In our previous article “What is a Binding Financial Agreement?” we briefly looked at how ‘binding’ a binding financial agreement (BFA) drafted pursuant to the Family Law Act 1975 is and when the Federal Circuit and Family Court of Australia Court may set aside a BFA. In this article we look at a few cases where the Court have either set aside a BFA or upheld a BFA as binding and valid.
Chetri & Thapa [2024] FedCFamC2F 1611 (14 November 2024)
In this case a financial agreement was set aside when it was clear that the wife had not received adequate legal advice.
The central issue was whether the BFA met the legal requirements under section 90G of the Family Law Act 1975, particularly whether the wife received genuine independent legal advice before signing it.
The husband and wife married in 1997 and the husband claimed they separated in 2017 (when the financial agreement was signed). The husband’s evidence was that the wife received the required legal advice including meeting with her solicitor, Mr S.
Mr S also gave evidence claiming to have given proper advice in a 30–40 minute meeting. But he was unable to recall the specifics of such advice.
The wife gave evidence that her English was limited, being originally from Country C, that she did not know Mr S, and never engaged him or paid him any fees for advising on the financial agreement. It was also established that on the financial agreement an alleged property owned by the wife in Country C, was actually false.
The Court effectively found that Mr S’s evidence inconsistent, vague, and contradictory, and that he failed to advise the wife on the advantages, disadvantages, or her rights under the Act, including contributions and relevant legal considerations which he was required to do.
The Court found the agreement not binding under s90G(1)(b) and declined to make it binding under s90G(1A), concluding it would be unjust and inequitable to do so.
Guan & Shen [2024] FedCFamC2F 117 (1 March 2024)
The mother and father were in a de facto relationship from 2005 until April 2021, and they have two children.
A binding financial agreement was signed in 2017, although it was undated and contained various flaws. The agreement outlined a 50:50 split of the joint property, but it was challenged by the mother on grounds of improper legal advice and undue pressure from the father as he had stated at the time of the agreement being drafted that he would only assist her if she signed the agreement. The father failed to provide full disclosure of his financial resources during the proceedings and did not appear at the trial.
The Court accepted the mother’s evidence that she was not properly advised about the consequences of the agreement, nor was she given the opportunity to negotiate or reflect on the terms. The Court also accepted that the father’s conduct, including pressure and threats towards the mother, was unconscionable, and that there was a material change of circumstances such that the mother would suffer hardship if the agreement was not set aside.
The financial agreement was set aside, and orders made taking into account the mother’s greater financial contributions and greater contribution as home maker and parent.
Suess & Suess [2024] FedCFamC1F 175 (20 March 2024)
In the case involving the wife and husband, the Court considered various claims regarding the financial settlement and the validity of a financial agreement. The wife argued that the husband had misled her about the value of assets, particularly the business D Pty Ltd, and that she was not given the opportunity to obtain an independent valuation. She claimed that this lack of full and frank disclosure undermined the fairness of the settlement. However, the Court found that the wife had the chance to obtain valuations but chose not to, and there was no evidence that the husband or his advisors deliberately misrepresented the business’s value.
The wife also raised the issue of unconscionable conduct, claiming that she was under pressure due to her adult children’s involvement in the settlement discussions, and that this led her to accept an unfair agreement. The Court found that while the wife’s relationship with her children was emotionally complicated, there was no special disadvantage that would render the agreement unconscionable. Both parties had independent legal advice and participated voluntarily in the negotiations.
The court concluded that the wife was not misled about the value of the assets, had the opportunity to conduct her own valuations, and that the husband did not engage in unconscionable conduct. Therefore, the financial agreement was upheld as binding, and there was no basis to set it aside
Telfer & Telfer [2022] FedCFamC1F 547 (29 July 2022)
In this matter, the applicant and the respondent were in a de facto relationship, and the applicant sought to challenge a financial agreement they had signed while still in the relationship. She claimed that her consent to the agreement was obtained through unconscionable conduct, arguing she was under a special disadvantage that seriously affected her ability to make a judgment about her best interests.
The Court considered the applicant’s emotional dependence on the respondent and the history of the relationship, including the signing of a similar BFA in 2012. Despite the emotional dynamics, the Court found that the applicant was not in a position of special disadvantage when she signed the December 2018 agreement. The applicant was aware of the respondent’s consistent views about the importance of a financial agreement to protect his assets, had time to consider the agreement, and received legal advice.
The Court rejected the argument that the respondent acted unconscionably. It noted that the applicant knew about the respondent’s unyielding stance on financial protection and had willingly agreed to it in the past. The respondent’s actions were consistent with his known position, and the court did not find any undue pressure or unconscionable behaviour.
Ultimately, the Court concluded that the December 2018 financial agreement was not vitiated by unconscionable conduct, and the applicant’s challenge was dismissed.
What can be learnt from these cases?
It is clear from the above cases that there are very particular circumstances as to when a Financial Agreement can be set aside. For parties considering entering a Financial Agreement, the most difficult issue is how to ensure that the other party receives genuine independent legal advice. But with careful drafting and ensuring that both parties have the opportunity to negotiate, and time to consider the terms of the agreement, the Court will be reluctant to set a financial agreement aside.
Special care must also be taken to ensure that all assets and liabilities of the parties are disclosed and opportunity provided for valuations. Financial agreements should, especially when entered into prior to marriage or during a relationship, take into account the possibility of children, a key factor which a Court will consider in deciding whether to set aside an Agreement.
Parties should be mindful of their behaviour to ensure there can be no finding of unconscionable conduct or duress.
While there will always be the risk that a BFA may be challenged, they are useful to provide certainty to parties in the event a marriage or de facto relationship breaks down. With careful drafting and consideration of all circumstances, it is unlikely they will be set aside by the Court and can assist in providing protection of assets that were obtained prior to the relationship.
If you are considering a Binding Financial Agreement or would like further advice, please contact the experienced team at Miller Sockhill Lawyers on 07 5444 4750.