as an aid to confusion, complexity or uncertainty. They are not intended as the outer limits of the obligation of financial disclosure, but as providing avenues towards disclosure.
The need for each party to understand the financial position of the other party is at the very heart of cases concerning property and maintenance.
Unless each party adopts a positive approach in this regard delays will ensue with the consequent escalation of legal, accounting and other expenses, always assuming that a party has the strength to continue the struggle for information and understanding."
In the marriage of Briese, Smithers J. at para. [6] provided an example of the cost consequences in Family Law Court Proceedings where a party eventually provides full and frank disclosure, but only after unduly prolonging the proceedings + being evasive as to their financial circumstances [emphasis added]:
In the unreported decision of Nygh J. in Marinko (29 October 1982) the learned Judge made an order for costs against the husband, in part because of his conduct of the proceedings.
He found that the husband had unduly prolonged the proceedings and further that he had been evasive as to his financial circumstances.
At p. 3 of his reasons for decision his Honour said:
"It is quite clear that under reg. 97, there is an obligation on the parties to make a full and fair disclosure of all their financial assets; it is also expected of the parties that they shall co-operate with the conduct of the proceedings in order to bring them to an early and prompt conclusion with a minimum of expense.
This obligation is incumbent upon the Court under sec. 97(3) of the Act, and by inference, it lies upon the parties and their legal advisers to co-operate in that goal.
It is, therefore, not an answer to say that the wife did not succeed fully, or that the evidence which she finally obtained out of the husband was not all helpful, or essential to her case.''
Credits:
This FAQ was written by James D. Ford GAICD | Principal Solicitor, Blue Ocean Law Group℠.
Important Notice:
This FAQ is intended for general interest + information only.
It is not legal advice, nor should it be relied upon or used as such.
We recommend you always consult a lawyer for legal advice specifically tailored to your needs & circumstances.